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LAW OF DIMINISHING
MARGINAL UTILITY
• If I’m hungry and eat a fluffel/hamburger, I
get LOTS OF UTILITY (satisfaction,
happiness points)
• If I eat a 2nd fluffel, I get less utility
• IF I eat a 3rd, I get very little satisfaction.
• IF I eat a 4th, I’ll probably be SICK
LAW OF DIMINISHING
MARGINAL UTILITY
• The more you get of something, the less you
appreciate it……….food, clothes, money,
love (?)
1 4
QUANTITY
MARGINAL BENEFITS vs
MARGINAL COSTS
UTILITY
PRICE
Price=M C
10
MC>MB
MB>MC
MB
QUANTITY
MARGINAL BENEFITS vs
MARGINAL COSTS
UTILITY
PRICE MC>MB
10
MB>MC
Price=M C
2
6 12
MB
QUANTITY
AS PRICE DROPS, DEMAND
INCREASES FOR CRUSOE
PRICE
A’s DEMAND CURVE
10
2
6 12
QUANTITY
FRIDAY LIKES APPLES LESS
PRICE
B’s DEMAND CURVE
10
1 6
QUANTITY
JUST CRUSOE (A) & FRIDAY
(B) IN SOCIETY
PRICE
A+B’s DERIVED DEMAND
CURVE
10
2
10 18
QUANTITY
Demand
• Does not only depend on price…
• Does not only depend on Economic
Variables
• In Health…depends on a multitude of
factors….. Consider demand by the elderly
for EMERBENCY ROOM SERVICES
PREDETERMINED FACTORS
AGE
INCOME
ETHNICITIY
AIR POLLUTION
SATISFACTION WITH
HEALTH SERVICES
ENABLING FACTORS
HEALTH INSURANCE
AVAILABILITY OF GP CARE
HOME HOSPITALIZATION
CARDIAC DISORDERS
-CHF, AMI, chest pain.
DIABTES
DEPRESSION
OCCULAR PROBLEMS
OVERALL HEALTH STATUS
IMPROVED MODEL
PREDETERMINED
Enabling ADL
Diagnosis-based
HOSP USE
Needs
Cognition SELFSELF
-RATED
Depression
HEALTH
Social Isolation STATUS
Life Stresses
SI * Stress
interactions