Health Economics-Health Economics-From Basics to AppliedFrom Basics to AppliedPart-IPart-I

Nayyar Raza Kazmi

Allocative efficiency– Directing resources to their most

productive use. Means assessing which intervention produces greatest health gains for a given investment of resources and focusing on that activity

Technical efficiency– Carrying out agreed activities using the

least possible resources

Think of any Health activity that has a poor allocative efficiency.

GDP– Value of all the goods and services

produced in a country plus its exports and minus imports (divided per total population of country to express it per head)

GNP– Similar but includes assets owned

abroad minus payments (debts).

Supply-Demand CurveSupply-Demand Curve

Costing Concepts in Health Costing Concepts in Health EconomicsEconomics Total Cost

– is what it costs to operate at some particular rate of output. If a firm makes just one kind of product, and is not planning to expand or contract, then the total cost is the same as the firm's budget.

Fixed Cost – Total cost can be divided into two portions: Fixed Cost and

Variable Cost. Fixed Cost is the part of the budget that stays the same regardless of whether you produce a lot, a little bit, or even if you produce zero. Overhead, rent on buildings, and interest on loans are in fixed cost.

Variable Cost – is the rest of total cost, the part that varies as you produce

more or less. Producing more adds to Variable Cost. Producing less reduces it.

What is the Variable Cost??What is the Variable Cost??

Marginal CostsMarginal Costs

Marginal cost is the difference in total cost between one rate of output and another. Usually, unless stated otherwise, the marginal cost is the change in cost that results from changing the output by one unit.

What is the Marginal CostsWhat is the Marginal Costs

What is the Marginal CostsWhat is the Marginal Costs

Relation between TC, FC, VC and MCRelation between TC, FC, VC and MC

DiscountingDiscounting

If a Health Project is estimated to produce $300 million in health benefits in 10 years and an alternative project would produce $250 in 5 years, which one we should invest in assuming a discount rate of 5%.

Economic Evaluation of Health Economic Evaluation of Health ProgramsProgramsCost Minimization AnalysisCost Benefit AnalysisCost Effectiveness AnalysisCost Utility Analysis.

Cost Minimization AnalysisCost Minimization Analysis

An analysis to determine which option costs the lowest for a given range of health outputs/ outcomes.

Cost Benefit AnalysisCost Benefit Analysis

1.(a) Marginal cost for 1,000 adults = 1,000 × $25 = $25,000.

Marginal benefit for 1,000 adults = 1,000 × (0,24 – 0.14) × $200 = $20,000.

No. Do not vaccinate as MC exceeds MB.