I would reset the player and monster health at the start of the battle.
The weapons would make a good class, the weapon has a name, a cost and an amount of damage. Then you could make a list of weapons that could be iterated for display at the shop. When the player buys a weapon, you could update their 'current' weapon and then use the 'current' weapon when calculating damage during the battle.
The following is some sample code of how the shop might work after you create the weapon class and a list of them. The sample code does not attempt to format the list in a 'pretty' form or to validate the user input, both would be beneficial updates.
for idx in range(len(weaponlist)):
print idx + 1, weaponlist[idx].description, weaponlist[idx].cost
z = input("Which weapon do you want?")
if money > weaponlist[z].cost:
playerweapon = weaponlist[z]
print "You have bought", playerweapon.description
else:
print "You can't afford the", weaponlist[z].description
The functions that display the health (of the player and the enemy) also calculate the damage applied and as such are poorly named. (The function name does not reflect what it does.) I would tend to separate them into a couple of functions, one to display the health and another to calculate the damage for an attack and apply it.
In the current program it is possible that the player might not have enough money to even buy the lowest weapon. If they can't buy a weapon, how much damage should they do?
The fight sequence currently does not take into account the weapon being used. (There is code that appears to want to support the concept, but the damage function returns before any of that code can be executed.)
Currently there is no difference between the monsters, they all have the same health and do the same damage. Was this how you intended it to work? (If you make some of the monsters harder, might the player want to 'run away' from something that is too tough?) Should there be better rewards from fighting harder monsters?
Right now, all damages are 'flat' random chances. If the damage is 1 to 10, all of the numbers from 1 to 10 are equally likely. A lot of 'combat' games have the concept of dice for damage. Where a weapon might use 2 six-sided dice commonly shown as (2d6). This example weapon will do from 2 to 12 points of damage, but not all numbers are as likely. The extremes (2 and 12) are rare and the most common damage will be 7. This would likely apply to both player and monster damage calculations.
