Health Economics and Policies Course: Demand and Supply of Medical Care

1. Faculty of Medicine Health Economics and Policies (31505391)Demand and SupplyDemand for Medical Care.Supply of public health. By HatimJaber MD MPH JBCM PhD 18 +20 -02- 2019

2. Course Content 31505391 • Week 1 Introduction to Course introduction to Health: health value, health determinants. • Week 2 Introduction to: Health care management Health Policy and Healthcare Delivery. • Week 3 The scope of Economics and Health Economics . • Week 4 Demand and Supply Demand for Medical Care. Supply of public health . • Week 5 The Market for Health Insurance. • Week 6 Financing health care Economic in Health Policy -Cost and price. • Week 7 Health systems performance analysis. Measurement and evaluation in health care. • Week 8 Midterm assessment (Exams.) 21-3-2019 • Week 9Public Goods, Market Failures, and Cost-Benefit Analysis. • Week 10 Economic evaluation . Economics and efficiency cost analysis and cost effectiveness. • Week 11 Economic effects of Bad habits including smoking and alcohol consumption • Week 12 Quality Improvements in healthcare delivery Methods to improve health care delivery. • Week 13 Human resources in Healthcare delivery. • Week 14 Health Markets and Regulation and Economic regulation of health markets. • Week 15-16 Final assessment (Exams.)

3. Week 4 • Basic concepts of supply and demand • Individual demand for health • Basic concepts of supply and demand analysis • The Demand curve, The supply curve • Factors that Affect Demand and Supply • The Role of Price Signals • Assessing Need and Demand for Health Care • Supplier Induced Demand • Supply and Demand Relationship • The role of health care as an input to the production of health. • The responsiveness of demand for health care with respect to time, price, and income. • The relation of income and the demand for health care.

4. Presentation outline18-2-2019

6. Scope of health economics The scope of health economics is involved eight distinct topics: • What influences health? (other than health care) • What is health and what is its value. • The need for health care. • The demand for health care. • The supply of health care. • Micro-economic evaluation at treatment level • Market equilibrium • Planning, budgeting and monitoring mechanisms

7. Economics is a social science that deals with the production, distribution, consumption of goods and services and their management“ The public sector often fills the "needs" of society by providing such things as roads, schools and public assistance or welfare. • "wants" of society by producing and distributing goods and services to a portion of the population based on demand.

8. Maslow's hierarchy of needs: He proposed that people have a hierarchy of psychological needs, which range from security to self-actualization

10. Physical needs • Food • Water • Air • Shelter • Clothing These items are essential for good health and well-being, and for continuation of life.

11. Safety and Security Needs • Staying well, avoiding being ill • Avoiding danger • Safe circumstances • Stability • Protection • Structure, for order, some limits

12. Love and Acceptance Needs • Friends, sweetheart, children, affectionate relationships in general, even a sense of community

13. The Esteem needs • Self-esteem • The need for the respect of others, the need for status, fame, glory, recognition, attention, reputation, appreciation, dignity, even dominance.  • Self-respect • Confidence, competence, achievement, mastery, independence, and freedom

14. Self-actualization • Knowledge and appreciation of beauty, goodness, freedom and a realistic view and acceptance of self and others. • According to Maslow, only a small percentage of the world’s population is truly, predominantly, self-actualizing. 

15. Need: This is often thought of as a physiological or biological requirement for maintaining life, such as the need for air, water, food, shelter, and sleep. • Satisfactionis achieved by fulfilling needs. Physiological needs should be contrasted with psychological wants that make life more enjoyable but are not necessary to stay alive. • Examples of a "need“: • Include basic medical service, educational programs, funding for daycare, assistance in obtaining food, shelter, clothing, transportation, heat and job training. • Need might be perceived or professionally defined.

16. Needs are distinguished from wants because a deficiency would cause a clear negative outcome, such as dysfunction or death. • Needs can be : • Objectiveand physical, such as food, or • Subjectiveand psychological, such as the need for self-esteem. • How are such needs satisfied? • There are eleven broad categories of "intermediate needs" that define how the need for physical health and personal autonomy are fulfilled.

17. How are such needs satisfied There are eleven broad categories of "intermediate needs" • Adequate nutritional food and water • Adequate protective housing • A safe environment for working • A supply of clothing • A safe physical environment • Appropriate health care • Security in childhood • Significant primary relationships with others • Physical security • Economic security • Safe birth control and child-bearing • Appropriate basic and cross-cultural education.

18. Definitions of Health Needs

19. Demand

20. Demand - definitions • Demand is a schedule or curve that shows the various amounts of a product that consumers will buy at each of a series of possible prices during a specific period. • A curve illustrating the inverse relationship between the price of a product and the quantity demanded of it, other things equal, is the demand curve.

21. Demand is the ability and desire to pay for goods and services. If there is a high demand, the for-profit sector, governments will supply those wants . Some examples of what the population demands from this sector include luxury cars, expensive restaurants, physical cosmetic alterations, insurance, marketing and advertising, accounting and finance. • Demand refers to how much (quantity) of a product or service is desired by buyers. • The quantity demanded is the amount of a product people are willing to buy at a certain price; the relationship between price and quantity demanded is known as the demand relationship.

22. Demand • A relation between the price of a good and the quantity that consumers are willing and able to buy during a given period, other things constant. • Willing: you want to buy the product • Able: you can afford the buy the product

23. Health Demand: The desire and actual effort involved in attempting to bridge the gap between optimal health and ill health(to meet health needs) through the utilization of health care services. In general, demand reflects : • population health needs, • their ability to pay for service utilization • availability of services to be used.

24. Demand Law of demand: the claim that the quantity demanded of a good falls when the price of the good rises, other things equal

25. Demand Schedule and Curve • Demand curve: • a curve showing the relation between the price of a good and quantity demanded during a given period, other things constant.

26. The Demand Schedule Demand schedule: a table that shows the relationship between the price of a good and the quantity demanded Example: Helen’s demand for lattes. • Notice that Helen’s preferences obey the Law of Demand.

27. Helen’s Demand Schedule & Curve Price of Lattes Quantity of Lattes

28. Demand Curve A curve showing the relation between the price of a good and the quantity demanded. Price $6 Point on the line that matches the schedule $5 Every point on the line matches the schedule. It is a price/quantity demanded that consumers are willing and able to buy. $4 $3 Demand Quantity 0 200 150 50 75 100

29. Law of Demand States that a quantity of a good demanded during a given period relates inversely to its price, other things constant. • Price increases  Quantity Demanded decreases • Price decreases  Quantity demanded increases • Creates a downward sloping demand curve

30. Individual and Market Demand • Individual demand is the demand schedule or curve of a single consumer. • Market demandis the sum of all the individual demands. • The demand of all consumers in the marketplace for a particular good or service • Summation at each price of the quantity demanded by each individual

31. The Individual Demand Curve • The demand curve is a graph illustrating how much of a given product a household would be willing to buy at different prices. • Quantity demanded is inversely related to price, holding other factors constant. • Price #Qd$ • Price $Qd# • The Law of Demand states that, all else equal, as price falls, the quantity demanded rises, and vice versa.

32. Changes in Demand • Increase in demand • At each and every price MORE of the good is demanded • Shifts to the right Price A B $5 D2 D1 Quantity 100 150

33. Review of Demand • A change in quantity demanded is not a change in demand • Change in quantity demanded is caused by a change in price • Change in quantity demanded is a movement along the demand curve • Change is demand is caused by a change in the determinants • Change in demand shifts the demand curve

34. Determinants of Demand • Changes in consumer income • Changes in prices of related goods • Changes in consumer expectations • Changes in the number or composition of consumers • Changes in consumer tastes

35. Changes in determinants • Results in changes to the RELATIONSHIP BETWEEN PRICE AND QUANTITY DEMANDED. • At each and every price a DIFFERENTquantity is demanded. • Results in a shift in the demand curve • New curve must be drawn

36. Number of Buyers Price Prices of other goods Determinants of Demand Income Quality Expectations about future Supply? Tastes

37. Determinants of Demand Price Prices of other goods Expectations about future Quality Income Tastes Number of Buyers Supply?

38. Price • Price is the most importantdeterminant of demand. • A “demand curve” plots combinations of prices and quantity demanded. • A shift in price causes a shift along the demand curve • A change in price causes a shift along the demand curve. • A shift along the demand curve is referred to as a “shift in the quantity demanded.”

39. Non-price Determinants of Demand Determinants of demand are factors other than price that locate the position of a demand curve. • Income • Tastes and preferences • The prices of related goods • Substitutes - Two goods are substitutes when a change in the price of one causes a shift in demand for the other in the same direction as the price change. • Complements - Two goods are complements when a change in the price of one causes an opposite shift in the demand curve for the other. • Expectations • Future prices • Income • Product availability • Market size (number of buyers)

40. Income • Changes in income canincrease or decrease demand. • A good whose demand decreases with an increase in income is called an “inferior good.” • A good whose demand increases with an increase in income is called a “normal good.”

41. Change in consumer income • Normal goods • A good for which demand increases as consumer income rise • Inferior goods • A good which demand increases as consumer income falls

42. Change in Income • Incomeis the sum of all households wages, salaries, profits, interest payments, rents, and other forms of earnings in a given period of time. It is a flow measure. • The effects of changes in income vary depending on the type of product demanded. • When income rises, all else equal, the demand for normal goods increases, while the demand for inferior goods decreases.

43. Number of buyers • An increase in the number of potential buyers will increase the demand for the good. • For example, the demand for land increases as the population increases. • Similarly baseball tickets are generally more expensive in larger cities.

44. Tastes • Demand curves can shift due to changes in tastes over time. • For example, demand for cereal may be high in the morning but low at night.

45. Quality • Demand curves can shift due to changes quality. • At a given price, demand for pizza is higher than the demand for Papa John’s.

46. Presentation outline20-2-2019

47. Supply - Definition • Schedule showing relationship between price and quantity supplied for a specified time period, other things being equal • The amount of a product or service that firms are willing to sell at alternative prices • Supply is a schedule or curve showing the amounts of a product that producers will make available for sale at each of a series of possible prices during a specific period. • A curve illustrating the positive, or direct relationship between the price of a product and the quantity supplied of it, other things equal, is the supply curve.

48. Supplyrepresents how much the market can offer. The quantity supplied refers to the amount of a certain good producers are willing to supply when receiving a certain price. The correlation between price and how much of a good or service is supplied to the market is known as the supply relationship.

49. Price, therefore, is a reflection of supply and demand. The relationship between demand and supply underlie the forces behind the allocation of resources. • Demand and supply theory will allocate resources in the most efficient way possible.

50. Supply The quantity supplied of any good is the amount that sellers are willing and able to sell. Law of supply: the claim that the quantity supplied of a good rises when the price of the good rises, other things equal.