Economics

Question 1

Economics

Answer 1

The study of how limited resources can best be used to fulfill unlimited human wants

Supply and demand

Question 2

Decisions in vet med have many economic implications

Answer 2

-Creep feed in calves this year?
>gains in calves vs cost of feed

• Invest in free-stall barn?

-invest in blood chemistry machine? Hire more staff?

-Should client pay for cruciate surgery for 12 yr old dog?

-Disease impacts on economics?

Question 3

Research papers, trials and economics

Answer 3

-Clinical trials and traditional scientific research describe potential of treatments and effects BUT do the costs from the treatments justify the gains!?

Question 4

Why worry about economics?

Answer 4

-evaluate the past
-quantify/describe the present
-predict or plan for the future (least effective)

Question 5

Economic projections

Answer 5

-predictions are often imprecise; however forecasting is main reason for economic evaluations
-compare your level of confidence
>predicting different levels/responses
>use models to approximate reality

Question 6

Economic projection models

Answer 6

-take into account all of the steps and implications of the model
ex. Cost of going to the store to get milk

**someone can always criticize model, because cannot include every factor all the time

Question 7

Biological systems of economic projections

Answer 7

-biological systems are open systems…they involve many variables that can effect the outcome of any plan

-degree of precision is often poor

***Even with imperfect info, the order of magnitude can be helpful = common sense estimate

Question 8

Profit

Answer 8

Profit= revenue- expenses

Question 9

Main motivation

Answer 9

Profit
-easy to focus on profit as an end point
-quantifiable units (dollars)

Question 10

Other motivations

Answer 10

**not everyone motivated by profit

=UTILITY (everyone has a concept about what is good for us)
-not easily measurable

Question 11

Medicine and utilities

Answer 11

At some stage you can make a decision… is it worth it?
-chronic disability? or injury?
-is new drug, operation, or change in lifestyle worth it?

Question 12

Utility in medicine

Answer 12

Age vs treatment
-Cancer in an elderly dog?
-Open heart surgery in 84 year old

**willingness to pay and quality of life in adjusted years

Question 13

Food animal producers economics

Answer 13

-profit is not always motivation but they pay attention to it. Not needed to survive.

-Is increased production worth the cost that it takes to get there?

Question 14

Risk

Answer 14

-two basic aspects of risk
>probability of harm
>magnitude of bad outcome

**most people are risk averse (ex. buying fire insurance)

Question 15

Profit vs risk in vaccination programs

Answer 15

-May not be profitable long term however they do minimize the chance of a catastrophic outcome

**minimize risk at the expense or profit

Question 16

Economic analysis

Answer 16

1. partial budgets
2. decision analysis

Question 17

Questions to ask when analyzing economic analysis papers

Answer 17

1. Is there a good clinical trial behind this before economics is analyzed?
2. Who are the cost vs benefits in relation to? Individual farmer vs. government? Vet?
3. Was the time value of money now worth the same in the future? (ex. reason bank will charge interest; money that I have now is worth more to us than money we will receive later)
4. Time horizon- usually not linked to “forever; longer the horizon, the more difficult the analysis. Connected to time value of money
5. Was sensitivity analysis done?
6. Do numbers make sense? Is it complete? Does it inform you to make a more productive decision?

Question 18

Time value of money

Answer 18

Future value= present value X (1+interest rate) ^periods