Ch 1. Econ and Health Econ Flashcards
What is economics?
Economics is the study of scarcity and the means by which we deal with this problem.
What problems do economics try to solve?
There are four specific questions that are the primary concern of economics:
• What goods are being produced and in what quantities? (For example: what types of malaria prevention measures are being implemented and how much of each type?)
• How are these goods produced? (What resources are required to produce these
malaria prevention measures?)
• How is society’s output of goods divided among its members? (Who has access to
these measures?)
• How efficient is society’s production and distribution? (Can we get the same amount
of protection from malaria using fewer resources? Would an AIDS awareness cam- paign be a more effective use of resources than malaria prevention?)
Define “health sector”
Consists of :
- organized public and private health services,
- the policies and activities of health departments and ministries,
- -health-related non- government organizations and community groups,
- and professional associations.
Define “goods”
These are the outputs (such as health care) of a production process that involves the combining of different resources such as labour and equipment. Goods (including services) are valuable in the sense that they provide some utility (see below) to individual consumers.
They are termed ‘goods’ as they are desirable, as distinct from ‘bads’ which you will read about later!
Define “health sector”
Consists of organized public and private health services, the policies and activities of health departments and ministries, health-related non- government organizations and community groups, and professional associations.
Define “goods”
These are the outputs (such as health care) of a production process that involves the combining of different resources such as labour and equipment. Goods (including services) are valuable in the sense that they provide some utility (see below) to individual consumers.
They are termed ‘goods’ as they are desirable, as distinct from ‘bads’ which you will read about later!
Goods are the result of combining resources in the production process.
Define “marginal analysis”
An examination of the additional benefits or costs arising from an extra unit of consumption or production of a ‘good’
Define “market”
A situation where people who have a demand for a good come together with suppliers and agree on a price at which the good will be traded. A necessary condition for properly functioning markets is a system of property rights to ensure that people can participate in good faith.
Define “marginal analysis”
An examination of the additional benefits or costs arising from an extra unit of consumption or production of a ‘good’
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Refers to the “next unit”
Decisions are rarely made on an ‘all or nothing’ basis; instead they often tend to be made at the margin: if marginal benefit (the change in benefit) is greater than marginal cost (the change in cost), we go ahead; if marginal benefit is less than marginal cost, we do not.
Define “resources”
These represent inputs into the process of producing goods. They can be classified into three main elements: labour, capital and land. Different goods would generally require varying combinations of these elements. Resources are generally valued in monetary terms.
Define “utility”
The happiness or satisfaction an individual gains from consuming a good. The more utility an individual derives from the consumption of a good, all else being equal, the more they would be willing to spend their income on it
Define “welfare (social welfare)”
The economic criterion on which a policy change or intervention is deemed to affect the well-being of a society. In general, this is assumed to be determined by aggregation of the utilities experienced by every individual in a society.
What is considered “resources”
Resources can be classified as labour, capital and land:
• labour refers to human resources, manual and non-manual, skilled and unskilled;
• capital refers to goods that are used to produce other goods – for example
machinery, buildings and tools;
• land generally refers to all natural resources, such as oil or iron ore.
Define “welfare (social welfare)”
The economic criterion on which a policy change or intervention is deemed to affect the well-being of a society. In general, this is assumed to be determined by aggregation of the utilities experienced by every individual in a society.
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Welfare is the sum total of utility experienced across all individuals within a society.
What are two essential characteristics that distinguish different goods:
- Physical attributes – an ice cream and a cup of tea are clearly different commodities because they require different manufacturing techniques and because they satisfy different wants.
2 Context in which the good is consumed – for example:
a. The time in which the good is available – an ice cream that is available on a hot summer’s day is a different good from one available in the cold midwinter.
b. The place where the commodity is available – a cup of tea available in a fashionable café is a different good from tea that is sometimes sold at a petrol station.
What are three ways in which individuals can benefit from the ownership of a good?
- it can be consumed (or used) and thus utility directly derived from it.
- investment value. Goods themselves can also be used as inputs into a production process.
- exchanged
What are three ways in which individuals can benefit from the ownership of a good?
- consumed (or used) and thus utility directly derived from it.
- investment value. Goods themselves can also be used as inputs into a production process. For instance, apples might be the output from farm production and consumed immediately, or they can also be used as input into the production of apple pies or cider.
- exchange value. If you do not invest or consume a commodity then you can sell it and potentially purchase other goods.
What is price? What affects price?
Price is the amount of money exchanged for a good. Can be affected by:
- # of suppliers
- price they’re willing to accept for a good
- # of payers
- price they’re willing to pay for a good
How might a government intervene in a market?
- taxes
- licensing
- fixing prices
- regulating quality
- take control over suppler or demand
- make laws that free up markets
Households are often thought of as buyers or sellers? What is their function in relation to firms?
Buyers. They own resources (labour, land, shares in capital) and supply them to firms in return for money (wages, rent, interest and profit).
Firms are often thought of as buyers or sellers?
What is their function in relation to households?
Sellers. Firms turn resources into goods and supply them to the households, again, in return for money.
What is a resource, how are resources classified and what are the three ways of employing a resource?
Resources are inputs into the process of producing goods.They can be divided into three categories: land (including all natural resources and minerals), labour (all human resources) and capital (man-made resources used as aids to further products, e.g. equipment). A resource can be employed in one of three ways: consumed, invested or exchanged.
Scarcity
Economics is based on idea that resources are less than the demand. Scarcity then influences our choices around production and consumption. Choosing to use our limited resources here, will of course decrease resources somewhere else.
Why do choices need to be made?
- our income is finite
- our income is insufficient to fund all the things we want
Thus we need to make choices that maximize our utility and improve social welfare.
