ch 5.docx

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Department
Economics
Course
ECO440H5
Professor
Multiple Professors
Semester
Winter

Description
Ch 5 Supply Production in the long and short runDiminishing returns to scale a situation when a proportionate increase in all inputs yields a less than proportionate increase in outputfixed input an input to production that does not vary in the short run The time for which at least one input cannot be changed actually defines the short runLong run a decisionmaking time frame over which quantities of all inputs to production can be variedoutput the good or service that is the result of the production process in the case of health services the service that is deliveredoutcome a change in health status as a result of the system processes in the health services context the change in health status as a result of careproduction function the functional relationship that indicates how inputs are transformed into outputs in the most efficient wayproduction possibilities frontier the boundary between the combinations of goods that can be produced and those that cannot with the resources availablereturns to a factor this measures the addition to output as one factor to production is increasedretursn to scale this measures the addition to output as the scale of operations increases in the long run so that all inputs can be variedshort run a decisionmaking time frame within which at least one input the fixed input cannot be variedtechnical operational efficiency a point at which a producer cannot produce more output without using more of at least one inputvariable input an input to production that varies directly with the level of outputSupply Analysisthe analysis of supply examines the behavior of firms or producers ranging from large corporations to the sole provider in either the public or private sectorssupply is the willingness and ability to sell a good at each and every price over a given period of timeit depends on a number of factors influencing the relationship between inputs and outputs the production function and cost of producing those outputsThe production possibilities frontieroutputs are defined as the goods produced in a production processwhereas the ultimate goal of health care might be good health this is difficult to define and measurethe mix of outputs and outcomes expected from health care means the relationship between inputs and outcome is complextraditionally intermediate outputs have been used to explore production and supply in health care ex Vaccinations carried out hips replaced or kidney transplants performedalthough these measures do not provide health outcomes nor can they capture outputs such as support provided by the medical staff they are still important in helping understand the issue of efficiency in relation to the provision of health servicesthe production possibilities frontier PPF is a tool that economists use to illustrate the different combinations of outputs that are achievable with a limited set of resourcesconsider a clinic that provides ambulatory care of patients with TB or angina Lets suppose thatthe only input is nurse timeTB and angina consultations are of the same durationgiven current staffing the maximum number of consultations per day is 200Figure 51 shows that the PPF might look like for our clinicsuppose instead that some nurses have skills that mean they are better at TB consultations they can achieve more with amount of time and other are better at trating angine In these circumstances transferring a nurse who is a specialist in angina trastment from TB to angina could actually increase outputthe PPF in thise case is illustrated in figure 52 the frontier is now concave to the origin rather than a straight line This is the form we typically expect PPFs to take as long as its the case that resources are not equally productive in all activitiesin terms of fig 52 this means that if nurses are allocated to their specialities they would be able to produce more than 200 consultations For example at around 100 angina cases 120 TB consultations could be produced giving 220 consultations per dayFigure 53 shows a PPF for a hypothetical economy The graph shows the porudction of health care relative to everything else in the economyTechnical efficiency a given output is produced with the least inputs requires that we are at a point where we cannot increase one output without reducing anotherHENCE the PPF represents technicaly efficient points by definition Every point in figure 53 and 52
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