This document defines key economic concepts related to scarcity, choice, supply and demand, and consumer and producer surplus in the context of health care. It explains that economics studies how limited resources are allocated to meet unlimited human wants. Choice and opportunity cost are defined as selecting some options over others. Supply and demand influence price, with supply increasing with price and demand decreasing. Consumer surplus is what consumers save by paying below what they are willing to pay, while producer surplus is what producers gain by selling above their costs. Health care is discussed as both a consumption and investment good.

1. Concepts in economics -scarcity and
choice, opportunity choice ,supply and
demand, consumer and producer
surplus

2. • Economics is a social science, which is the
study of how people interact with each other.
• Economics is the study of how scarce
resources are allocated to fulfill infinite wants
of consumers.
• Economics: is the study of how individual and
societies use their scarce resources to satisfy
their unlimited needs.
Concepts in economics

3. Earth has limited resources.
Resources are used to produce goods and
services.
People have infinite wants and needs.
There is a conflict between finite resources and
infinite needs and wants.
People can’t have everything they want so
resources may be rationed in some way.
This is where economics comes in.
Logic of economics

4.  Goods: physical object that are capable of being
touched such as vegetables, meat or motorcars.
 Services: intangibles such as motorcycles repairs
insurance.
 Wants: things that we would like to have but are not
necessary for our immediate physical survival such as
iPhones and televisions.
 Needs: things that we must have to survive such as
food, clothing.
 Resources: goods used to produce other goods.
Core economic terms

5. • Scarcity means that there is a limited quantity of
resources to meet unlimited wants and needs.
• Scarcity simply means that there is not enough of
something to satisfy everyone who wants it and
therefore you must pay a price for it.
• Everything is scarce because our wants always
exceed the limited resources available.
• Anything that costs something is scarce.
• If it were not scarce it will be free or a free good
and you could have as much as you wanted
without paying for it.
scarcity

6. • Scarcity refers to the condition of insufficiency
where human beings are incapable to fulfill their
wants in a sufficient manner. In other words, it is
a situation of fewer resources in comparison to
unlimited human wants. Human wants are
unlimited. We may satisfy some of our wants but
soon new wants arise. It is impossible to produce
goods and services so as to satisfy all the wants of
people. Thus scarcity explains this relationship
between limited resources and unlimited wants
and the problem therein.

7. • Economic problems arise due to scare goods.
These scare goods have many alternative uses.
For example, land can be used to construct a
factory building or to make a beautiful park or
to raise agricultural crops. So, it is very
essential to think about how limited resources
can be used alternatively to satisfy some
wants of people to get maximum satisfaction
as possible

8. • The choice is the process of selecting a few goods or
wants from the bundles of goods or wants.
• Human wants are unlimited. So, they are unable to
fulfill all their wants at once
• Since people do not have infinite incomes they make
choices whenever they purchase goods and services.
• They have to make decisions on how to allocate their
limited financial resources and so always needs to
chose between alternatives.
• This leads one of the core concepts in economics:
opportunity costs .
Choice

9. • Opportunity choice cost: the relevant cost of any
decision is its opportunity cost - the value of the
next-best alternative that is given up. This will
mean that if we choose more of one thing, we
will have to have less of something else.
Economists use the term opportunity cost to
explain this behavior. The opportunity cost of any
action is the value of the next best alternative
forgone. By making choices in how we use our
time and spend our money we give something
up.
Opportunity choice

10. Supply and demand
• Supply and demand offers two possible
answers
The prices can be high because demand is
high.
The price can be high because the supply is
limited

11. SUPPLY
• The term supply is nothing but anything which
is offered for sale.
• In economics Supply of a product during a
given period of time means the quantities of
goods which are offered for sale at particular
prices.
• Hence, supply of a commodity may be defined
as the amount of that commodity which
sellers are able and willing to offer for sale at a
particular price during a given period .

12. …
• The ability of seller to supply a commodity
depends on the stock available with him.
• Similarly seller should have willingness to
supply a product.
• This depends upon the difference between
reservation price and the prevailing market
price or the price which is offered by the
buyer for that commodity

13. LAW OF SUPPLY
• The law of supply can be stated as “by keeping other
factor constant supply expands with rise in price and
contracts with fall in price”.
• The law of supply reflects the general tendency of the
producers in offering their stock of a product for sale in
relation to the changing prices.
• It has been observed that usually sellers are willing to
supply more with rise in prices.
• The supply varies directly with the changes in price.

14. The Supply of Health Care
• We now turn to the supply side of health care. Economists often
talk of output being produced using a production function that
uses labor, capital, and intermediate inputs.
Example: What is the production function of a hospital?
 The labor in a hospital includes doctors, surgeons, orderlies,
technicians, nurses, administrative staff, janitors, and many
others.
 The hospital buildings are part of the hospital’s capital stock. In
addition, hospitals contain an immense quantity of other capital
goods, such as hospital beds and diagnostic tools—everything
from stethoscopes to x-ray machines.
 Intermediate inputs in a hospital include dressings for wounds,
and pharmaceutical products, such as anesthetics used for
operations.
 Other sectors of the health-care industry likewise employ labor,
capital, and intermediate inputs.

21. • Consumer Surplus is the difference between the
price that consumers pay and the price that they are
willing to pay. On a supply and demand curve, it is
the area between the equilibrium price and the
demand curve. For example, if you would pay 76p
for a cup of tea, but can buy it for 50p –
your consumer surplus
Consumer Surplus

22. • Producer surplus is the difference between how much
a person would be willing to accept for given quantity
of a good versus how much they can receive by selling
the good at the market price.
• The difference or surplus amount is the benefit
the producer receives for selling the good in the
market
Producer surplus

24. • Healthcare is both a consumer good as well as an
investment good. As a consumption good, healthcare
improves welfare, while as an investment commodity,
healthcare enhances the quality of human capital and
improves labour productivity, partly by increasing the
number of days available for productive activities.

25. • Increasing consumption of health services in the
population is therefore an important policy issue in many
countries. In this regard, understanding private
healthcare demand should help in formulating better
health policies

26. • In economic theory, economic surplus refers to two
related quantities: Consumer and producer surplus.
Applying this theory to health care “convenience” could
be one way how consumer benefits might manifest itself.

27. • Value of convenience defined as the consumer surplus in
health care can be shown in different health care
settings.” Again, this hypothesis should be accepted as a
starting point in this research area and hence further
primary research is strongly recommended in order to
fully proof this concept.

28. • microeconomic surplus,
• convenience,
• health care,
• health care policy
 The main component of this theory