The document provides an introduction to health economics. It defines economics and explains that health economics deals specifically with how limited healthcare resources are used to meet unlimited healthcare wants and needs. It also discusses the demand for healthcare, noting that demand depends on both the demand for health as well as perceptions of how healthcare impacts health. The document also outlines some of the key requirements of healthcare systems, including being economical, effective, efficient, and equitable. Finally, it briefly discusses the concepts of demand and supply in healthcare markets.

1. HEALTH ECONOMICS

2. Part I: objectives
INTRODUCTION TO ECONOMICS
Defining Economics.
Explaining the three major tasks of Economics.
Understand the tools used in Economic Analysis.
Understanding the types of Economics.
Understanding economic problem

3. Economics Definition
Economics is the science that deals with the
consequences of resources scarcity.
 The discipline of economics deals with use of scarce resources to
satisfy human wants and how best to use the resources available.
(the study of the use of limited resources by a society for meeting its unlimited
wants.)
Economics is a social science that studies how individuals
and organizations in society engage in
 production
 distribution and
 consumption of goods and services.

4. Facts about Economics:
Objective : the main objective of economic
activity is to allocate the scarce resources in
such a way that maximum satisfaction may be
achieved.
The subject matter of economics is therefore the
scarcity of resources.

5. Some economic terms
Scarcity: is a relative (comparative) term which
means less than requirements.
A commodity is considered scarce when it is
limited in supply, for example; the production of
food may be in thousands of tonnes, but it is
scarce because it is less than the requirements.

6. Some economic terms
Needs: Refers to basic human beings requirements
for survival; food, clothing, housing and water.
Wants: any human desire is known as want or end.
All wants of human beings cannot be satisfied
because human beings’ resources are scarce and
wants are virtually unlimited.
All people work in order to Satisfy their wants (i.e.
their desire).

7. Some economic terms
Choice: is the selection of the wants which
have greater importance than others.
Utility: is the quality of the commodity to
satisfy any human wants (desire).
In economics, the word or term utility is used for
individuals to mean satisfaction and the word
welfare is used for populations to mean
happiness, both provided by commodities.

8. Human wants and choices
Human wants are numerous or
unlimited or in the sense that once a
goal is achieved another crops up.
However, Human beings are able to
make choices between competing
wants-
EG.a new shirt or a book.

9. What is a commodity?
Commodities are either goods (i.e. products that you
can touch or hold e.g. medicines) or services (e.g.
consultation).
There are three (3) things you can do with a commodity:
- you can consume to gain utility
- invest for it
- trade it ( i.e. exchange it) for some
other resources

10. The meaning of economy
The word economy refers to all the economic activities
and institutions (i.e. anything involving scarcity and
choice) within a geographically defined area; e.g. a
district, region, national, global
Ie. Economy is the process which defines how resources
are utilized to fulfill wants.
In economy, resources are classified into three classes;
Labour, Capital, and Land

11. Three Major Tasks Of Economics
Descriptive Economics
Explanatory Economics
Evaluation

12. Three Tasks Of Economics Cont…
Descriptive Economics;
 Refers to the identification, definition, and
measurement of phenomena.
 Concerned with determining the nature of the
phenomena as well as obtaining estimates of
their magnitudes.
 No explanation.

13. Three Tasks Of Economics Cont…
Explanatory Economics;
 Involves explaining and predicting certain phenomena.
 Conducting an analysis in a cause-effect format.
 Performed with the aid of models that classify various
causal factors in a systematic framework
 e.g. the health status and the price of the
medical services.

14. Three Tasks Of Economics Cont…
Evaluation;
 Involves judging or ranking alternative phenomena
according to some standard.
 An acceptable standard must be obtained.
 Based on this standard, alternative ways of using scarce
resources are then ranked.
 In choosing the standard, one major criterion is
acceptability.

15. Tools Used In Economic Analysis
 Economic Variables
 Relationship between Economic Variables
 Graphic representation of relationships.
 The direction of the relationships
 The slope of the relationships.
 The position of the relationship.
 The shape of the relationships.
 The nature of economic propositions.

16. Tools In Economic Analysis Cont…
1. Economic Variables;
 Examples ( prices, costs, incomes, and quantities of
commodities)
 Can be measured along a scale.
 Once appropriate unites of measurement have been
chosen ( Riyals, visits, days).

17. Tools In Economic Analysis Cont…
2. Relationships between economic variables;
 Relationship show how one variables changes in relation to
another variable.
 The relationships can be specified in a causal or non-causal
manner.
 Causal relationships – if …., then….

18. Tools In Economic Analysis Cont…
3. Graphical representation of relationships;
 Step function is solid line relates diagrammatically to only
specified values.
 We can draw a continuous curve joining all the points
specified in the relationship.

19. Tools In Economic Analysis Cont…
4. The direction of the relationships;
 Positive relationship.
 Opposite or negative relationship.
 Non-relation or constant relationship in “Y”.
 Non-relation or constant relationship in “X”.

20. 0
2
4
6
8
10
12
1 2 3 4
constant Y
positive
negative
constant X

21. Types Of Economics
 Economics offers an overall viewpoint
about toward understanding many
problems, all of which relate to scarcity
in one form or another.
 Economics can be;
1. Macroeconomics
2. Microeconomics.

22. MACROECONOMICS
Macroeconomics is the study of aggregate economic activities, such as:
1. The economy level of outputs;
 We can measure that by some variables such as; GDP, Rate of
depression, Rate of slackness ..ets.
 Real GDP is the market value of all final goods and services produced
in the domestic economy during a one year period measured with
constant prices.
2. Level of national income;
 We can measure that by some variables such as N.I.
 National income (N.I) is the income earned by the factors of
production.
 Income earned of the sold or consumed GDP.

23. MACROECONOMICS Cont…
3. Level of employment;
 We can measure that by some variables such as the rate of
unemployment.
 The Rate of Unemployment is the percent of the total labor
force which is unemployed.
4. General price level;
 We can measure that by some variables such as Inflation or
Deflation Rate ets.
 Inflation is the annual rate of increase in a price index.
 Deflation is the annual rate of decrease in the price level.

24. MICROECONOMICS
Microeconomics the study of economic behavior of
individual decision making units such as:
 Consumers
 resource owners and
 business firms in a free –enterprise economy.
We can measure that by some studies such
as market , pilot and feasibility studies.

25. THE CONCEPT OF ECONOMIC
PROBLEM
Economic problem is based on the fact that;
economy's finite resources are insufficient to
satisfy all human wants and needs.
It assumes that human wants are unlimited,
but the means to satisfy human wants are
scarce.

26. ECONOMIC PROBLEM Cont…
Factors of production are
 land,
 labor
 capital
They are the inputs necessary for the
production of good and services .
The terms “factors of production” and
“economic resources” are interchangeable.

27. Basic Economic Questions
1. Which goods and services to produce?
2. How to produce the goods and services?
3. Who receives the goods and services?

28. ECONOMIC PROBLEM Solving…
This involves to make the best use of limited or
scarce resources.
Solving any economic problem should answer the
basic economic questions such as
1. What to produce?
'What and how much will you produce?'
This question lies with selecting the type of supply
and the quantity of the supply, focusing
on efficiency.
e.g. "What should I produce more; laptops or
tablets?"

29. ECONOMIC PROBLEM Solving…
2. How to produce?
'How do you produce this?'
This question deals with the assets and
procedures used while making the product,
also focusing on efficiency.
e.g. "Should I hire more workers, or do
I invest in more machinery?"

30. For whom to produce?
'To whom and how will you distribute the goods? and
'For whom will you produce this for?' arises from this
question.
This question deals with distributing goods that have
been produced, focusing on efficiency and equity.

31. Part II. HEALTH ECONOMICS
Health economics deals with a specific portion of
“the” economic problem, that concerned with
health and health care.
Health economics is a branch of economics
concerned with issues related to efficiency,
effectiveness, value and behavior in the
production and consumption of health and health
care.

32. What differentiates health care from other
services;
1.The personal and often urgent needs the service
meets.
2.dealing with pain and suffering and with life and
death decision.
3.access to the service is often considered to be a
basic human right irrespective of ability to pay.

33. HEALTH CARE AND HEALTH
One of the basic principles of the public health care systems is that;
- Treatment should be provided on the base of need rather than
on the base of that funds are available. And
- on the base of that equity should be one of the objectives of the
service’
The purpose of health care is to;
 produce an improvement in health,
 the maintenance of good health and/or
 a reduction in suffering.

34. HEALTH CARE AND HEALTH Cont…
Health care services can be bought and sold, while health
cannot .
Health is difficult to define and even more difficult to measure
According to the world health organization {WHO} good health is “a state
of complete physical and mental well-being and not merely the absence
of disease or infirmity”.
Poor health in an individual will have an impact on and may
pose threats to others.

35. HEALTH CARE AND HEALTH Cont…
Improved health care services thus provide benefits to society
as a whole if they result in improved health as well as providing
benefits to the individual.
The role of medicine in improving the health status of the
population has been exaggerated and that factors such as
 housing, education, diet, hygiene and standard of living
 have had more significant impact on levels of health than
what we conventionally think of as health services.

36. THE DEMAND FOR HEALTH CARE
The demand for health care services will depend on
the demand for health and on the perception of the
link between health care and health.
 One complication of trying to model or predict this demand
is that individuals value apparently equal health states
differently.
 Most health care is carried out by families within the home.
 Health care systems may produce outputs other than health
(Comfort, Security, etc).
 The demand for health care will also vary according to the
age structure of the population.

37. THE DEMANDFORHEALTH CARECont…
Tanzania expect to be effective in public health services which
will protect us from infectious diseases
A diverse and sometime conflicting set of interests may happen
between;
 Those who pay for health services.
 Those who provide them.
 Those who shape them through strategic and operational
management.
 Those who would like to benefit from them, if need be.

38. Mention and discuss the requirements of Health services.
Discuss about Demand and Supply

39. Requirements of health services
1. Economy.
2. Effectiveness.
3. Efficiency.
4. Value for money {VFM}.
5. Equity.
6. Ethical issues.

40. Requirementsof health services Cont…
1. Economy
 We would like the services to be inexpensive.
 Somebody always pays either directly or indirectly.
2. Effectiveness
 We expect the service to be effective we want each procedure to produce
perceptible health gains {or reductions in suffering}.
 The evidence based medicine beginning to influence health care providers.
3. Efficiency
 We expect our services to be efficient. If we can deliver an equally effective
service in different ways then we would want to choose the least expensive.

41. Requirementsof health servicesCont…
4. Value for money {VFM}
 These three requirements, economy, effectiveness and efficiency,
come under the heading of value for money {VFM}.
5. Equity
 Three broad ways of defining equity in health care;
A. Equality of health status attained.
B. Equality of use of health care {for equal need}.
C. Equality of access to health care {for equal need}.
 Horizontal equity- the principal of equal treatment for equal need.
 Vertical equity- provision of unequal treatment for unequal need.
6. Ethical issues
 The behavior of doctors and other health care professional may put
them into conflict with those who manage resources.
 The doctor could manipulate the situation for financial gain.
 The patient is protected from these abuses by the doctor's ethical
and professional codes of conduct.

42. DEMAND AND SUPPLY
In a market economy , output is distributed through
a system of prices.
Each good and service produced is sold to those who
are willing and able to pay the market price.
The market demand for a good or service is
presented as a schedule which relates the number of
units (quantities) that will be purchased at alternative
prices, holding constant other variables that influence
the purchase decision.

43. DEMAND AND SUPPLY Cont…
Change in market demand is a shift in the market demand
curve that results from:
 a change in the number of consumers in the market
 consumer preferences
 consumer money income
 the price of a substitute commodity
 the price of a complementary commodity.
 a change in the number and or size of producers.
 a change in the technology a change in the price of a factor
of production
 a change in the price of other commodities used in
production.

44. Why Economics for
Healthcare?
 The scarcity of resources and healthcare resources…..Increasing
demand for efficiency
 Alternative use of healthcare resources exist…increasing demand
for effectiveness
 Increasing Demand for Value for money...considering the
patients’welfare….
 Increasing Demand for Accountability
 Increasing demand for equity
 Increasing demand for profitability(Public and private)……..Health
financing mechanism reform

45. Scarcity of Health resources
Health resources
Everything input in the delivery of a specific treatment or
intervention
Medical personnel time,
equipment,
drugs,
patient time,…
Scarcity
 Scarcity means choices and distribution
 Scarcity means trade-off

46. Why Economics in provision of
pharmaceutical services
Same reasons……………..but in the pharmaceutical services
perspective…………….

47. Health economics in pharmaceutical
services
Some concepts in the pharmaceutical services
field
Equity
Providing service with high level of equality
cost-effectiveness
Affordable costs to all community members
cost-benefit
Incurred costs should reflect the benefit
acquired by the patient.

48. practices affecting the adoption of
health economics principles
These can affect positively or negatively depending on the
situational polarity…..
 Prescribing practices (rational vs irrational)
 Dispensing practices(rational vs irrational)
 Procurement practices (Good procurement practice
or vice versa)
 Storage and distribution practices (Shelf lives,
FEFO, scheduled or unscheduled and/or bulk/small
distributions)……….

49. Health economics does not look on health care
system only but also on clients’ health
protection and seeking behaviors…..
……Now check out any patient behaviors/factors
that are centrally to health economics