Please weigh in on my answer below to see if it makes sense based on these two questions:

Thanks!

• In your own words use utility analysis to explain why people demand health. How does the Law of Diminishing Marginal Utility fit into the analysis?
• How would you expect the price elasticity of demand for medical care to vary with health status? Give a specific example.

Does my answer make sense????

My answer:

People demand health for a couple reasons. 1. It allows us to keep living, an obvious answer, I know. 2. It gives us the ability to work which allows us the ability to acquire more goods and services. The utility, or satisfaction, from demanding health increases with the amount of health demanded. Though the utility is not a measurable area and is very subjective from person to person.

The Law of Diminishing Marginal Utility can come into play when a healthy person is paying a high insurance rate. The rate of payment does not provide a positive utility for the payer, as they are healthy. If an unhealthy payer were receiving numerous treatments for the same price, their utility would be higher and would not diminish like the first payer.

I would expect the price elasticity of demand for medical care to inelastic with health status. When I look at how does the demand react to the changes of price and health status? I feel that the price is set to a baseline depending on diagnosis or health status. With a more complicated health status the price can be inelastic.