Understanding Economics: Macro, Micro, and Health Perspectives

Posted on Feb 15, 2025 in Economy

Understanding Key Economic Concepts

Economics: A social science that studies the production, distribution, exchange, and consumption of goods and services.

Macroeconomics

Macroeconomics: A branch of economics that studies national economies and the determinants of national income, output, and the interrelationship among diverse economic factors.

Microeconomics

Microeconomics: A branch of economics that studies the decisions of individual consumers, households, and firms, and how these decisions interact to form the prices of goods and services in specific markets.

Positive Economics

Positive Economics:

  1. It expresses what is.
  2. It is based on facts.
  3. It deals with actual or realistic situations.
  4. It can be verified with actual data.
  5. Judgments are not given.
  6. It deals with how an economic problem is solved.
  7. Eg: What determines the price rise?

Normative Economics

Normative Economics:

  1. It expresses what should be.
  2. It is based on ethics.
  3. It deals with idealistic situations.
  4. It cannot be verified with actual data.
  5. Judgments are given.
  6. It deals with how an economic problem should be solved.
  7. Eg: What is a fair price?

Health Economics

Health Economics: The application of the theories, concepts, and techniques of economics to the health sector.

Causes for the Global Increase in Healthcare’s Share

  • People may be buying more health services (doctors order more tests).
  • People may be buying higher-quality health services (organ transplants, laser surgery).
  • Healthcare inflation rate may be higher than the general inflation rate.
  • Insurance.
  • Aging population.
  • Increased use of medical technology.

Economic Problems of Healthcare Delivery

  1. Inflation: Medical care prices have grown faster than other prices overall in many parts of the world.
  2. Access: For many people, rises in costs significantly reduce accessibility to healthcare.
  3. Quality of healthcare.
  4. Other economic-related concerns which can affect the delivery of healthcare: production and demand.
  5. With economic recession.

Perfect Competition

The conditions of perfect competition are as follows:

  • A large number of buyers and sellers.
  • No barriers to entry.
  • No significant economies of scale.
  • No product differentiation or brand names.
  • Assumption of self-interest.
  • No externalities or spillover effects.

Market Failure

Market failure: The failure of an unregulated market [the free market] to achieve an efficient allocation of resources or to reach social goals, by either producing more or less than the optimal level of output.

Sources of Market Failure

  • Monopoly, oligopoly: Market dominance by monopolies [one producer], oligopoly [few producers].
  • Externalities in production and consumption.
  • Imperfect information.
  • Common-pool Resources and Public Goods.
  • Equity (fairness) issues.
  • Inappropriate consumer preferences.
  • Imperfect competition.

Government Intervention

Government Intervention:

  • Pollution taxes to correct for externalities.
  • Taxation of monopoly profits.
  • Regulation of oligopolies.
  • Direct provision of public goods.

Economic Analysis

Economic Analysis:

  1. Cost minimization analysis: when the outcomes of alternative interventions are the same in terms of volume and type.
  2. Cost-effectiveness analysis: when the volume but not the type of outcomes of alternative programs are different.
  3. Cost-utility analysis: when the type (and perhaps the volume) of outcomes from alternative programs are not the same.
  4. Cost-benefit analysis: The preceding evaluative methods all leave the outcome/benefit side of the equation in natural units.

Sources of Funding in Health Sectors

  1. Government.
  2. General government decentralization.
  3. MOH decentralization.
  4. Social insurance.
  5. Lotteries and betting.
  6. Private health insurance.