Introduction
This topic covers the economics behind public health planning: basic economic concepts (market, demand, supply, competition), the healthcare market and its failures, the role of government, funding and funding systems, the cost of health care in Bulgaria, marketing in healthcare, opportunity costs, current challenges and health technology assessment.
Economics
- Economics is the science that studies the production, distribution and consumption of goods and services.
- Focuses on the behaviour and interactions of economic agents and how economies work.
- Is about how to choose and satisfy specific needs with a limited budget.
- Is concerned with money, like accountancy, and is objective.
- Central concept in economics: the market, with 2 main signs, demand and supply.
- Law of demand: all else being equal, as the price of a good increases (↑), the quantity demanded decreases (↓); conversely, as the price decreases (↓), the quantity demanded increases (↑). The market is regulated by prices and quantity; the market price in general should satisfy both sides.
- Law of supply: other factors held constant, an increase in price results in an increase in quantity supplied. There is a direct relationship between price and quantity: quantities respond in the same direction as price changes.
- Competition: a condition where different economic firms seek to obtain a share of a limited good by varying the elements of the mix: price, product, promotion and place.
- Choice: as the price of a good rises, consumers substitute away from that good, choosing more of other alternatives.
- Effectiveness: the degree to which objectives are achieved and the extent to which targeted problems are solved.
Free market and perfect competition
- The two concepts overlap.
- Perfect competition means a huge number of producers and consumers (a large number of buyers and sellers).
- Free market: buyers make all trades that increase their economic utility and make no trades that do not increase their utility.
- Characteristics of the perfect market:
- perfect information: well informed, independent, rational buyers;
- homogenous products;
- no barriers to entry or exit;
- no participant has market power to set prices (with a large number of sellers, no one has market power);
- factors of production are perfectly mobile;
- firms sell where the most profit is generated.