Final Economic Tools Concepts

Topics: Supply and demand, Price elasticity of demand, Elasticity Pages: 12 (2850 words) Published: August 5, 2015

Economic Tools and Concepts
Keturah Smith-Hinds
May 25, 2015
Nancy Jennings

Economic Tools and Concepts
Healthcare is one of the foremost concerns of the most civilized society. American presidents have been trying to revamp the healthcare system from the era of President Clinton and others. The goal is to minimize healthcare spending and contain the national healthcare budget. President Obama has successfully brought about significant changes in the healthcare industry through the advent of “The Affordable Care Act.” This new policy ensures that more of the medically underserved populations have easier access to health insurance coverage and benefits. Even so, the healthcare cost is still rising. The high cost of healthcare services and products is a global issue. An increase in the demand and supply of healthcare products and services fuels the economy of the American healthcare industry. Consequently, healthcare organizations and healthcare providers are required to supply increased volume of healthcare services based on the increased demand. The demand for healthcare services has increased globally because of several factors including increased knowledge in medical science, technology, efficacy in pharmaceuticals and an increased life expectancy. Therefore, the economic evaluation of health care systems and healthcare programs are necessary and important to healthcare providers, consumers, and policymakers. Frequent economic evaluation of the healthcare industry will keep a finger on the pulse of health spending. This paper examines economic tools and concepts including supply and demand curves, marginal analysis and elasticity used to evaluate current issues and situations that exist in today’s healthcare industry. Supply and Demand

According to Cunningham (2000), fiscal evaluation of health care programs is a remarkable tool; it sheds light on the cost and benefits of healthcare programs. A fiscal evaluation helps healthcare systems (HS) and healthcare providers with the decision making, supports the change in programs and administrative operations. A fiscal evaluation of health care programs is routine in medicine but is appropriate for other aspects of healthcare including dentistry and research. The goal of a fiscal evaluation of healthcare programs is to determine the use of scarce resources for the greater benefit of the majority (Cunningham, 2000). According to Getzen (2013), the choice consumers make to purchase is known as demand, and the choices made by suppliers are called supply. They are the chief dynamics of the financial system. Consumers move from one end of the trade pole to the other participating either on the demand or the supply end. For example, demanders swap funds for merchandise and services. On other hand, suppliers swap labor and material for funds. It is essential to understand the supply and demand process to appreciate how a deal adds additional “value as consumers’ surplus on the demand side, and producers’ surplus or profit on the supply side” (Getzen, 2013, p. 23). However, to truly understand the economics of the system one must evaluate the provider side of the equation. The provider side is made up of physicians and other healthcare professionals including health organizations (HO), convalesce facilities, rehabilitation centers, pharmaceuticals, and insurances carriers (Getzen, 2013). Demand and Supply Curve

Getzen (2013) explains the concept of demand and supply; by insisting that a consumer, who desires to purchase healthcare product and services such as total knee replacement, is a fraction of the demand. However, deciding not to buy makes such consumers undetectable; a dormant demander that does not successfully partake in the marketplace. However, if the price of the total knee replacement becomes more feasible because of a decrease in the manufacturing cost of the apparatus and lower cost to perform the procedure, the overall price...

References: Cunningham, S.J. (2000, March). Practice Economics, 188(5), 250-254.
Getzen, T. E. (2013). Health economics and financing (5th ed.). Hoboken, NJ: John Wiley &
Sons, Inc.
Mitton, C., Francois, D., & Donaldson, C. (2014, January). Managing healthcare budgets in
times of austerity: The role of program budgeting and marginal analysis. Applied Health
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