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45 Cards in this Set
- Front
- Back
What is Marginal Revenue?
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Extra revenue that an additional unit of product will bring; add'l income from selling one more unit of good, sometimes = to price
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Marginal Revenue
Mathematical Formula |
MR = change in total revenue d(TC) / change in number of units sold d(
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Economies of Scale
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the cost advantages that a business obtains due to expansion; factors that cause a producer's average cost per unit to fall as output rises
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Price Discrimination
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exists when sales of identical goods or services are transacted at different prices from the same provider.
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Equilibrium Price
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the point at which quantity demanded = quantity supplied
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Positive Externality
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external benefits on a party not directly involved in the transaction
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Allocative Efficiency
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a situation in which limited resources of a firm are allocated in accordance with the wishes of consumers; price = marginal costs or P=MC
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What is an Economic Good?
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Any Good or service that is scarce relative to our wants for it
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Health Care as an Economic Good
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Resources that produce health care services are finite & our wants for health care have no known bounds
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What is Opportunity Cost?
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the value of the next best alternative foregone as the result of making a decision.
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Efficiency
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the allocation of scarce resources that maximises the achievement of aims
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Effectiveness
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the extent to which health care services actually improve health
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Equity
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fairness in the sharing of health resources between people
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ethics
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code of widely held normative criteria about the provision of health care
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Economics
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social science that studies the production, distribution, trade and consumption of goods and services
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Normative Economics
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Applies Subjective Value Judgement
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Positive Economics
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objective prediction and explanation of consequences of choices, given a set of assumptions, and a set of observations
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Scarcity
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resources are scarce, or limited and that not all human needs and desires can be met
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Two Primary Micro Economic Agents and Objectives
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Producer - Profit
Consumer - Utility |
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Markets
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where forces of supply and demand meet and prices are determined
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equilibrium price
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clears the market; quantities demanded = quantities supplied
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Demand
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the amount of a good or service that consumer are willing and able to buy at a given price
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Demand
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The amount of a good or service that consumers are willing and able to buy at a given price
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Utility
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the satisfaction people get from consuming a good or a service
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Supply
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the amount of a good or service that producers are willing and able to sell at a given price
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Law of Demand
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this inverse relationship between price and quantity demanded
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Private vs. Public Health Systems
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Private: firms forecast changes in prices and the consequences for the revenues & profits
Public: policy makers analyze demand to predict health care use and may then modify demand to meet health policy targets |
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Consumer Choice Theory
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explains why consumers behave or react in certain ways to changes in various factors in order to maximize their utility
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Marginal Rate of Substitution
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slope of the indifference curve; amount of one good that must be sacrificed if the consumption of another good is increased in order for utility to remain unchanged
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Elasticity
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measures the responsiveness of one variable to changes in another variable
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Grossman Theory
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theoretical framework for understanding choices related to health and health care; individuals invest in health up to the point where the marginal benefits from the investment, which include a consumption benefit plus an investment benefit, are equal to the marginal costs incurred by the investment
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principal agent relationship
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the doctor - the agent - makes available their specialist knowledge to the patient - the principal.
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supplier induced demand
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doctors act as imperfect agents who maximise their own utility
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aggregate demand for health care
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country's overall demand for health care; related to a country's overall income
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Production Function
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-Indicates the highest output that a firm can produce for every specified combination of inputs given the state of technology.
-Shows what is technically feasible when the firm operates efficiently. |
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Isoquant
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graphical representation of a production function, showing all the combinations of inputs that will produce a particular output.
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marginal rate of technical substitution
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The slope of the isoquant, measures how substitutable the factors of production are
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marginal product of an input
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the change in output resulting from a change in the quantity of the input used, other things held constant.
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technical efficiency
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producing the maximum output from a given input combination
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production frontier
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defined as a set of boundary points within which all firms are technically inefficient.
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Returns To Scale
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a technical property of production that examines changes in output subsequent to a proportional change in all inputs (where all inputs increase by a constant factor
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Increasing Returns To Scale
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output more than doubles when all inputs are doubled
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Constant Returns To Scale
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output doubles when all inputs are doubled
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Decreasing Returns To Scale
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output less than doubles when all inputs are doubled
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Law of Diminishing Marginal Returns
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As the use of an input increases in equal increments, a point will be reached at which the resulting additions to output decreases (i.e. MP declines).
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