Notes for Health Economics (ECON 415)
Powerpoint Lecture Files in Powerpoint format:
Day 1 Days 2 & 3 Day
4 (Oct. 3)
Ten
Important Principles of Economics to Keep in Mind
1.
Scarcity and Choice
2.
Opportunity Cost
3.
Marginal Analysis
4.
Self-interest
5.
Markets and Pricing
6.
Supply and Demand
7.
Competitive Forces
8.
Efficiency
9.
Market Failure & Government Failure
10.
Comparative Advantage
Quantity
Supplied and Its Determinants
·
Price (+)
·
Prices of Inputs (-)
·
Prices of Substitutes in
Production (-)
·
Prices of Complements in
Production, AKA By-Products (+)
·
Technology, cost reducing,
(+), product improvement (?)—demand side change, improved quality
·
Number of sellers (+)
Shifting
Supply, Sliding along supply
Reiterate,
Quantity Demanded and Demand not the same;
Quantity
Supplied and Supply not the same
Example
of why it matters:
Argument,
three statements: where is the problem?
- A
tax on automobiles will increase the price of automobiles. (true)
- The
higher price of automobiles will cause the demand for automobiles to drop.
- A
drop in the demand for automobiles will cause the price of autos to drop,
perhaps down to the original price.
·
Putting Supply and Demand
Together
·
Price lower than crossing
point
·
Price higher than crossing
point
·
Forces moving price to
crossing point (equilibrium)
·
Price controls
o
Price ceilings
§
Gasoline
§
Rental Housing
o
Price floors
§
Minimum Wage
§
Agricultural products
Elasticity
·
Of Demand
o
Measurement
o
Factors determining
o
Elasticity and Expenditures
·
Of Income
·
Cross Elasticity
·
Price Elasticity of Supply
Consumer
and Producer Surplus Analysis
Taxes—A
Simple Case
·
An Excise Tax on Sellers
·
An Excise Tax on Buyers
·
What Difference Does it
Make?
·
Taxes and Elasticity of
Demand
·
Taxes and Elasticity of
Supply
Marginal
Analysis
·
Marginal Benefits
·
Marginal Costs
·
Utility, Marginal Utility
and Budget Constraints
·
Deriving a Demand Curve
·
Marginal Costs and Marginal
Revenues
·
Average Variable Costs and
Price
·
Irrelevance of Sunk Costs
·
Fixed Costs in Long Run
·
Marginal Benefits, Marginal
Costs and Gains from Trade
·
Perfect Competition
·
Monopoly
·
Oligopoly
·
Monopolistic Competition
“Perfect”
Competition
·
Conditions:
o
Many Buyers and Sellers
(Atomistic Traders)
o
Easy Entrance and Exit / No
Barriers in or out
·
What Conditions Mean
·
Results
o
MC=MR=P
o
P=Lowest Average Cost in
Long Run
Monopoly
·
Conditions:
o
Single Seller
o
High Barriers to Enter
·
What Conditions Mean
o
Industry Demand is Seller’s
Demand
o
Profits not enough to bring
in new competitors/overcome entry barriers
·
Results
o
P>MR=MC
o
P>ATC Min
Welfare
Cost of Monopoly
Monopsony
and Welfare Costs
·
Point of Price
Discrimination--Profit
·
3 conditions
o
Price Searcher/Market Power
o
Discernibly Different Price
Elasticities of Demand
o
Can Keep Buyers from
Reselling / Costly to Resell
·
Why 3 conditions must hold
·
Types of Price
Discrimination
·
Two-Part Pricing
Information
Costs and Fraud
·
Search Goods, Experience
Goods, and Credence Goods
·
Errors and Cost of Errors
·
Merit Goods?
Externalities
·
Negative
·
Positive
·
Commons Problems
·
Transactions Costs
·
Reciprocal Rights
Public
Goods
·
Collective Consumption
·
Free Rider, Non-exclusivity
·
Market Failure
Democracy
·
Voting Choice
·
Information and Voting
·
Special Interest vs. Public
Interest Issues
·
Median Voter
·
Bureaus and Monopoly
·
Voting as a Public Good
·
Info Gathering for Voting a
Public Good
Government
Failures