• behavioral science
• develop models that can
  • predict/explain behavioral patterns
  • can be tested with data or experimentation
• underlying assumptions- actors are rational
  • firms seek to maximize profit
  • people want to maximize utility

• study of decisions in the face of constraints
  • how do firms make decisions given market conditions
  • how do people make decisions given limited resources
• has predictive nature- given change in constraints, how will people respond

• value of forgone benefit which could be obtained from a resource in its next best alternative use
  • must take into account direct and indirect costs (ex: time)

• economics is about making the most efficient use of resources
• efficiency is achieved only by producing/consuming somethin to the poin where the cost of the last unit is no greater than the benefit derived from that unit
• need to access the relative costs and benefits of each marginal addition or reduction in production/ consumption

• assumption- we value our future differently from our past
• a parameter individuals use in estimating the present value of a commodity compared to its value at some point in the future
• value of health gains today compared to value attached to health gains in the future

• important to understand that people value their future differently and often this changes with age, income, and education
• particularly important in understanding risky behaviors and developing policies that take this concept into account
• we tend to like immediate gratification and so need to take that into account

• definition- action of one party makes another worse/better off, yet the first party does not bear the costs or receive the benefits
  • spill over effect- when a person or group external to the transaction derives benefit or harm from the transaction
• examples
  • positive- using a condom, deworming, school feedin program, vaccination
  • negative- second hand smoke, spread contagious disease by riding public bus, DWI and injuring another, Greenhouse gas

• as costs/benefits are born by another person, there is no incentive for the individual indulging in behavior to stop
• understanding of externalities and ability to develop models to show the impact of negative or positive externalities is a major contribution of economists
• how can policy makers use this info to develop appropriate policies?

• defined as good that is non-rivalrous and non excludable
  • consumption by one person does not reduce the availability for consumption by others
  • theoretical construct
  • commodities such as air, environment can be considered as public goods

• definition- measure of sensitivity/responsiveness
  • ex: change in demand due to change in price or income
  • income elasticity of demand
  • price elasticity of demand
• when change in deman is greater than change in price = ELASTIC
• when change in demand is less than change in price = INELASTIC

• one party has better access to info than the other
  • esp. true in health care
  • doctor knows how to treat condition although patient may not
  • patients know their health state beater than insurance company (ex: adverse selection, moral hazard are implications of asymmetric info)

situation where consumers do not bear the direct costs of services and so are encouraged to behave in a way which increases those services

amount of demand created by doctors, which exists beyond what would have occurred in the market in which consumers are fully informed

• improve capacity to purchase food
• adequate sanitation, housing
• increase access to education
• better access to health care info
• increase access to health care and health technology

• high health expenditures can preclude treatment or pose a major financial burden
  • especially if individuals have to bear total burden of the costs
• social risk management schemes mostly target the better off leaving poor most vulnerable
• imperfect market and thus role of governments to intervene and provide health

• directly- higher productivity of workers
• indirectly
  • increase learning, education
  • spillover effects of greater savings and investment
  • demographic shift
  • health financing policies have an impact on economic performance

• uncertainty exists in terms of adverse health shocks and when they occur- how do you prepare
  • people shed risk by purchasing insurance
  • much of the structure of health care sector driven by the nature of insurance
  • insurance also alters peoples behavior
• risk pooling reduces impact of an adverse health shock