Foundations of Healthcare Economics

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Submitted By debst1953
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Health Economics- HSA510

Project Paper
Foundations of Health Care Economics

Supply and demand or demand and supply, which comes first in the study of consumer behavior regarding health care choices. Such questions can boggle the mind; however, healthcare economists and researchers have made it easier for professionals, health care managers and others to decipher how rational individuals make consumption choices when faced with limited choices, especially in the health care environment. In economics, the simplest way to determine the demand for a particular health care service can be illustrated through supply and demand curves. The theory of demand proposes that when prices increase for a health product or good then there will be less demand for that product or good. A further assumption of this theory is that all other things are equal or held constant. Therefore, if consumers buy less at higher prices then the demand curve will slope downward. Consideration should also be given to other variables that may affect the demand for a health product or good. Those variables or demand shifters would include income, other prices, insurance, and tastes. Supply can also be determined in the same fashion as demand. If a health supplier or producer is willing to offer a health product or good for at a certain price, generally if the price raises, so does the supply and in this case, there would be an upward sloping demand curve. The supply shifters in this case would be technological change, input prices, prices of production-related goods, size of the industry, and weather. Another tool used in consumer demand for a health care service is the utility function. Folland, Goodman, & Stano (2010), state that utility is a measure of consumer satisfaction with various combinations of consumer goods. It includes a market basket filled with a…...

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