Health Economics

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Submitted By nicabacani
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Economics has what can be referred to as a “gold standard” of resource allocation mechanisms—the perfectly competitive market, which has the following characteristics. First, there would be many buyers and sellers with no single economic agent influencing the exchange of goods among market participants. Second, it is a homogeneous or standardized product. For example, goods that individual producers cannot alter or differentiate to collect a higher price. Third, there are no barriers to movement of firms into or out of the market. Fourth, there is perfect information about market conditions that is available to all market participants; and lastly, economics is a fully defined system of property rights in which ownership of all products and productive resources is assigned.
In economic theory, the law of supply and demand is considered one of the fundamental principles governing an economy. It is described as the state where as supply increases the price will tend to drop or vice versa, and as demand increases the price will tend to increase or vice versa. Basically this is a principle that most people intuitively grasp regarding the relationship of goods and services against the demand for those goods and services. When supply and demand are in balance, the economy is said to be in equilibrium between price and quantity.
Health can indeed be regarded as a fundamental commodity that is essential to a person’s well being, leading to a demand for improvements in it. Health does have characteristics that more conventional goods have. It can be manufactured; it is wanted and people are willing to pay for improvements in it. However, its relationship with the demand for health care is not one-to-one.
In the context of ordinary goods and services, economics distinguishes between a want, which is the desire to consume something, and effective demand, which is a want…...

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