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EAE 309: Health Economics Notes

Institution: Kenyatta University

Course: Bachelor of Economics

Content Category: lecture notes

Posted By: davidkariuki1010

Document Type: DOCX

Number of Pages: 89

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Summary

TOPIC 1: INTRODUCTION
The scope and relevance of health economics HEALTH ECONOMICS
The concepts presented are drawn from the core of economic theory that can be found in nearly any economic textbook, but because there are special features of health care that make it “ different?? than standard goods and services (e.g., shoes, hammers, haircuts, VCRs, legal services etc.), applying the concepts in the health sector is not always straightforward. This is part of what makes health economics such an interesting and challenging field. Where else, for instance, is such a basic economic truth as the proposition that increasing the number of suppliers for a good will lower the price of the good turned on its head with the anomalous finding that, in the physician services market, increases in supply of physicians have been associated with increases in price? But once you understand the nature of health care as an economic commodity and the structure of the health care sector, the result is not surprising. Indeed, you can use basic economic concepts to understand the dynamics that lead to such an “anomalous?? result.
Definition: Health Economics is therefore defined as the study of how scarce resources are allocated to and within the health economy and also utilization of these resources to provide the health care needs of the population.
Production of health care and its distribution across different populations also fall under this definition. Under Health Economics, we will lay bare the enormity and the importance of the health sector. To achieve this, different measures of size and growth are used to establish the relevance of the health economy to both individual and national policy concerns. Further, we will utilize economics in trying to explain how health care markets function.
So, what do we need: Health Economics or Health Care Economics?

Health is defined as “a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity” (WHO, 1948).
Having defined health we then ask: Is health an economic commodity? We note that health has value in use and may be scarce but it has no value in exchange, i.e it is non-tradable. So since

health is not tradable, then it is not an economic commodity. Whenever someone is not well health wise, he/she goes for health care.
Health Care is demanded to contribute to achieving health.

What is health care then? It is the prevention, treatment, and management of illness and the preservation of mental and physical well-being through the services offered by the medical and allied health professions. Health care has value in use (to restore health status), value in exchange (it is tradable) and is scarce as well. Therefore health care is an economic commodity.
Foundations of Health Economics
Health economics draws its theoretical inspiration mainly from four traditional areas, namely:
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