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Medical economics deals with the economic aspects of the medical field including the medical profession and healthcare market as well as the financial and economic impact of disease on the healthcare delivery system, government, society, physicians and patients.

Used synonymously with health economics, medical economics is concerned with the application of economic theories to the different phenomena and problems usually associated with two distinct healthcare markets namely; physician and nurse services and institutional services. Dominant areas of application of medical economics are the determination of cost effectiveness of medical treatments and the cost to benefit analysis of pharmaceutical products.

Mathematical models are often used in the synthesis of epidemiology and biostatistics data to support medical decision-making for health policy and individual users. The study and application of health economics however, is the most important aspect of medical economics.


Economics in general is the science of scarcity. It is essentially based on the principle that there are not enough resources to meet the wants of every individual; therefore a choice has to be made between which wants are to be met which are not. To put it in terms of the healthcare system, there are not enough healthcare resources to meet the requirements of all the people. Therefore a choice must be made regarding which healthcare needs must be prioritized and which individuals the resources should be allocated to.

The application of health economics is based on the universal desire to obtain the maximum possible value for money by ensuring that healthcare provisions are cost effective and not just clinically effective.

Obtaining maximum value for money in healthcare implies two basic goals—achieving a predetermined objective at the lowest cost possible, and utilizing limited resources to maximize benefits to the entire patient population. Both these goals require the evaluation of services to determine the most cost-effective solution from a range of available options. Efficiency analysis, which is used to measure how well resources are utilized in order to achieve desired outcomes, is the other important and associated concept of health economics.

Efficiency has two different aspects:

Allocation efficiency: It relates to the extent to which resources are allocated to individuals or populations who should benefit the most from them. It requires high-risk patients to be addressed on priority for primary prevention, resulting in improved health levels for a given treatment.

Technical efficiency: It relates to the extent to which healthcare resources are integrated to achieve optimum outcome, or in other words, the minimum amount of resources combined to achieve a desired health outcome. Technical efficiency reduces the prescription of unnecessarily long and expensive courses of treatment or medication.


The definition and measurement of health outcomes are riddled with many difficulties, but such measurements are the foundations on which evaluations of health economics are based. Economists describe health outcomes in terms of utility, which measures the extent to which a specific outcome is preferred by an individual. Assessment of outcomes is made in terms of enhanced quality of life (reduced pain, improved sensory functions, improved mobility, etc.) and enhanced survival (years added to life).

Analyses of quality of life associated with health measure how a treatment affects the physical, emotional and social aspects of life from a patient’s perspective. Various techniques have been developed over the years to place values on different states of health to quantify and then analyze them. There are various measures such as the number of lives saved, years gained and rates of survival, to evaluate the impact of treatment on survival of patients. It is notable here that the focus of health services is growing towards improving the quality of life, rather than quantity of life or just survival.

The quality of life values, also called “weights”, are combined with survival data to produce a single, integrated measure of the quality and quantity of life generated through healthcare interventions. Quality-adjusted life-years (QALYs) apply the weights to indicate the post-treatment quality of life that a patient experiences. It must be understood here that these analyses are still in the early developmental stage with a number of methodological issues yet to be resolved.

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There are two distinct concepts of cost; financial and economic. Financial cost is the monetary payment made for acquiring a goods or service which is traded in the market. Economic cost on the hand is related to the wider concept of consumption of resources, irrespective of whether they are traded. The application of economic concept of cost means that the time patients and their attendants spend at the hospital during treatment is a real cost for them, even without any financial payments.

This concept is based on the general understanding that when a resource is being consumed in a specific way, it becomes unavailable for use in the production of other services that could have been traded for a benefit (such as profit from sales). Now since the resource is engaged elsewhere, the benefit would also have to be foregone. Such foregone benefits are called “opportunity costs” in economics. Even though the foregone benefits are very difficult to measure or quantify in practice, opportunity cost is a highly relevant concept in health economics as it emphasizes the obvious dilemma that underlines the allocation and use of resources in healthcare.


Demand is the most crucial component of the healthcare market. All other actors of the market are influenced by the demand for healthcare. When studying this demand, it is important to understand that healthcare has many peculiar characteristics that make it different from all other goods and services. Also important is to understand that despite its different characteristics, health can still be regarded as a good or a fundamental commodity essential for people’s physical and emotional well-being. Therefore, the demand for healthcare can be analyzed as that for any other good, even though the usual assumptions of the effects of resource allocation may not apply because of its inherent peculiarities.

The analysis of healthcare supply takes two different but related approaches. The first approach is based on the resource input and goods output model to determine the relationship among resources used, costs, and output generated within a firm. The issues highlighted in this method are related mostly to production efficiency, economies of scale, productivity, and factor substitution. The other method of analyzing the supply uses market structure to determine the number of suppliers in the given market; and how they behave with respect to setting outputs and prices, and making profits. The three main market structures—perfectly competitive, oligopolistic, and monopolistic can be studied to analyze the behavior of many healthcare and related organizations such as pharmaceutical manufacturers and insurance companies, and providers of ophthalmic and dentistry services.


Economic evaluation of healthcare provides an objective and systematic framework to determine the costs and benefits so that policymakers can make informed decisions. All the methods of economic evaluation follow a common structure which explicitly measures inputs in terms of costs (financial, economic and opportunity) and outputs (profits and health improvement).

The main methods include:

Cost-minimization analysis: This method determines whether the outcomes of two or more competing interventions are equivalent. It helps in selecting the cheapest intervention when there is sufficient evidence that the outcomes are equivalent.

Cost-effectiveness analysis: It measures health benefits of interventions in the natural unit while considering the common goal of competing interventions. The method is used to determine the additional cost per unit of the achieved goal of the intervention, otherwise referred to as the incremental cost-effectiveness ratio.

Cost-utility analysis: It measures the outcome by evaluating the effect of an intervention on quality of life (morbidity) and survival (mortality) when there is no common therapeutic goal. QALY calculates the number of additional life years with respect to the quality of life for the given state of health experienced each year.

Cost-benefit analysis: It measures cost and benefits in the monetary unit by comparing their financial values. Using this method, an intervention is selected when its financial benefits exceed the financial costs. When there are funds for only one intervention, the one with the highest benefits over cost from the available options is selected.

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In order to appreciate Managerial economics assignment help, we should first get our concept of managerial economics clear. What exactly is managerial economics? There are a number of definitions of managerial economics, lets look at a couple of them. According to Wikipedia, managerial economics bridges economics theory and practice, drawing heavily from qualtitative techniques like regression analysis, correlation and calculus. It further defines managerial economics as the application of economic concepts and analysis to help in rational managerial decisions.

There is one more definition of managerial economics which defines it as "is the science of directing scarce resources to manage cost-effectively. It consists of three branches: competitive markets, market power, and imperfect markets. A market consists of buyers and sellers that communicate with each other for voluntary exchange. Whether a market is local or global, the same managerial economics apply."

Now that we have the fundamentals clear, we can now dive into the more intricate components of managerial economics. All you need to do is to email us your economics homework details to info@urgenthomeworkhelp.com. We generally respond to all our emails in less than 10 minutes. If you need instance help with your managerial economics homework, chat with our customer success team on our website - we are available 24x7, including weekends and holidays.


Microeconomics deals with economics at an individual or company level whereas macro economics deals with economics at a national or global level. While microeconomics studies the decisions of individuals of people and organizations with respect to allocation of resources and prices of goods and services, it focuses on supply and demand, among other factors that influence price levels.


Macroeconomics, on the other hand, studies the entire economy of a country. It deals with entire economies and studies concepts like GDP (Gross Domestic Product) and the impact of national income, rate of growth, price levels and unemployment on GDP. John Maynard Keynes started the use of the term monetary aggregates and is credited with founding macroeconomics.

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