University of South Carolina, Arnold School of Public Health, HSPM J712 Sept. 17, 2003
Copyright © 1999-2003 Samuel L. Baker
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The Context of Studying Supply and DemandSound applet

How we allocate resources and distribute goods and services in the U.S.Sound applet

The U.S. generally uses markets to solve the Economic Problem in practice. Cost-benefit or cost-effectiveness analysis are ways to make allocation and distribution decisions. For them to be used, there must be a decision-maker. The decision-maker could be

Practical and theoretical problems with cost-benefit and cost-effectiveness analysisSound applet

Some practical problems are discussed in the cost-benefit and cost-efffectiveness lectures for last week.

Additional problems of using cost-benefit and cost-effectiveness analysis include:

Interpersonal comparisons of value - How to Do It?Sound applet

Cost-effectiveness analysis for public health and medical decisions makes implicit interpersonal comparisons of value, depending on the chosen goal:

If the goal is: The implication is:
Saving lives Everyone's life is worth the same.
Saving years of lives More valuable to save the life of a young person.
Saving quality-adjusted years of life More valuable to save the life of a young, fully functional person.
Valuing lives at present value of future earnings Most valuable to save lives of 20-ish white men.

Economic decisions are fraught with practical and ethical problemsSound applet

Nevertheless, decisions have to be made, and are being made constantly.

The market is the mechanism for making most economic decisions in the U.S. (and most other countries).Sound applet

Markets are analyzed using the concepts:

MarketsSound applet

Make many decisions directly. Provide the context for administrative decisions.

Why study markets, supply and demand?Sound applet

To predict what a market will do.

To critique a market

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