Summary of Lectures (Part 1)

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ECMC34 ± Lecture 1
Features of Market for Healthcare
1) Extent of Government Involvement (High in Canadian Heathcare)
older 65
2) Uncertainty at all levels of healthcare
- who gets sick? (as a rule of thumb take number from US divide by 10 is
Canada) cannot provide an exact number
- people of higher risk ± elderly, lower immune system, genetics, pregnant
women etc.
- how well do treatments work?
- ex: prostate cancer ± take out the prostate or inject radioactive pills
- risk of infection, invasiveness, etc.
3) Differences in knowledge b/w healthcare providers and consumers of healthcare (patients)
- imperfect information ± sellers can rip off buyers since buyers may not know
- ex: blood test ± buyers does not have the tools to do it
- doctors get paid every time a patient sees them
4) Externalities ± actions of others that impose costs or create benefits for others
- ex: vaccination program (H1N1), vitamin B in bread, vitamin C in juice,
smallpox, measles etc.
- TB ± consumption disease, multidrug antibiotic treatment
Risk ± is known unknown
Uncertainty ± unknown unknown
ECMC34 - Lecture 2
Producing Health ± Production Function Approach
Output = Health Status
Inputs = Health care, Lifestyle (Nutrition/Exercise), Environment, Human Biology
(you can control HC while Human Bio is hard to control)
Health Status = f(Health Care, Lifestyle, Environment, Human Biology)
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Marginal Product will decline over time
Total Product vs. Marginal Product
- Marginal Product is relevant for making decisions
- more resources into sectors where MP is largest
Increase in Socio-economic Status is associated with higher health status, education
Inputs Healthcare ± might not be as important as public health (ex: Cholera ± water borne
disease, West Nile ± mosquitoes)
- vaccination programs (ex: mumps, Rubella, Measles)
- antibiotics
Lifestyle ± Nutrition/Diet (ex: heart disease, vitamin B in Bread, diabetes)
- Exercise (ex: control diabetes, improvements in health)
- Smoking (lung cancer, eczema, heart diseases)
Environment ± where you live (ex: Lead, air pollution, water born pollution, asthma,
eczema, other respiratory diseases)
- air, water, soil pollution
Human Biology ± genetic reasons for illness
- illness or disease can run in families (ex: heart attack, haemophiliac, breast
cancer in Iceland has been isolated to genetics)
When is healthcare most important?
- children under 2, people over 70 yrs, pregnant, etc.
ECMC34 ± Lecture 3
1) Substitution b/w inputs in healthcare sector ± physicians and nurses
2) Efficient size of healthcare firm/hospital
3) Technical Efficiency and allocative efficiency
Substitution b/w inputs
- some technology that takes inputs and converts it into output (technology is
like a recipe)
x inputs used is fixed proportions
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