CONSUMER THEORY

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 (?)

• EXCEPTION: HARD DRUGS (nicotine,

heroin etc) especially CRACK (increasing
marginal utility?)
DIMINISHING MARGINAL
BENEFITS
UTILITY

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

 GENDER & MARITAL STATUS

 INCOME

 ETHNICITIY

 AIR POLLUTION

 HEALTH CARE PRACTICES-

seat belts, crash helmets

 SATISFACTION WITH
HEALTH SERVICES
 ENABLING FACTORS
 HEALTH INSURANCE

 AVAILABILITY OF GP CARE
 HOME HOSPITALIZATION

 USE OF PHYSICIAN GATEKEEPERS

financial incentives

 GEOGRAPHIC PROXIMITY TO ER,

HOSPITAL and GP services
 SOCIAL SUPPORT NETWORKS
 NEED FACTORS
 CANCER

 FALLS - 9.3% of all elderly

er use in Israel.

 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