RECENT years have witnessed a sharp upsurge of interest in the economics of health. On the one hand physicians, hospital administrators, public-health officials and other health experts are becoming increasingly aware of the need to carry out informed systematic analyses of the problems of organizing, financing and distributing health services. On the other hand, economists are discovering the tremendous economic importance and challenge of health care and are beginning to apply to this field the analytical tools and concepts that have proved useful in a large variety of other situations.One such concept is that of demand, and this paper . . .