ABSTRACT
This chapter discusses the consumer's demand curve for medical care from the utility function and analyzes the effects of a health insurance policy on that demand curve and quantities demanded. It shows how demand varies with systematic features such as income, age, gender, and location. The chapter suggests that the consumer has a stable utility function, in the sense that it doesn't change from period to period or with new information, for example, about the value of medical care. One important question that appears when we consider more than one type of medical care is whether the various services are complements or substitutes. Complements are goods or services that are consumed together, and "help each other out" in producing health. Gasoline and tires are complements in the production of miles driven. The demand for medical care derives from the more fundamental demand for health itself, which produces utility.
