HEALTH ECONOMICS EXAMS SCRIPT UPDATED
QUESTIONS AND ANSWERS SURE A+
✔✔Income Elasticity - ✔✔What happens to quantity X when income goes up
✔✔Normal Good - ✔✔Any good where demand goes up when income goes up
✔✔Inferior Good - ✔✔Any good where demand goes down when income goes up
✔✔Scarcity - ✔✔problem of resources being limited in amount but desired in a
seemingly infinite amount. Means there are not enough resources to fulfill all human
needs and wants.
✔✔Consumer Sovereignity - ✔✔the desires and needs of consumers control the output
of producers.
✔✔Shortage - ✔✔Demand for a product exceeds supply
✔✔Surplus - ✔✔Supply for a product exceeds demand
✔✔Adam Smith Market System - ✔✔the idea of the invisible hand—the tendency of free
markets to regulate themselves by means of competition, supply and demand, and self-
interest.
, ✔✔What are the limitations of economics? - ✔✔-inability to isolate variables in real
world to determine cause and effect
-difficulty with replication
-markets are too influenced by human behavior which is unpredictable
-impossible to determine all factors at play
✔✔What are the basic economic tasks of any health system? - ✔✔-what and how much
to produce/provide
-how are goods and services going to be produced
-who gets these goods and services
-how much goes to consumption and how much goes to growth
✔✔What are externalities? - ✔✔Benefit or cost to people other than the consumer. Ex:
flu shot, rabies shots for dogs
✔✔Why should the government get involved in treatment for AIDS patients? - ✔✔There
is a cost to the general public, it is an externality, and there is a benefit to everyone to
cure or treat the virus in order to prevent the spread.
✔✔Are healthcare expenditures falling or rising? - ✔✔Healthcare expenditures are
rising, but not at the rate that they once were.
✔✔What are third parties? - ✔✔Entities that are neither a healthcare provider or patient,
but involved in healthcare.
ex. Insurance, government
✔✔What is the role of the federal government? - ✔✔Pay $0.40 for every dollar spent on
healthcare, create regulations
✔✔Where is most of the money spent? - ✔✔hospitals
✔✔How much is spent on physicians? - ✔✔16%
✔✔How much is spent on drugs? - ✔✔10%
✔✔How much is spent on hospitals? - ✔✔32%
✔✔What are the other expenditures? - ✔✔investment, public health activities,
government administration, dental services. Nursing homes, home health, medical
products, net cost of health insurance
✔✔What are out-of-pocket costs? - ✔✔11%
QUESTIONS AND ANSWERS SURE A+
✔✔Income Elasticity - ✔✔What happens to quantity X when income goes up
✔✔Normal Good - ✔✔Any good where demand goes up when income goes up
✔✔Inferior Good - ✔✔Any good where demand goes down when income goes up
✔✔Scarcity - ✔✔problem of resources being limited in amount but desired in a
seemingly infinite amount. Means there are not enough resources to fulfill all human
needs and wants.
✔✔Consumer Sovereignity - ✔✔the desires and needs of consumers control the output
of producers.
✔✔Shortage - ✔✔Demand for a product exceeds supply
✔✔Surplus - ✔✔Supply for a product exceeds demand
✔✔Adam Smith Market System - ✔✔the idea of the invisible hand—the tendency of free
markets to regulate themselves by means of competition, supply and demand, and self-
interest.
, ✔✔What are the limitations of economics? - ✔✔-inability to isolate variables in real
world to determine cause and effect
-difficulty with replication
-markets are too influenced by human behavior which is unpredictable
-impossible to determine all factors at play
✔✔What are the basic economic tasks of any health system? - ✔✔-what and how much
to produce/provide
-how are goods and services going to be produced
-who gets these goods and services
-how much goes to consumption and how much goes to growth
✔✔What are externalities? - ✔✔Benefit or cost to people other than the consumer. Ex:
flu shot, rabies shots for dogs
✔✔Why should the government get involved in treatment for AIDS patients? - ✔✔There
is a cost to the general public, it is an externality, and there is a benefit to everyone to
cure or treat the virus in order to prevent the spread.
✔✔Are healthcare expenditures falling or rising? - ✔✔Healthcare expenditures are
rising, but not at the rate that they once were.
✔✔What are third parties? - ✔✔Entities that are neither a healthcare provider or patient,
but involved in healthcare.
ex. Insurance, government
✔✔What is the role of the federal government? - ✔✔Pay $0.40 for every dollar spent on
healthcare, create regulations
✔✔Where is most of the money spent? - ✔✔hospitals
✔✔How much is spent on physicians? - ✔✔16%
✔✔How much is spent on drugs? - ✔✔10%
✔✔How much is spent on hospitals? - ✔✔32%
✔✔What are the other expenditures? - ✔✔investment, public health activities,
government administration, dental services. Nursing homes, home health, medical
products, net cost of health insurance
✔✔What are out-of-pocket costs? - ✔✔11%
