Examples of de merit goods bad goods cigarettes drugs

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Examples of De-merit goods (bad goods) = cigarettes, drugs, speed Role government: Health education Subsidizing / taxing consumption Legislation Externalities- Side-effect of consumption or production of goods and services that are not considered when consuming/producing. o Positive externalities: Individual benefit < social benefit Individual cost > social cost Under-production / consumption o Negative externalities: Individual benefit > social benefit Individual cost < social cost Over-production / consumptione.g. listening to the radio from a person in the next room, well- kept front garden, public artwork, volunteer, vaccinee.g. pollution, over-fishing, smoking Externalities -Health Positive externalities E.g. prevention contagious disease, 49 JOUST HCD3422: HEALTH ECONOMICS & FINANCING D. MASINDE
immunization, treatment STDs, caringbenefit of consumption/production is lower for individual for society as a whole price paid will be below price it is worth supply will be below what is ideal for society Role government: Subsidize consumption/production Provision create market Funding Public Goods = non rival and non-exclusive good E.g. radio broad cast, fresh air…Impossible to set a price: Non payers cannot be excluded Extra consumer doesn’t lead to extra costs No body willing to pay (free riding) Nobody willing to supply No additional costs to extra consumer No one can be excluded from consumption Public goods -Health Healthy society: Everyone benefits Incentive to “free ride”: leave the healthy life-style and preventive measures to others.e.g. incentive not to be vaccinated if everyone else is? Who would invest in Research and Development for medicines in a completely liberalized private market? Role of government: -Subsidize consumption/production -Provision -Funding -Regulation (e.g. patient law) Incomplete competition = One or few providers of goods (monopoly: single seller), or one or few buyers of a goods (monopsony: single buyer), who thus have power in the market to influence prices.e.g. OPEC: artificially high prices because of power of suppliers (as long as no alternatives) artificial shortage of oil Incomplete competition in Health-Health care facilities often are monopolies due: High start-up cost (investment in building and equipment, risks) High barriers to enter market as supplier (specialized, long training, licensing) Limited choice for consumer: Price set higher than costs, no incentive to be efficient or to provide quality services Role of government: Provision Quality control Price regulation Legislation Equity: Equity = being fair or just.technical (how) and allocative (what) efficiency, regardless of who gets so inequality is not a market failure. BUT Still reason for government intervention. Equity -Health Health = Human right (Constitution of Kenya 2010). Ethical duty of health workers to treat according to NEED, not ability to pay.. In private market: Less supply at higher price than ideal for society Role government: Guarantee human right for good health Provision Subsidizing Funding

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