Health Economics Introduction PDF

SOC 5 HEALTH ECONOMICS   Branch of economics which deals with care of sickness, promotion, maintenance and improvement of health.  What is Economics?  Economics is the study of the proper allocation and efficient use of scarce resources to produce commodi...

SOC 5 HEALTH ECONOMICS   Branch of economics which deals with care of sickness, promotion, maintenance and improvement of health.  What is Economics?  Economics is the study of the proper allocation and efficient use of scarce resources to produce commodities for the maximum satisfaction of unlimited human needs and wants. ETYMOLOGY OF ECONOMICS Free powerpoint template: www.brainybetty.com 4 Economics comes from the Ancient Greek oikonomia, which literally means "management of a household” Free powerpoint template: www.brainybetty.com 5  WHAT ARE NEEDS?  Needs are essential for human survival like food, clothing and shelter.  The absence of these needs could mean an early demise of humans in this world.  FOODS SHELTER CLOTHING EDUCATION HEALTH CARE Free powerpoint template: www.brainybetty.com 7  THREE KINDS OF NEEDS 1. Basic Needs 2. Essential Needs for decent and comfortable living 3. Needs for Luxury Goods Free powerpoint template: www.brainybetty.com 8  WHAT ARE WANTS?  Wants are goods that give more satisfaction and make life more pleasant and worth living.  They refer to a person’s desire and preference to specific ways of satisfying a basic need. Free powerpoint template: www.brainybetty.com 9 Free powerpoint template: www.brainybetty.com 10  TWO KINDS OF WANTS  Public Wants - are those that come out of the public sector.  Public wants are anything that the government seek to purchase. Free powerpoint template: www.brainybetty.com 11  Private Wants - are those that come out of the private sector.  Private wants are anything that individuals and businesses seek to purchase Free powerpoint template: www.brainybetty.com 12  “Economize” and Its Implications  As consumers, to economize is to get the greatest satisfaction out of the consumption of goods and services that they possess. Free powerpoint template: www.brainybetty.com 13  Producers, on the other hand, use various resources in order to produce final goods and services.  They have to produce particular goods and services that have demand from consumers. Free powerpoint template: www.brainybetty.com 14 1. To strengthen economic freedom a. Consumer choice b. Freedom of occupational choice c. Freedom to consume or save Free powerpoint template: www.brainybetty.com 15 d. Freedom to own properties e. Freedom of enterprise A competitive market functions to protect the freedom and rights of consumers, workers and producers. Free powerpoint template: www.brainybetty.com 16  Protection is in the form of legal framework so that free markets can operate to: a. Maintain competition b. Preserve high standards in goods and services c. Shield against fraud Free powerpoint template: www.brainybetty.com 17  GOALS OF ECONOMICS 2. To promote economic efficiency Efficiency is producing more output with the use of fewer resources. Free powerpoint template: www.brainybetty.com 18  Factors that Contribute to Efficiency 1. Modern Technology (new tools and machines) 2. Managerial Skills An efficient economy responds to both consumer demand and the relative scarcity of resources. Free powerpoint template: www.brainybetty.com 19 MODERN TECHNOLOGY MANAGERIAL SKILLS Free powerpoint template: www.brainybetty.com 20 3. To promote economic stability Stability means there are no violent ups and downs in the economy. The goal is a consistent growth in a changing world Free powerpoint template: www.brainybetty.com 21 Economic freedom, efficiency, and growth in the economy emanate mainly from the actions of individuals with government assistance in the form of legal framework and social institutions to protect them from market imperfections. Free powerpoint template: www.brainybetty.com 22 4. To promote economic security. People with corresponding skills, capital, and assets are sold in exchange for income, and the value of those agents depend on the worth of the final goods and services produced by them. Free powerpoint template: www.brainybetty.com 23 5. To attain a high level of growth in the economy. Economic growth means that the capacity to produce goods and services is increasing and it is growing more rapidly than the population. Free powerpoint template: www.brainybetty.com 24  FACTORS THAT DETERMINE GROWTH 1. Expansion in the resources available for producing goods and services Example: Larger labor force and larger capital stock Free powerpoint template: www.brainybetty.com 25 2. Improved skills and technology, including managerial and entrepreneurial skills resulting to the production of more goods and services Free powerpoint template: www.brainybetty.com 26  Government Responsibilities in Promoting Economic Growth 1. To provide law and order that will create a conducive investment climate a. Enforcement of contracts b. Preservation of the environment Free powerpoint template: www.brainybetty.com 27 2. To provide public services that the private sector cannot provide but are important for an expanding economy. Free powerpoint template: www.brainybetty.com 28 SOCIAL SCIENCES RELATED TO ECONOMICS Free powerpoint template: www.brainybetty.com 29  ANTHROPOLOGY  Anthropology is a branch of science that studies the biological, psychological, social, and cultural aspects of human life. Free powerpoint template: www.brainybetty.com 30  Anthropos (Gr.) group of people  Logus (Gr.) study or science  In economics, it’s necessary to understand the social aspects to be aware of the basic needs of human being and enhance his social life. Free powerpoint template: www.brainybetty.com 31  POLIITICAL SCIENCE  Polis (Gr.) city or state  Scire (Lat.) to know  Political Science is a systematic study of the state and government Free powerpoint template: www.brainybetty.com 32  Political Science is important in economics because it studies the mechanics of the distribution of power.  Its primary concern is to find out the relationship between the authority and the masses Free powerpoint template: www.brainybetty.com 33  SOCIOLOGY  Socius (Gr.) society  Logus (Gr.) study or science  Sociology is the study of the society or groups Free powerpoint template: www.brainybetty.com 34  In economics, sociology focuses on social relations, social organizations, social interactions, social structures, and social processes  It also deals with various issues and problems… Free powerpoint template: www.brainybetty.com 35  PSYCHOLOGY  Psyche (Gr.) soul  Logus (Gr.) science or study  Psychology is the scientific study of the human behavior. Free powerpoint template: www.brainybetty.com 36  Psychology, in economics, guides man in mind conditioning or individual perception and decision- making (e.g., buying of goods and services, choosing leaders in the government.) Free powerpoint template: www.brainybetty.com 37  HISTORY  History is a social science that focuses on the study of past events.  It enables man to have a detailed and in-depth interpretation of the causes and effects of past events Free powerpoint template: www.brainybetty.com 38 MAJOR BRANCHES OF ECONOMICS Free powerpoint template: www.brainybetty.com 39  MICROECONOMICS  Microeconomics deals with the behavior of individual components such as household, firm, and individual owner of production Free powerpoint template: www.brainybetty.com 40  Macroeconomics  It deals with the behavior of the economy as a whole with the view of understanding the interaction between economic aggregates such as employment, inflation, and national income. Free powerpoint template: www.brainybetty.com 41 METHODOLOGIES OF ECONOMICS Free powerpoint template: www.brainybetty.com 42  POSITIVE ECONOMICS  Positive economics relates to what the problem is.  It is an economic analysis that explains what happens in the economy and why it happens, and how the economy works. Free powerpoint template: www.brainybetty.com 43  NORMATIVE ECONOMICS  Normative economics is concerned with what should be.  It is an economic statement that makes recommendations to economic policy. Free powerpoint template: www.brainybetty.com 44 SCIENTIFIC METHOD OF ECONOMICS Free powerpoint template: www.brainybetty.com 45 1. Data Gathering. Economic knowledge is obtained from observation of economic events.  Data is obtained through historical records and interviews of past performances; also called empirical method Free powerpoint template: www.brainybetty.com 46 2. Economic Analysis. Data gathered is useless if not analyzed.  It is essential in arriving at a synthesis of the recorded data.  It is an approach in order to predicts economic behavior on the basis of assumption. Free powerpoint template: www.brainybetty.com 47 3. Economic Conclusions. After laying down all assumptions, one proceeds to reasoning in order to generate conclusion.  Reasoning is either inductive or deductive. Free powerpoint template: www.brainybetty.com 48  Inductive reasoning is the process of reasoning from particular to general  Deductive reasoning is the process of reasoning from general to particular Free powerpoint template: www.brainybetty.com 49 DEVELOPMENT OF ECONOMIC THOUGHT Free powerpoint template: www.brainybetty.com 50  The history of economic thought deals with various intellectuals and theories in the subject that developed into economics from the ancient period to the modern day. It covers many schools of economic thought. 51   Aristotle examined wealth accumulation and inquires whether property should be in the hands of private or public institutions. (Ancient Times) Free powerpoint template: www.brainybetty.com 52  St. Thomas Aquinas argued that it was moral for business to trade goods at a just price. (Medieval Era) Free powerpoint template: www.brainybetty.com 53  Adam Smith was considered the father of modern economics for his treatise An Inquiry into the Nature an His theories rest Causes of the upon a Wealth of Nations substantial work (1776). of the physiocrats. Free powerpoint template: www.brainybetty.com 54  Physiocrats Originated in France and were most popular during the second half of the 18th century headed by Anne-Robert- Jacques Turgot and François Quesnay It was deemed to as the "Government of Nature" Most significant contribution was their emphasis on productive work  Agriculture was the source of wealth in the economy Circulation or flow of input and output Advocated minimal government intervention Promoted individualism and laissez faire as each individual was best suited to determine what goods he wanted and what work would provide him with what he wanted out of life  CLASSICAL ECONOMISTS (Successors of Adam Smith) Free powerpoint template: www.brainybetty.com 59 1. David Ricardo 2. John Stuart Mill 3. Jean-Baptiste Say 4. Thomas Malthus  They scrutinized the ways how the capitalists and labor classes created and distributed goods and services  They conceptualized the effects of population and international trade on the economy.  THREE CLASSICAL ECONOMISTS DAVID RICARDO David Ricardo –focused on the distribution of income among landowners, workers and capitalists. JOHN STUART MILL John Stuart Mill – THOMAS MALTHUS pointed a distinct Thomas Malthus – used the idea of diminishing difference between the returns to explain low living standard is. He also market’s two roles: explained the Population increases allocation of resources geometrically while food production increases and distribution of arithmetically. income.   Karl Marx rebuked the capitalist system, which he portrayed as exploitative and alienating. Free powerpoint template: www.brainybetty.com 62  CLASSICAL ECONOMICS  “Selfish behavior by individuals leads to an outcome that benefits everyone in society.”  Adam Smith  This statement summarizes the main idea which served as the basis of classical economics. Free powerpoint template: www.brainybetty.com 63  The labor theory of value – unified the theories of the classical economists  The classical economists observed economic and social transformation brought by the industrial revolution. They maintain a free-market economy. Free powerpoint template: www.brainybetty.com 64  The Consumption Theory, developed by the Birmingham School and Malthus (early 19 th century) argued that government intervention must alleviate unemployment and economic fluctuations.  Influenced Keynesian economics Free powerpoint template: www.brainybetty.com 65 Manchester Capitalism, a distinguished school of thought, campaigned for free trade against mercantilism. Free powerpoint template: www.brainybetty.com 66 BRANCHES OF CLASSICAL ECONOMICS Free powerpoint template: www.brainybetty.com 67  1. General Equilibrium Theory  It was advanced by Leon Walras in 1874.  It explained how much of each good is created and how the price of each good is related to every other good. Free powerpoint template: www.brainybetty.com 68  2. Quantity Theory of Money  It was developed by David Hume, a Scottish philosopher/economist, a contemporary of Adam Smith.  It is about money prices as opposed to real quantities and relative prices. Free powerpoint template: www.brainybetty.com 69  It aims to tell how much a person earns in relation to the number of hours he work.  This theory is also used to understand what determines inflation. Free powerpoint template: www.brainybetty.com 70  NEOCLASSICAL ECONOMICS  The advocates of this school of economic thought include:  William Stanley Jevons  Irving Fisher  Alfred Marshall  Arthur Cecil Pigou Free powerpoint template: www.brainybetty.com 71  KEYNESIAN ECONOMICS  Keynes is considered the father of macroeconomics.  He wrote “The General Theory of Employment, Interest Rates and Money” in 1936. JOHN MAYNARD KEYNES Free powerpoint template: www.brainybetty.com 72  His book was a response to high rates of unemployment in Britain in the wake of Depression.  His theory was based on the twin concepts of aggregate demand and aggregate supply Free powerpoint template: www.brainybetty.com 73  Aggregate demand explains the total value of goods and services that all households and firms would like to spend in a given period of time.  Aggregate supply explains how many workers are needed to produce the goods and services needed to meet that demand. Free powerpoint template: www.brainybetty.com 74  MONETARISM  “Money matters, and it matters a lot.” This is the most important tenet of monetarism.  It is the crucial determinant of how the overall economy performs. Free powerpoint template: www.brainybetty.com 75  Monetarism talks about the supply of money—the total quantity of money in the system and how fast it is rising or falling.  Any increase in the money supply faster than the growth of the money causes inflation.  Fluctuations in the growth of money generate business cycle. Free powerpoint template: www.brainybetty.com 76 Slower money growth causes recession Accelerating money growth brings about recovery and boom. Free powerpoint template: www.brainybetty.com 77  RATIONAL EXPECTATIONS (New Classical Economics)  It was conceptualized by Robert Lucas and Thomas Sargent.  It states that people understand how the economy works and use all information available to them in making their economic decisions. Free powerpoint template: www.brainybetty.com 78  OBE ASSESSMENT TASKS 1. Draw a comprehensive chart showing the different schools of economics/economic thought that influence the world of economics. Below each economic school identify the economist/s and write a brief, specific, and definite description for each economist. A picture of each economist is also highly recommended. 2. Draw a comprehensive timeline of the various economic theories and their exponents. Include a picture of the economist. Free powerpoint template: www.brainybetty.com 79 3. Create a Concept Web about Economics: definitions, goals, relationships to other disciplines, branches, methodologies, and methods of economic studies. 4. Research and make a Biographical Sketch of the following economists: Free powerpoint template: www.brainybetty.com 80  Adam Smith  Karl Marx  David Ricardo  Leon Walras  Thomas  David Hume Robert  William Malthus Stanley Jevons  John Maynard  Alfred Keynes Marshall  John Stuart Mill Free powerpoint template: www.brainybetty.com 81