Module 1: Overview
Economics: study of human behaviour
• Based on strong assumption of rationality where economic agents will behave
rationally to maximise benefits when faced with choices between alternative
scarce resources
• Learn how firms behave under certain conditions or when faced with certain
incentives
Economic problem:
1. Resources are scarce
2. Unlimited wants and desires meant choices have to be made for consumption and
prodution
3. Ultimate choice results in efficient outcome
4. Resources in a given activity are minimized to maximise the benefits or outcomes
achieved
Economics of Health:
• The determinants of health are outside traditional health services and encompasses
everything (multidisciplinary team)
• Hence, this means that good health is not just about medical services
• Challenge is the study of choices between alternative uses of scarce resources
for activities related to health care to achieve the definition of health by WHO
o Health is a state of complete physical, mental and social wellbeing and not
just the absence of disease and infirmity
• However, the economics of health is heavily influenced by:
o Social objectives
o Culture
o Medical systems
o Economic characteristic of current condition
o Historical values
Healthcare refers to resources society uses on people in ill health in an attempt to cure them
or to care for them.
• Cure: improvement in heath by treating them
o Fully restore health
o Improve health though not completely
o Limit the extent to which health deteriorates
• Prevention: reduce probability of illness or premature death, where some undesired
event can be avoided
• Rehabilitation: to restore strength and health through recovery
• Care: provide dignity for sick people (qualitatively different purpose)
o When no known medical technologies are available, car is the only remaining
activity that can be provided
Types of healthcare differ in the following ways:
1. Purpose: cure, prevention and rehabilitation aim to improve health outcomes but care
has a qualitatively different purpose
2. Availability of alternative to healthcare:
3. Time horizon: cure and care is present but prevention is future, and for some cases,
quick fix is never an option (orthopedics event has long time of rehabilitation)
What is health and what does good health do?
Health care brings about good health which is needed for us to earn money and satisfy our
social needs. All these are then measured by utitlity In terms of satisfaction (a very difficult
parameter to measure
,Trends in healthcare:
• Increases initially but plateaus:
o Level of income and health outcomes
o Amount of health spending and health outcomes
• Increases linearly:
o Wealth and %GDP spent on healthcare
o Wealth and % of healthcare publicly financed
Module 2: Introduction to basic economic concepts
• Opportunity cost is the value of benefits foregone because a resource is not
available for its best alternative use.
o We often make decision to do something over another because we value the
activity we are doing currently more than the other activity we abandoned.
This is because we perceive the opportunity cost of the current activity if not
done with the available resources now would be greater than that of the other
o Foregone benefits refers is more than just dollars, it highlights: Everytime you
decide to do something, you are also deciding not to do something
o Market prices do not always reflect opportunity cost and resources have
value even though they may not be tradeable in the market
• Scarcity implies only that resources are not unlimited
o We must make choices between alternative courses of action and is an act of
choice which determines the real economic cost of each course of action
• Production possibility frontier: Graphical representation of all possible
combination of goods that can be produced in an economy
o Any point within the curve: can be produced with the available resources,
o Any point outside of curve: cannot be produced with the available resources
o At B: inefficient production mean that more of one good can be attained
without compromising on the amount of the other
, • Efficiency means doing the best we can with what we have
• Types:
o Technical efficiency links the value of inputs to the quantity of outputs
and occurs when no more of a given output can be produced from the
available resources.
o Allocative efficiency is a broader concept and links the value of inputs
to the value of outputs where the best possible combination of goods
and services as valued by society as a whole is being produced.
Module 3: Economics of markets
Competitive market model is a model that provides a useful framework for analyzing the way
in which consumers and providers interact under a set of assumptions that emaphasise
rationality.
Rationality assumes independent buyers and seller where buyers aim to maximise
benefits they get from consuming goods and services and producers aim to maximise their
profits from the production or sale of goods and services.
DEMAND
Demand for a given commodity or service is reflected by both willing (function of want or
need) and ability to pay (function of income): wants of a consumer backef up by
willingness and ability to pay
• As the price increases, demand for a product decreases
• The more we have of a commodity, the less marginal benefit we receive from each
additional unit (law of diminishing returns)
Factors affecting demand:
• Price of commodity
• Price of alternative products
• Income or wealth of consumers
• Tastes of consumers
The trend of higher price causing lower demand is explained by:
• Substitution effect: When price for good X rises, demand of it will fall as some
consumers will switch from good X to good Y as these alternatives are cheaper.
• Income effect: When price for good X rises, the consumers who purchase the same
amount of good X will have to spend more and hence leave them relatively poorer
(not able to afford to buy as much as hey used to)
• Opportunity costs: travelling time, transport costs etc
Supply
Supply is the quantity of a product that producers are willing to supply depending on price
Economics: study of human behaviour
• Based on strong assumption of rationality where economic agents will behave
rationally to maximise benefits when faced with choices between alternative
scarce resources
• Learn how firms behave under certain conditions or when faced with certain
incentives
Economic problem:
1. Resources are scarce
2. Unlimited wants and desires meant choices have to be made for consumption and
prodution
3. Ultimate choice results in efficient outcome
4. Resources in a given activity are minimized to maximise the benefits or outcomes
achieved
Economics of Health:
• The determinants of health are outside traditional health services and encompasses
everything (multidisciplinary team)
• Hence, this means that good health is not just about medical services
• Challenge is the study of choices between alternative uses of scarce resources
for activities related to health care to achieve the definition of health by WHO
o Health is a state of complete physical, mental and social wellbeing and not
just the absence of disease and infirmity
• However, the economics of health is heavily influenced by:
o Social objectives
o Culture
o Medical systems
o Economic characteristic of current condition
o Historical values
Healthcare refers to resources society uses on people in ill health in an attempt to cure them
or to care for them.
• Cure: improvement in heath by treating them
o Fully restore health
o Improve health though not completely
o Limit the extent to which health deteriorates
• Prevention: reduce probability of illness or premature death, where some undesired
event can be avoided
• Rehabilitation: to restore strength and health through recovery
• Care: provide dignity for sick people (qualitatively different purpose)
o When no known medical technologies are available, car is the only remaining
activity that can be provided
Types of healthcare differ in the following ways:
1. Purpose: cure, prevention and rehabilitation aim to improve health outcomes but care
has a qualitatively different purpose
2. Availability of alternative to healthcare:
3. Time horizon: cure and care is present but prevention is future, and for some cases,
quick fix is never an option (orthopedics event has long time of rehabilitation)
What is health and what does good health do?
Health care brings about good health which is needed for us to earn money and satisfy our
social needs. All these are then measured by utitlity In terms of satisfaction (a very difficult
parameter to measure
,Trends in healthcare:
• Increases initially but plateaus:
o Level of income and health outcomes
o Amount of health spending and health outcomes
• Increases linearly:
o Wealth and %GDP spent on healthcare
o Wealth and % of healthcare publicly financed
Module 2: Introduction to basic economic concepts
• Opportunity cost is the value of benefits foregone because a resource is not
available for its best alternative use.
o We often make decision to do something over another because we value the
activity we are doing currently more than the other activity we abandoned.
This is because we perceive the opportunity cost of the current activity if not
done with the available resources now would be greater than that of the other
o Foregone benefits refers is more than just dollars, it highlights: Everytime you
decide to do something, you are also deciding not to do something
o Market prices do not always reflect opportunity cost and resources have
value even though they may not be tradeable in the market
• Scarcity implies only that resources are not unlimited
o We must make choices between alternative courses of action and is an act of
choice which determines the real economic cost of each course of action
• Production possibility frontier: Graphical representation of all possible
combination of goods that can be produced in an economy
o Any point within the curve: can be produced with the available resources,
o Any point outside of curve: cannot be produced with the available resources
o At B: inefficient production mean that more of one good can be attained
without compromising on the amount of the other
, • Efficiency means doing the best we can with what we have
• Types:
o Technical efficiency links the value of inputs to the quantity of outputs
and occurs when no more of a given output can be produced from the
available resources.
o Allocative efficiency is a broader concept and links the value of inputs
to the value of outputs where the best possible combination of goods
and services as valued by society as a whole is being produced.
Module 3: Economics of markets
Competitive market model is a model that provides a useful framework for analyzing the way
in which consumers and providers interact under a set of assumptions that emaphasise
rationality.
Rationality assumes independent buyers and seller where buyers aim to maximise
benefits they get from consuming goods and services and producers aim to maximise their
profits from the production or sale of goods and services.
DEMAND
Demand for a given commodity or service is reflected by both willing (function of want or
need) and ability to pay (function of income): wants of a consumer backef up by
willingness and ability to pay
• As the price increases, demand for a product decreases
• The more we have of a commodity, the less marginal benefit we receive from each
additional unit (law of diminishing returns)
Factors affecting demand:
• Price of commodity
• Price of alternative products
• Income or wealth of consumers
• Tastes of consumers
The trend of higher price causing lower demand is explained by:
• Substitution effect: When price for good X rises, demand of it will fall as some
consumers will switch from good X to good Y as these alternatives are cheaper.
• Income effect: When price for good X rises, the consumers who purchase the same
amount of good X will have to spend more and hence leave them relatively poorer
(not able to afford to buy as much as hey used to)
• Opportunity costs: travelling time, transport costs etc
Supply
Supply is the quantity of a product that producers are willing to supply depending on price
