Health Economics

Question 1

Define economic supply:

Define economic demand:

Answer 1

Supply: the amount of a good available

Demand: the amount of a good people want

Question 2

Economics

Describe the general slopes of supply and demand curves.

Answer 2

“Supply to the sky;

demand to the dirt”

Question 3

Economics

Supply and demand are plotted on a graph with _________ on the Y-axis and _________ on the X-axis.

Answer 3

Supply and demand are plotted on a graph with price on the Y-axis and quantity on the X-axis.

Question 4

Economics

What is the economic law of demand as price increases?

Answer 4

Demand decreases as price increases

(save money for other purchases)

Question 5

Economics

What is the economic law of supply as price increases?

Answer 5

Supply increases as price increases

(make hay while the sun shines!)

Question 6

Economics

Where is the supply and demand equilibrium point?

Answer 6

Question 7

Economics

Describe where surplus can be found on a supply and demand graph.

Answer 7

Question 8

Economics

Describe where shortage can be found on a supply and demand graph.

Answer 8

Question 9

Economics

Give a simple definition of elasticity as a concept of economics.

Answer 9

The amount that the price of a product can fluctuate before it has a negative impact on sales

Question 10

Economics

For perfect inelasticity, the demand curve will be _________ (horizontal/vertical).

Answer 10

For perfect inelasticity, the demand curve will be vertical.

Question 11

Economics

If a good is economically inelastic, what does this indicate?

Answer 11

There is little variation in price;

people will buy it almost no matter the price.

Question 12

Economics

True/False.

The elasticity of a product typically depends on its nature (i.e. whether it’s a luxury or a necessity).

Answer 12

True.

Question 13

Economics

Is healthcare generally elastic or inelastic as a good?

Answer 13

Inelastic

Question 14

Economics

Which economics term refers to the satisfaction one achieves from consuming a good/service?

Answer 14

Utility

Question 15

Economics

Which economics term refers to the fast that the more of a certain product you own, the less satisfaction you receive from the later ones (e.g. the fifth chocolate you eat is not as good as the first)?

Answer 15

The law of diminishing marginal utility

Question 16

Economics

True/False.

Most product economies are economies of scale, meaning that the production cost per unit decreases as production increases.

Answer 16

True.

Question 17

Economics

What are economic externalities?

Answer 17

Effects on third parties

(not the producer or consumer; e.g., a factory’s pollution affecting community members’ well-being)

Question 18

Economics

What type of tax can be used to correct for economic externalities by requiring the damaging party to pay the third parties who are negatively affected?

Answer 18

A Pigouvian tax

Question 19

Economics

In economics, ___________ occurs when an entity has an incentive to increase its exposure to risk because it does not bear the full costs of that risk.

(E.g. a patient with full health insurance decides to eat less healthy options because he has insurance to cover expenses for any diet-related illnesses.)

Answer 19

In economics, moral hazard occurs when an entity has an incentive to increase its exposure to risk because it does not bear the full costs of that risk.

(E.g. a patient with full health insurance decides to eat less healthy options because he has insurance tto cover expenses for any diet-related illnesses.)

Question 20

Economics

Which economics term refers to the ‘missed’ or ‘lost’ utility (value) you do not receive by choosing to spend your funds/time elsewhere?

Answer 20

Opportunity cost

Question 21

Economics

Name the three economic factors that make a product ‘valuable.’

1. _______ provided
2. Relative scarcity
3. Transferability

Answer 21

Name the three economic factors that make a product ‘valuable.’

1. Utility provided
2. Relative scarcity
3. Transferability

Question 22

Economics

Name the three economic factors that make a product ‘valuable.’

1. Utility provided
2. Relative _______
3. Transferability

Answer 22

Name the three economic factors that make a product ‘valuable.’

1. Utility provided
2. Relative scarcity
3. Transferability

Question 23

Economics

Name the three economic factors that make a product ‘valuable.’

1. Utility provided
2. Relative scarcity
3. ________

Answer 23

Name the three economic factors that make a product ‘valuable.’

1. Utility provided
2. Relative scarcity
3. Transferability

Question 24

Economics

What general term can be applied to describe the problem with healthcare markets that arises when high-risk customers are more likely to purchase insurance, and thus low-risk customers are more likely to opt out because they do not want to pay the elevated costs?

(I.e. insurance companies increase premiums to accomodate the liability of high-risk customers, the increased premiums drive out low-risk customers, further driving costs up as the insurance pool shrinks and becomes more and more high-risk.)

Answer 24

Adverse selection

Question 25

Economics

Which will increase the likelihood of adverse selection in an insurance system, pooled or non-pooled plans?

Answer 25

Pooled plans

(range of healthy and sick all lumped into one plan, thus benefiting the sickest most and the healthiest least)

Question 26

Economics

Identify the two economics terms that can be used in deciding if a career or other life choice is a good option for someone:

1.) What term refers to the person’s personal psychological preference for risk vs. assurance?

2.) What term refers to the relative speed with which the career provides value for the person’s investment (of time, energy, funds, etc.)?

Answer 26

1.) Discount rate

2.) Internal rate of return

Question 27

Economics

If an individual’s discount rate (a matter of personal psychological preference) is higher than the internal rate of return of being a physician, should the individual decide to be a physician?

Answer 27

No.

The rate of return will not be satisfactory to them.

Question 28

Economics

Describe the idea of marginal efficiency of capital as explained through the Grossman model.

Answer 28

The rate of return of health investments decreases as health increases

(i.e. an application of the law of diminishing returns on your efforts to be healthier)

Question 29

Economics

True/False.

The usefulness of being healthy is that an individual will have both increased amounts of utility and also increased amounts of time to maintain / work on their health.

Answer 29

True.

(See the Grossman health production curve.)

Question 30

Economics

What economics term refers to different populations being presented different prices for the same service (based off some descriptive factor between the populations)?

Answer 30

Price discrimination

Question 31

Economics

What factor makes drug companies reluctant to practice price discrimination in low-income countries (i.e. charging poor countries less than wealthy)?

Answer 31

Black markets

(The drug shipments might be scooped up and sold at inflated rates.)