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Health Economics & Policy 3 rd Edition James W. Henderson

Health Economics & Policy 3 rd Edition James W. Henderson. Chapter 2 Using Economics to Study Health Issues. Is Economics Relevant?. Economics is the study of human behavior Economics is a way of thinking Economics provides a systematic way of looking at a problem. Economic Methodology.

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Health Economics & Policy 3 rd Edition James W. Henderson

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  1. Health Economics & Policy3rd EditionJames W. Henderson Chapter 2 Using Economics to Study Health Issues

  2. Is Economics Relevant? • Economics is the study of human behavior • Economics is a way of thinking • Economics provides a systematic way of looking at a problem

  3. Economic Methodology • Critical assumptions • Rational choice and self interest • Science of “rationality” • Most “scientific” of all the social sciences • Abides strictly to scientific method • Theory and empiricism • Model building • Problem solving

  4. Economic Optimization • Neoclassical framework • Rational decision makers • Optimizing behavior • Predictable results • Marginal decision making • MB = MC, not TB = TC • Victor Fuchs – flat of the curve

  5. Demand and Supply • Rational self interest and competition • Lead to equilibrium outcomes • Constraints impede market outcomes • Government regulations • Price floors and ceilings • Medical care markets • Halfway competition • Ineffective regulation stripping managed care of its ability to control prices

  6. Elasticity of Demand • Sensitivity to change • Price elasticity • Elasticity and expenditures • Introduction of cost-saving technologies may not lower spending – technological diffusion may actually increase spending • Income elasticity • Classification of goods • HCE as percent of GDP

  7. Competitive Model • Assumptions • Graphical presentation • Applicability to medical care

  8. Imperfect Competition • Supply-side imperfections • Demand-side imperfections

  9. Key Economic Concepts • Scarcity and choice • Opportunity cost • Marginal analysis • Self-interest • Markets and pricing

  10. Key Economic Concepts • Supply and demand • Competition • Efficiency • Market failure • Comparative advantage

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