A Hypochondriac in the Grossman model: Imagine an individual in the Grossman model who suddenly develops hypochondriasis.
a) How would this affect her optimal level of health? Explain your answer in the light of the three roles that health plays in the model. Use appropriate diagrams to facilitate your explanation.
b) Now imagine this hypochondriac suddenly wins a mega jackpot lottery of $1 million. How does this exogenous income shock change decisions about her health status?