How inputs are converted into outputs may be affected by other mediating factors, for example the environment in which production takes place, such as whether the clinic is publicly or privately owned.Ī key observation of economics is that resources are known to be limited in quantity at a point in time, but there are no known bounds on the quantity of outputs that is desired. The output of a process using health care inputs, such as health care professionals, therapeutic materials and clinics, could be an amount of health care of a given quality that is provided, for example. The inputs to this productive process are resources such as personnel (often referred to as labour), equipment and buildings (often referred to as capital), land and raw materials. All production requires the use of resources such as raw materials and labour, and we can regard production as a process by which these resources are transformed into goods: The definition of economics above includes the term to produce, emphasising that economics deals with both health and health care as a good or service that is manufactured, or produced. However, it also always asks if the issues are different in health care.ġ.1 Production, resources, scarcity and opportunity cost In analysing these issues, health economics attempts to apply the same analytical methods that would be applied to any good or service that the economy produces. There are many different definitions of economics, but a definition given in a popular introductory textbook (Begg, Fischer and Dornbusch, 2005) is instructive: The study of how society decides what, how and for whom to produce. As Morris, Devlin Parkin and Spencer (2012) put it: Health economics is the application of economic theory, models and empirical techniques to the analysis of decision-making by individuals, health care providers and governments with respect to health and health care. So, in describing the principles of health economics, we are really setting out the principles of economics and how they might be interpreted in the context of health and health care. But from an economics point of view, health economics is simply one of many topics to which economic principles and methods can be applied.

Health Economics: 1 - Principles of Health Economicsįrom a Public Health point of view, health economics is just one of many disciplines that may be used to analyse issues of health and health care, specifically as one of the set of analytical methods labelled Health Services Research.

Scarcity principle definition