Chapter 1 - Chapter 1 Health economics studies the supply...

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Chapter 1 08/23/13 Health economics: studies the supply and demand of health care resources and the impact of health care resources on a population What are health care resources? o Medical supplies o Personnel o Capital Resources are limited (scarce), but human wants are unlimited—requires us to make choices (tradeoffs) Four basic questions: 1. What combination of all goods and services to produce? 2. What combination of medical goods and services to produce? 3. How are we going to produce these goods and services? 4. Who will receive these goods and services? Allocative efficiency: choosing the best mix of goods and services that the society wants to have (through their actions) Production efficiency: producing goods and services in the least costly way Opportunity cost: the value of your next best alternative (what you gave up) 08/26/13 Law of increasing opportunity costs: increasing amounts of one good must be given up to receive equal increments of another good o Reason: our resources are not perfect substitutes for each other o When you have a bowed-out shape (see below example)
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Production Possibilities Curve (PPC): model illustrating tradeoffs o Assumptions: resources and technology are fixed (what we have right now is what we got) o Curve represents different combinations of televisions and health clinics you can produce o
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