Health Economics Mid Term

Front 1

What is Marginal Revenue?

Back 1

Extra revenue that an additional unit of product will bring; add'l income from selling one more unit of good, sometimes = to price

Front 2

Marginal Revenue
Mathematical Formula

Back 2

MR = change in total revenue d(TC) / change in number of units sold d(

Front 3

Economies of Scale

Back 3

the cost advantages that a business obtains due to expansion; factors that cause a producer's average cost per unit to fall as output rises

Front 4

Price Discrimination

Back 4

exists when sales of identical goods or services are transacted at different prices from the same provider.

Front 5

Equilibrium Price

Back 5

the point at which quantity demanded = quantity supplied

Front 6

Positive Externality

Back 6

external benefits on a party not directly involved in the transaction

Front 7

Allocative Efficiency

Back 7

a situation in which limited resources of a firm are allocated in accordance with the wishes of consumers; price = marginal costs or P=MC

Front 8

What is an Economic Good?

Back 8

Any Good or service that is scarce relative to our wants for it

Front 9

Health Care as an Economic Good

Back 9

Resources that produce health care services are finite & our wants for health care have no known bounds

Front 10

What is Opportunity Cost?

Back 10

the value of the next best alternative foregone as the result of making a decision.

Front 11

Efficiency

Back 11

the allocation of scarce resources that maximises the achievement of aims

Front 12

Effectiveness

Back 12

the extent to which health care services actually improve health

Front 13

Equity

Back 13

fairness in the sharing of health resources between people

Front 14

ethics

Back 14

code of widely held normative criteria about the provision of health care

Front 15

Economics

Back 15

social science that studies the production, distribution, trade and consumption of goods and services

Front 16

Normative Economics

Back 16

Applies Subjective Value Judgement

Front 17

Positive Economics

Back 17

objective prediction and explanation of consequences of choices, given a set of assumptions, and a set of observations

Front 18

Scarcity

Back 18

resources are scarce, or limited and that not all human needs and desires can be met

Front 19

Two Primary Micro Economic Agents and Objectives

Back 19

Producer - Profit

Consumer - Utility

Front 20

Markets

Back 20

where forces of supply and demand meet and prices are determined

Front 21

equilibrium price

Back 21

clears the market; quantities demanded = quantities supplied

Front 22

Demand

Back 22

the amount of a good or service that consumer are willing and able to buy at a given price

Front 23

Demand

Back 23

The amount of a good or service that consumers are willing and able to buy at a given price

Front 24

Utility

Back 24

the satisfaction people get from consuming a good or a service

Front 25

Supply

Back 25

the amount of a good or service that producers are willing and able to sell at a given price

Front 26

Law of Demand

Back 26

this inverse relationship between price and quantity demanded

Front 27

Private vs. Public Health Systems

Back 27

Private: firms forecast changes in prices and the consequences for the revenues & profits
Public: policy makers analyze demand to predict health care use and may then modify demand to meet health policy targets

Front 28

Consumer Choice Theory

Back 28

explains why consumers behave or react in certain ways to changes in various factors in order to maximize their utility

Front 29

Marginal Rate of Substitution

Back 29

slope of the indifference curve; amount of one good that must be sacrificed if the consumption of another good is increased in order for utility to remain unchanged

Front 30

Elasticity

Back 30

measures the responsiveness of one variable to changes in another variable

Front 31

Grossman Theory

Back 31

theoretical framework for understanding choices related to health and health care; individuals invest in health up to the point where the marginal benefits from the investment, which include a consumption benefit plus an investment benefit, are equal to the marginal costs incurred by the investment

Front 32

principal agent relationship

Back 32

the doctor - the agent - makes available their specialist knowledge to the patient - the principal.

Front 33

supplier induced demand

Back 33

doctors act as imperfect agents who maximise their own utility

Front 34

aggregate demand for health care

Back 34

country's overall demand for health care; related to a country's overall income

Front 35

Production Function

Back 35

-Indicates the highest output that a firm can produce for every specified combination of inputs given the state of technology.
-Shows what is technically feasible when the firm operates efficiently.

Front 36

Isoquant

Back 36

graphical representation of a production function, showing all the combinations of inputs that will produce a particular output.

Front 37

marginal rate of technical substitution

Back 37

The slope of the isoquant, measures how substitutable the factors of production are

Front 38

marginal product of an input

Back 38

the change in output resulting from a change in the quantity of the input used, other things held constant.

Front 39

technical efficiency

Back 39

producing the maximum output from a given input combination

Front 40

production frontier

Back 40

defined as a set of boundary points within which all firms are technically inefficient.

Front 41

Returns To Scale

Back 41

a technical property of production that examines changes in output subsequent to a proportional change in all inputs (where all inputs increase by a constant factor

Front 42

Increasing Returns To Scale

Back 42

output more than doubles when all inputs are doubled

Front 43

Constant Returns To Scale

Back 43

output doubles when all inputs are doubled

Front 44

Decreasing Returns To Scale

Back 44

output less than doubles when all inputs are doubled

Front 45

Law of Diminishing Marginal Returns

Back 45

As the use of an input increases in equal increments, a point will be reached at which the resulting additions to output decreases (i.e. MP declines).