Review The Mission of Health Economics Health economics

Review

The Mission of Health Economics Health economics is not concerned with ‘saving money’ but with improving the level and distribution of population health with the resources available

The Flow of Money, Resources and Commodities Households Consumption Money Free Market Resources Money Commodities Investment Production Firms Price: The amount of money that is exchanged for a commodity

Government interventions in the market � Levying taxes � Fixing prices � Licensing suppliers � Regulating quality � Prohibit private demand � Prohibit private supply

Production possibilities frontier for the economy Opportunity Cost

Marginal Analysis Tomans / Number Marginal benefit of pizza 2000 1000 0 - 500 Marginal cost of pizza 1 2 3 4 Number

The Law of Demand Curve Quantity Demanded: The exact quantity demanded at a particular price, or a particular point on a demand curve. The law of demand: Other things remaining the same, the higher the price of a good, the smaller is the quantity demanded

A CHANGE IN DEMAND Movement along versus a shift of the demand curve � A change in demand versus a change in quantity demanded �

Determinants of Demand � The price of the good � The prices of related goods: › Substitutes › Complements � Income � Expected future prices � Population � Preferences

Determinants of Demand for Health Care � Need (as perceived by the patient); � Patient preferences; � Income; � Price/user charge; � Travel cost and waiting time; � Quality of care (as perceived by the patient)

The Law of Supply Other things remaining the same, the higher the price of a good, the greater is the quantity supplied; and the lower the price of a good, the smaller is the quantity supplied

Supply Curve

A Change in the Quantity Supplied versus a Change in Supply

Determinants of Supply 1. The prices of factors of production 2. The prices of related goods produced 3. Expected future prices 4. The number of suppliers 5. Technology: the way that factors of production are used to produce a good

A Change in the Quantity Supplied versus a Change in Supply • The prices of factors of production • The prices of substitute goods • The prices of complement goods • Expected future prices • The number of suppliers • Technology

Market Equilibrium

The Effects of a Change in Demand

The Effects of a Change in Supply

The Effects of an Increase in Both Demand Supply Example: • Provider induced demand • Growth of cosmetic surgery