health economics prelim

7/31/2019 Health Economics Prelim

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SAN PABLO COLLEGES

COLLEGE OF NURSING

SAN PABLO CITY

HEALTH ECONOMICS

Health and medical care is now as one of the countrys basic needs,

ranking after food, clothing and shelter. Being a necessity, it is already

considered as a good that is to be consumed whether or not it is within the

purchasing capacity of an ordinary consumer.

Health economics encompasses the medical care industry, it is

concerned with the economic aspects of health problem that deals with the

determination of the type, quality, quantity and prices of the resources,quantity and quality of resources allocated to the health area; the medical

care industrys efficiency; loses due to illness, disability and premature death

and possible economics of scale.

In the planning and management of a health system, major decisions

have to be made. The criterion used in decision-making is usually a

combination of value and efficiency criteria.

Definitions of Economics

Economics comes from the Greek word oikonomia meaning the

management of the household or the state. Economics is the study of human

relationship, between ends and scarce means and their alternative uses. It

deals with the processes of production exchange, distribution and

consumption of goods and services.

Fundamental Concepts of Economics

Goods refers to anything that satisfies human needs that includes materialobjects like food, clothing, furniture, and other physical goods but also

services of immaterial goods, like the service of the Doctors, Lawyers,

Teachers, or those of servants. All these satisfy any of our want.


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Utility material goods and services have qualities that satisfy human wants.

The quality of good that satisfy our wants is called utility. The utility of good to

a person depends upon how it satisfies his wants.

Wealth Wealth defined as those things that are useful scarce material and

transferable.

Production production is defined as the creation of utilities. It is the process

of adding utility to economic good.

There are five kinds of utility derived from production, namely, form utility,

place utility, time utility, possession utility and service utility.

The merchant is also engaged in production. He makes things more useful by

transferring the ownership of goods from producers to consumers.

Consumption Consumption is defined as the utilization of goods for the

direct satisfaction of wants.

Income The income of an individual consists of money received or of goods

services resulting from his productive activities. Income maybe classified as

nominal income or real income. The nominal income of and individual is the

money he receives during a given period. His real income consists of material

goods and services that the money income can buy.

Economic System refers to the economic and social institution that is

regarded as one. These institutions when grouped together commonly

constitute a unit of the economy such as consumers, producers and others.

Households are consumers, business firms are producers and also users of the

products of their firms, government may be both producer and consumer

when it uses materials and employs human resources in various government

projects.

Economic Sectors

Households are consumers who buy the products of industry. They also

provide some of the inputs needed by the firm such as land, labor and capital.

Business firms producer these are the producers of goods and services.

The Philippine has a mixture of domestic (Filipino owned) and foreign (non


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Filipinos) many of the domestic firms are privately owned while some are

government owned.

Government the government sector consists of various levels, namely, the

national and local governments, the legislative and department. The local

government is further subdivided into provincial, municipal and barrio units.

Rest of the world or foreign sector refers to the trade with other

societies the foreign or rest of the world unit. The foreign sector is usually

treated separately because of the unique characteristics or consumption and

production possibilities in the different countries of the world.

Types of Economic System

Traditional Economy a family produces a thing that it consumes decisionson what, how or whom to produce are made by referring to the traditional

manners of doing things.

The Command Economy the means of production are owned by the

government. Its decisions are arrived out by planners of government men

who dictate what, how, and for whom to produce.

The Market Economy the system depends on the prices set by the

conditions of demand and supply. The price of goods is the guiding factor for

producers to know what and how much to produce.

Mixed Economy the Philippines is a mixed economy since it applies a

mixture of forms of decision making.

Function of Economic System

1. An economic system must determine the needs to be served by

production.

2. To allocate the productive resources-land, labor, capital and directionamong the variety of goods and services to be produced.

3. To distribute among the members of society the total wealth produced.

4. To make provisions for economic growth.

General Economic Resources


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1. Land

2. Labor labor is the exertion of human efforts to make an income. Labor

means the exertion not only of manual but also of mental effort. There is

no activity in which man does not use both physical and mental

facilities.

3. Capital refers to the man-made goods in the production of goods and

services. Capital does not only mean money, it also includes buildings,

machinery, raw materials, and other physical necessities that are used

in the production. Savings refer to the part of a persons income which

not spent on consumption.

4. Entrepreneur

5. Technology

Three Components of Economics

Alternative choices when one makes a choice, there is always an

alternative that has to be given up

The choices of their cost in making the choice, you give up the chance of

the other and would have to face the cost of your whether it is much higher or

lower.

Effects of choices in the future so the choice you decide to pick will give

you either monetary reward or success or failure.

Supply and Demand

The demand curve is a graphical representation of the demand schedule.

It shoes the relationship between the prices and quantity of needs that

consumers are willing to pay.

The supply curve an upward sloping curve it shows the relationship of a

good price and the quantity that producers are willing to sell of a lower price(P1) the quantity produced. And sell is lower (Q1) at a higher price (P2) the

quantity produced and sell is higher (Q2).

The law of upward sloping supply when the price of the commodity

increased (all other thing being equally) producers tend to produce and sell

more of the said commodity when the price is decreased.


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Factors that affect the Supply of a certain Goods are the following:

Own price of the product: a higher own price of a certain product gives

better profits, producers of the product. When producing and selling a certain

product give businesses more profits, produces will produce more.

Production cost: products have costs, and the lower costs relative to the

prices, the better the profits. Thus, businesses try very hard to find ways to

bring down the production costs of their products.

Prices of production substitutes:

Market organization: the market organization where the business

participates is largely affects the supply of products.

Types

1. Monopoly: is a market structure in which a commodity is supplied by a

single firm. This is exemplified by meralco/PLDT

2. Oligopoly: it is a market state of imperfect competition, in which small

competitors dominate the industry.

3. Perfect competition: a market in perfect competition is the best for

consumers and has the following characteristics:

a. the number of sellers and buyers are very large.

b. the products offered by sellers are almost the same

4. Monopolistic competition: this is a market in between oligopoly and

perfect competition. It is a market structure in which there are many

sellers who are applying goods that are close but are not perfect

substitutes.

Market Equilibrium

a. comes at a price and quantity where the supply and demand force are in

balance.

b. at such a price and quantity, the amount that buyers wish to buy is justequal to the amount that sellers wish to sell.

c. price and quantity tend to stay the same, as long as other things remain

equally will something operates to change supply and demand.


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The demand curve

Pp2 D

P1

D

Q1 Q2 Quantity

The demand curve, downloading sloping curve, shows the relationship of price

of a good + quantity demand. At a lower price (P1) quantity demanded is

higher (Q2). At a higher price (P2) quantity demanded is lower.

Factors that affect the demand curve

Own price of the product: a higher own price of a product decreases the

demand but such a lower price increases the demand

Average income: as the average income of people and households increases

the demand of specific goods. This is because when people have higher

income they have more money to spend for buying things.

Population and demographics as the population increases more people will use

commodity.

Prices of related goods: related goods can either be substitute products or

complimenting products.

Substitute products are commodities that decrease the use of another productwhen more of the other is used.

Complimentary products have in the same direction. Lower gasoline prices will

tend to increase the demand for both gasoline and cars. Greater use of one

will lead to more use of the other and vice versa. More use of cars will increase


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the use of gasoline. More expensive gasoline will tend to lead the less use of

both gasoline and car.

Taste of buyers: influence buying decisions but is more difficult to assess.

Tasks likely differ from person to person.

The Demand Shift

The Demand Shift

Price

D

(-) (+)

Quantity

The demand shifts. Shift to the right indicates a positive (+) or an increase in

actual demand for a commodity. Shift to the left indicates a negative (-) shift

or decrease in the actual demand for a commodity.


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Health Economics

Health economics can be defined as broadly as the application of the

theories, concepts and techniques of economics to the health care sector.

It is thus concerned with such manner as:

a. The allocation of resources between varies health promoting activities.

b. quantity of resources used in health are delivered to improve health.

c. organization and finding of health organizations.

d. efficiency of the allocation and use of resources for health.

e. assessing the effects of preventive, curative and rehabilitative health

services on individual and society.

Relationship of Health and Economics

Improvement in Health Status

More resources improvement in

Allocated for health worker

productivity

Contributes to better economy


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THE CONCEPT OF HEALTH

Definition of Health

Health is derived from the Old English word for heal (hael) which means

whole, signaling that health concerns the whole person and his or her

integrity, soundness, or well-being.

Has two common meaning of health:

1. Negative definition of health health is the absence of diseases or

illness.

2. Positive definition of health health is a state of complete physical,

mental, and social well being, not merely the absence of disease or

infirmity (WHO 1946).

Holistic health means taking account of the separate influences and

interaction of different dimensions.

ENVIRONMENTAL

SOCIETAL

PHYSICAL MENTAL

EMOTIONAL SOCIAL

SPIRITUAL SEXUAL

Dimensions of Health

The inner circle represents individual dimensions of health.

Physical health concerns the body, e.g. fitness, and not being ill.


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Mental health refers to a positive sense of purpose and an underlying

belief in ones

own health, e.g. feeling good, feeling able to cope.

Emotional health concerns the ability to express feelings, and to

develop and sustain

relationship, e.g. feeling loved.

Social health concerns the sense of having support available from

family friends, e.g. having friends to talk to, being involved in the

activities with other people.

Spiritual health is the recognition and ability to put into practice moral

and religious principle pr beliefs.

Sexual health is the acceptance and ability to achieve a satisfactory

expression of ones sexuality.

The two outer circles are broader dimensions of health, which affect the

individual.

Societal Health refers to the link between health and the way to a

society is structured

Includes the basic infrastructure necessary for health (e.g.

shelter, peace, food, and income), and the degree of

integration or division within society.

Environmental health refers to the physical environment in which

people live, and includes things such as housing, transport, sanitation,

and pure water facilities and pollution.

How health is objectively measured?

Health is measured according to objective factors including:

Health measures


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There are measures of the health status of people, including vital

statistics such as height and weight, and dental status (decayed, missing and

filled teeth, DMF, index).

Floud (1989) argues that the average height of the population maybe

taken as a measure of health, as it represents a proxy for nutritional status

and therefore welfare. In the same way, Townsend et al (1987) use the

percentage of low birth weight babies as an indicator of health.

Health Behavior Indicators

Increasingly common are measurements of peoples behavior, which are

then used as a measure for health, (e.g. the number of people smoking,

drinking alcohol, using drugs, taking regular exercise, eating a healthy diet,

practicing safe sex or planned fertility, any may be used to described different

population, and to make comparisons between regarding relative healthstatus.

These lifestyle measures are sometimes narrowed down to more specific

behavior in relation to health services (e.g. the percentage of children

immunized against childhood illnesses, or the percentages of women screened

for cervical and breast cancer), may be used to described the health status of

a population.

Environmental Indicators

Measurements of the physical environment include air and water

quality, and housing type and density. These measures are routinely collected

by the environmental health departments of local authorities.

Socio-economic indicators

The social environment may also be measured of its healthiness.

Wealth is commonly used measurement assess social environment.

It is being suggested that countries with a more equitable distribution of

wealth enjoy better health and that countries with very unequal distribution of

wealth suffer poorer health.

- Objective measurements of peoples health status, health related

behavior and the environment might be combined to provide and over


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all picture of health. The health of different populations, from

neighborhoods to nations, may be assessed and compared using this

method.

- Improvements in the social and physical environment, such as an

increase in the number of smoke-free places, an increase in the number,

accessibility and safety of play areas and sports centers, or

improvements in housing amenities and density, may also be added into

the equation.

- Peoples health-related beliefs and attitudes, and the extent to which

their conform to professional beliefs, have also been considered to be a

measure of health. (e.g. the percentage of the population seeking to

make recommended lifestyle changes, or having and understanding of

basic health issues).

Determinants of Health

Two variables of Determinants of Health:

1. Measure of health, or ill health (e.g. mortality or morbidity)

2. Factor such as gender or occupation that could account for the differences

in health.

The health status can be accounted for not only by one variable, but many

factors which interact together. Such as:

- Key social stratification factors (class, gender, age, ethnicity)

- Environmental factors (housing tenure, environment, regional

locations, access to health services, access to leisure facilities)

- Lifestyle (nutrition, smoking, physical activity, psychosocial factors,

obesity) including CHD.

What is clear is that ill health does not happen by chance or through bad luck.

To identify the major determinants of health and ill has focused on the links

between social class and health and so on, such as follows:


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Genetic and biological factors which determine an individuals

predisposition disease.

Lifestyle factors in which health behaviors such as smoking contributes

to disease

Environmental factors such as housing or population

The extent and nature of health services

Social and Health

In 1980 a report was published of a Department of Health and Social

Security working group on inequalities in health. The report is known as theBlack Report, it provides a detailed study of the relationship between morality

and morbidity, and social class.

The term social class, social disadvantages, socio-economic status and

occupation are often used interchangeably. The classification of social class

derives from the Registrars scale of five occupational classes ranging from

professionals in class I to unskilled manual workers in class V. this has been

largely unchanged whereas Class III was divided into manual and non-manual

work.

The office of the National Statistics introduce eight new categories for

the census in 2001 to take account of changes in the labor market with a

social class for the self-employed and one for people who have never worked

or who are long-term unemployed.

Social Class Classification:

1. Higher managerial and professional

1.1 e.g. company directors, bank managers, senior civil servants1.2 e.g. doctors, barristers and solicitors, teacher, social workers

2. Lower managerial and professionals

e.g. nurses, actors, musicians, police , soldiers

3. Intermediate


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e.g. secretaries, clerks

4. Small employers and own account workers

e.g. publicans, playground leaders, farmers, taxi drivers

5. Lower supervisory, craft and related occupation

e.g. printers, plumbers, butchers, train drivers

6. Semi-routine occupations

e.g. shop assistants, traffic wardens, hairdressers

7. Routine occupation

e.g. waiters, road sweepers, cleaners, couriers

8. Never worked and long-term unemployed

Social class classification serves as an indicator of the way of life and living

standards experienced by different groups. It correlates with other aspects of

social position such as income, housing, education and working and living

environments.

Market place

Demand reflects the consumers desire for a commodity

Supply the amount of commodity available for supply sale

Aggregate demand

- The totality of a group of consumer

Demand schedule

- The quantities consumers are willing to buy of a good at various prices

Aggregate supply

- The totality of a group of producers supply

Supply schedule

- The quantities producers are willing to offer for sale at various prices


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Movement along the curve

- A charge from one point to another on the same curve

Shift of the curve

- A charge in the entire curve

Non-price factor

- Also known as parameters, are factors other that price

Demand function

- Shows how quality demanded is dependent of its determinants

Supply function

- Shows how quantity supplied is dependent on its determinant

Consumption- Defined as the utilization of goods

health economics prelim

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