MGEC34H3 Lecture Notes - Lecture 5: Budget Constraint, Technological Change, Health Promotion
17 Dec 2016
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October 18, 2016 lecture 5: consumer choice and demand. It"s not medical care services that consumers want, but health: demand for medical care is a derived demand, so it"s an input to producing health. Consumers don"t purchase health from the market: they produce it by spending time on health improving activities in addition purchasing medical care inputs. Demand for medical care services derived from demand of health and how the consumer produces health. Model assumptions: consumer is rational and perfectly informed, there is no uncertainty about the future. Important decisions made as if the future were known with certainty. Consumers can choose any affordable combination or bundle of goods, and from among these affordable bundles, they will choose the one preferred. Depiction of this choice requires two elements: consumer"s preference: described by a set of indifference curves, consumer"s budget constraint: described by the straight budget line.
