Health economics Flashcards
price elasticity of demand > 1
price elastic demand
income elasticity of demand > 1
luxury good
determinants of supply
price of the good
cost of factors of production
price of related goods
gov policies
number of other suppliers
features of the perfect market
homogeneous products
no externalities
many buyers and many sellers
no barrier to entry
rationale behaviour / self-interested
perfect information
equal access (to tech etc.)
market failure
when market fails to allocate resources efficiently or equitably
allocative efficiency
maximising societal welfare - how much of which goods to produce
Allocative efficiency is concerned with the allocation and distribution of resources. Allocative efficiency is about selecting the right mix of healthcare interventions to maximise the overall gain in
health for society
i.e. by targeting the interventions where they are most needed
technical efficiency
maximising output for a given set of inputs
economic efficiency
aka cost effectiveness
maxmising output for a given cost or minimising costs for a given output level
e.g. minimising cost per QALY
command or planned economic
where the gov set the level of production and determines pricing and distribution
market economy
resources are allocated on the basis of consumer behaviour
Discount factor
costs in year n * (1/ 1+r)^n (in year 1 discount factor = 1)
principle - agent theory
agent = doctor
principle = patient
principle is reliant on doctor to advise on care they need
conflicts of interest may lead to supplier induced/reduced demand
economic analysis
looks at benfits gained per unit of expenditure
calculating monetary value of health
human capital (productivity)
revealed preferences (actual real life trade offs)
stated preferences (questionnaires e.g. discrete choice experiments, contingent valuation(max WTP to avoid a health state)
calculating non monetary value of health (QoL)
utility instruments (questionnaires - EQ5D, SF 6D) scores converted to to QoL based on population surveys
providing scenarios:
standard gamble
time trade off
visual rating scales
person trade off
positive time preference and controversy of using discounting in health care
Discounting values current costs and benefits higher than those occurring in the
future because there is an opportunity cost to spending money now and we wish to enjoy benefits now rather than in the future.
Discounting future benefits is controversial as health, unlike money, cannot be invested to produce future gains.
Because of the long-time lag between investment and outcome that is often the case in prevention,
public health interventions often seem to be poor value for money when a discount rate is applied.
supply and demand =
supply is the amount of goods or services that the market can offer. Demand is how much of a good or service is desired by consumers/purchasers.
* In a perfect market, the balance of supply and demand determines price i.e. if the supply increases
and demand stays the same then the price will fall; if the demand increases and supply stays the
same then the price will rise.
pareto efficiency
cannot make someone in the market better off without making someone else worse off
return on investment
Return on investment (ROI) is a form of economic evaluation that values the financial return, or
benefits, of an intervention against the total costs of its delivery. It is calculated as the benefit minus
the cost, expressed as a proportion of the cost.
