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1.consumer Theory

The document discusses the law of diminishing marginal utility in consumer theory. It states that consuming additional units of a good provides less additional satisfaction or utility. It provides food as an example, noting that a second and third hamburger provides less additional satisfaction than the first. The only potential exception is hard drugs that may have increasing marginal utility. It then discusses marginal benefits and costs curves, showing how demand increases as price decreases based on individual and combined demand curves. Finally, it discusses how demand in health depends on numerous predetermined, enabling, and need factors, and proposes an improved model incorporating these elements.

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Cinciev Dragan
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373 views14 pages

1.consumer Theory

The document discusses the law of diminishing marginal utility in consumer theory. It states that consuming additional units of a good provides less additional satisfaction or utility. It provides food as an example, noting that a second and third hamburger provides less additional satisfaction than the first. The only potential exception is hard drugs that may have increasing marginal utility. It then discusses marginal benefits and costs curves, showing how demand increases as price decreases based on individual and combined demand curves. Finally, it discusses how demand in health depends on numerous predetermined, enabling, and need factors, and proposes an improved model incorporating these elements.

Uploaded by

Cinciev Dragan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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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

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