Module on: Nursing leadership, management

and health policy

For

3rd year comprehensive nursing student

 Topic 1: Introduction to economics and health
economics

What is economics
What is health economics
Concepts and principles economics
Classification of economics
Role of economics in health
Application of economics to the health sector
Issue of equity and efficient in the provision of health care
contents…
Topic 2:Health care production and Health care markets
 Need versus demand
 Demand and Supply
 Factors influencing demand and Supply
 Elasticity of demand
 Supply demand equilibrium
 Market failure and dealing with it
 Perfect competitions
 Medical care market
 Theoretical model for the analysis of the demand of health care, the
Demand of health care
Topic 3: Health and development

 Introduction to health and development

 Meaning of health and development
 Economic indicators and economic growth
 Sources of poverty
 Attacking poverty and inequality
Topic 4:Economics and financing in the health sector
contents…
 Healthcare financing
 Principles and types of healthcare financing
 Forms of financing healthcare
 Healthcare financing in Ethiopia
 Cost concepts
 Allocating costs between programmes
 Costing and Methods economic evaluation
Topic 5:Measuring and improving efficiency in health care
Measuring efficiency
Common causes of inefficiency
Strategies to increase efficiency
Introduction to health economics
Introduction to health economics
 What is economics?
 What is health economics)?
 Method of economics (concepts and
principles)
 Classification of economics
 Role of economics in health
 Application of economics to the health sector
 Issue of equity and efficient in the provision of health
Brainstorming!!

Health – a Priceless/invaluable/ Commodity

What is Economics?

What is Health Economics?

Why Health Economics?

What is Economics?
The discipline of economics is built upon
two immutable facts:
1. Limited resources
2. Unlimited “wants”

Scarcity

Choice
What is Economics?
What is Economics?

Economics is a science of choice

Economics is often described as the ‘science of

scarcity’ (Witter & Ensor 1997)
 What is Economics?

 Economics is a social science that studies how

individuals and organizations in society engage
in the production distribution and consumption of
goods and services.
• The study of how best to allocate scarce
resources among competing ones
 Economics is About Deciding/choices

 Economists do not restrict themselves to considering only decision

problems involving money and markets, though that is a big part of
economics.
Examples of Some Decisions Economists Have Analyzed:
 Whether to buy a car this week.
 Whether to have pizza for dinner tonight, or something else..
 Whether to go to college, and if so, which one.
 Whether to buy a lottery ticket in the Ethiopian National Lottery.
Economic analysis

Economic analysis provides important

insights into real-world problems. (difficult
problems usually have simple beginnings)
Economists attempt to diagnose and provide
solutions to problems
 What is Economics?

Economic analysis, is concerned with three major questions.

1. What to produce: For example, what types of malarial or diabetes

prevention measures to provide and how much of each type.

2. How to produce: For example, what resources to use and in what

combination to produce these malarial/diabetes prevention measures.

3. For whom to produce: For example, who will benefit by receiving

these measures?
 Economic Decisions
 Economic decisions are made at every level in society.
 The choices made by individuals, firms, and governments answer
basic economic questions:
What products do we produce?
How do we produce the products?
 for whom to the products? Who consumes
 What is Health Economics?

 Health Economics is the application of the discipline of economics to the

subject matter of health.
 Health economics is an application of economic theory, concept and
empirical techniques to the analysis of decision making by individuals,
healthcare providers, and governments with respect to health and health
care.
 Health economics help healthcare professionals, healthcare decision
makers, or governments, to make choices on how to make the best use of
limited health resources.
.

Basic Concepts and

Principles in
Economics
Basic Concepts in Economics
(Scarcity, choice and opportunity cost)utility
 ScarcityBasicis
Concept in Economics
the lack of enough resources to satisfy all
desired uses of those resources.
 Choice: People make choices because they cannot have
everything they want.
 Tradeoff the courses of action given up in order to
perform the preferred course of action
 Opportunity Cost It Is the value of the next best
alternative given up to obtain another good or service.
Utility: is the economic term for satisfaction obtained
from purchasing a particular good or service

Efficiency : measures whether healthcare

resources are used to get the best value for
money.
Equity : Equity relates to fair distribution, not same as
equality.
equity of financial contribution
equity in distribution of health care
equity in access or use of health care
 Opportunity Cost
There is no such thing as a free lunch
Economists believe that the costs of rational choice
are not the number of dollars spent on such choices,
but rather the opportunity costs.
The opportunity costs of a decision are the highest-
valued alternative that we give up to get something
else.
Basic Concept in Economics…
 Efficiency: Economical' use of the limited healthcare resource.
 Economic efficiency the achievement of maximum benefits, or utility, with a fixed
amount of resources
 Technical efficiency means producing a particular quantity of output using as few
inputs as possible or producing the maximum output from a particular quantity
of inputs
 Cost efficiency means each level of output is produced at least possible cost
 Allocative efficiency: Situations in which either inputs or outputs are put to their best
possible uses in the economy so that no further gains in output or welfare are possible.

,
 Efficiency …
.
A more useful activity is substituted for a less useful one at the
same cost;

Needless activities are eliminated

 the focus be on the costs and output at the margin and not
merely the average costs and overall output;

The costs be measured as opportunity costs and not just as

financial expenditures;
 Equity : relates to fair distribution, not same as equality.

• equity of financial contribution

• equity distribution of health care

• equity in access or use of health care

Horizontal equity: The equal treatment of individuals or groups who
share similar circumstances.
Vertical equity: Individuals with different (or unequal) health should
be treated differently (or unequally).
Equal distribution of benefits does not always result in equal gains,
as illustrated below.
Equal distribution of benefits does not always result
in equal gains, as illustrated below
Balancing equity and efficiency

When prioritizing health care the aim is to achieve

efficiency (maximizing health benefits given limited
resources) whilst not compromising equity (fair
distribution of resources).

Some market economists may argue that equity and

efficiency are mutually exclusive, however this doesn’t
necessarily apply to health systems; indeed the

both equity and efficiency as important measures of a good

health system.(Reidpath D et al, 2012)
 Principles of Economics …
Economic decisions are made at every level in society.

1.How people make decisions (4 principles)

People face tradeoffs
The cost of something is what you give
up to get it
Rational people think at the margin
People respond to incentives
.
 Principle #1: People face trade offs

Decisions require comparing costs and benefits of alternatives.

To get one thing, we usually have to give-up/lose another thing.
Whether to increase health care access or quality?“
Whether to increase efficiency or ensure equity?
Whether to go to college or to work?
Whether to go to class or sleep
Making decisions requires trading off one goal against another
Principle #2: The cost of something is what you give-up to get it ( Opportunity Cost)

Opportunity Cost:
 The opportunity costs of a decision are the highest-valued
alternative that we give up to get something else.
 Opportunity cost is the value of the next best alternative
 The cost of allocating scarce resources for one
use rather than the other use
 Deciding to do A implies deciding not to do B (i.e.
value of benefits from A>B).
If you have three options A, B, and C. And if A>B>C
the opportunity cost of A will be the value of B the next best
alternative)
Principle #2: The cost of something is what you give-up to get it
Principle #3: Rational people think at the margin

Marginal changes are small, incremental adjustments to

an existing plan of action.

Marginal analysis: requires assessment of relative costs and

benefits of each alternative production/consumption

People make decisions by comparing costs and benefits

at the margin.
Comparing MC and MB will tell you how you
should adjust your activity to be as well as possible
o If MB > MC then do it
o If MB < MC do not do it
o If MB=MC it is acritical point for decision so use incentive and
disincentive mechanisms to do this
 Principle #4: People respond to incentives

Marginal changes in costs or benefits motivate people to

respond.
 The decision to choose one alternative over another occurs
when that alternative’s marginal benefits exceed its marginal costs.
Since government can change benefits and costs at the
margin, government can affect outcomes
Can you think of some ways that government changes
incentive and decisions in your life?
Decreasing tax on cigarette ... Tendency to smoke more
Increase in saving interest rate…saving motivation
Introducing Health insurance ….health service utilization improve
 2. Classification of Economics
There are two branches of economics:
(1) Microeconomics….Micro means small
(2) Macroeconomics…Macro means Big or
Large
 Classifications of Economics

1. Macro Economics
 Macroeconomics examines national & international economies.

 It studies how the overall level of economic activity is

determined & how government intervention affects the economy
as a whole
 the study of aggregate economic behavior, of the economy as a
whole.
Macroeconomic Questions
Four big issues that macroeconomics tries to understand
are:
1. The standard of living: The level of consumption of goods
and services that people enjoy on the average/measured
[not perfectly] by average income per person.
2. The cost of living/ Inflation : The number of birrs /dollars
it takes to buy the goods and services that provide a given
standard of living.
Inflation- when the cost of living is rising and the value
of money is shrinking.
3.Unemployment rate: number of unemployed persons
divided by the number of people in the labor force
4.Economic fluctuations-recessions & expansions/Business cycle
The periodic but irregular up-and-down movement in
production and jobs is called the business cycle.
Objectives of Macro Economics policy

National output

The overall price level/stable/

Employment

Foreign sector.
 Objectives and instruments of macroeconomic policy
Four objectives are central to evaluating macroeconomic
performance
1. Output: The ultimate yardstick of a country’s economic
success is its ability to generate a high level of production
of economic goods and services for its population.
2. High employment: Providing good jobs with reasonable
 payment for those who want to work is another objective
of macroeconomic policy.
3. Foreign Sector: Involvement of foreign sector and good
trade balance with foreign trade exchanges.
4. Ensuring Stable Price: The overall price level does not rise
or fall rapidly….to keep contracts and other economic
agreements from distortion.
2. Micro Economics

Studies the decisions of individual households &

firms, the functioning of individual markets & how
markets are affected by individual markets, taxes &
other regulations
 Microeconomics focuses on the behavior of individual agents (such as consumers,
firms), and how they come together in markets.

 The choices that individuals and businesses make,

 The way these choices interact, and

 The influence the governments on these choices.

 2. Micro vs macroeconomic

EMPLOYME
PRICES INCOME
PRODUCTION NT

•how many
•How many • what is the • what are the
workers are
amoxicillin does price of wages of the
Micro employed in
factory y amoxicillin in workers in
pharmacy
produce? pharmacy x? pharmacy x?
x?
•How much
What is the • what are the • what are
goods and
price of all total wages and the total
services does
Macro consumer salaries number of
Ethiopia
goods in the of workers in works in the
produce each
economy? the economy? economy?
year?
Normative versus positive economics (Fact
or opinion?)
When using economics we must be careful to
distinguish between normative statements (or
value judgments) and positive (or factual)
statements
Positive economics
• Refers to economic statements that describe how things are.

• Positive economics describes the facts and behavior in the economy.

• It deals with objective scientific explanation of economic

happenings
E.g. what is the percentage of un employment?

How many people earn less than 3 birr/day birr/day.

What is the effect of high cigarette taxes on the number of smokers?

Normative economics
Refers to economic statements that prescribe how things
should be
They can be argued about but they can never be settled by
science or by appeal to facts
Normative economics involves ethics and value judgments
E.g. should government give money to poor people?
Should the government give free health service to all
Should the higher taxes & lower spending reduce the
budget deficit?
Positive vs Normative Economics…
Exercise
1. What percentage of health professional are unemployed?
2. Should the government give money to poor people?
3. Should hospitals owned by the government or the
private sector?
4. Should the `private wing` strategy improve health
service quality?
5. Should the public sectors or the private sector provide
extra jobs for unemployed?
The role of economics in health care
 Economics is about scarcity of resources;

 It is also obvious that resources in the health sector are

almost always scarce compared with health care
needs;
 Thus necessitating decisions to be made for
optimization of the available scarce health care
resources
The role of economics in health care
 The allocation of resources between various health-
promoting activities
 The quantity of resources used in health delivery
 The organization and funding of health institutions
 The efficiency with which resources are allocated and
used for health purposes
 The effects of preventive, curative and rehabilitative
health services on individuals and society.
How is Economics applied in Health?
• The analysis of the economic costs of diseases

• Benefits of programs

• Aspects of health problems - type, quality, quantity & prices of the

resources used
• Population problem, the quantity & quality of resources allocated to
the health area
• The medical industry’s efficiency & losses due to illness, disability &
premature death
 Unit 2
Health care production and Health care
markets
objectives ,

 Define market. demand, needs and supply

 Identify determinate of of demand and supply
 Describe the market equilibrium
 Describe concept of elasticity of demand and supply
 Describe Apply demand and supply in health care

 Describe the peculiar features of Health Care Markets

 Discuss Market failure and dealing with it
What is market.
 A market is a group of buyers and sellers with the potential to
trade each other.
 In economics, a market is not a place, but rather a collection of
traders.
 Market bring together buyers (demanders) and sellers
(suppliers) and they exist in many form.
 All markets involved demand, supply, price and quantities.

53
 Demand, Need Vs. Want

 A Need is something that is necessary for

humans to live a healthy life.
 Needs are distinguished from wants because
a deficiency would cause a clear negative
outcome, such as dysfunction or death.
 Wants: are things which we do not have but,
would like to have; e.g., burger while food is
need.

06/23/2023 54
Need ,Demand, vs Want
 A Need is something that is necessary for humans to
live a healthy life
 Need: is what objectively best suited to the existing
situation regardless of the ability to pay or things
without which we cannot live.
 Demand considers both the willingness or desire and
ability to buy a good.
 Wants: are things which we do not have but, would
like to have; e.g., burger while food is need.
What is DEMAND?
 The amount of any good or service a consumers/buyers
willing and able to buy during a specific period of time.

• In economics the hungry man who can not pay for food
has no demand for it.
Factors influencing demand
the good’s own price
the consumer’s money income
the prices of other goods
preferences (tastes)- Personal feelings toward the
value or desirability of various products.
Expectation of the future
Number of consumers
 The Law of Demand

The Law of Demand says that a decrease in a

good’s own price will result in an increase in the
amount demanded, holding constant all the other
determinants of demand. ceteris paribus

The Law of Demand says that demand curve is

downward/negatively sloped.
58
 A Demand Curve

 A demand curve must look like this, i.e. negatively

sloped.

Good’s
own price

demand

quantity demanded

59
Demand…
Normal good: When an increase in income causes an
increase in demand
Inferior good: When an increase in income causes a
decrease in demand
Substitutes Goods that can be used in place of other
goods
Complements Goods used along with an identified
good.
Demand of Related goods

Substitutes: Two goods are substitutes if an

increase in the price of one of them causes an
increase in the demand for the other.

Complements: Two goods are complements if an

increase in the price of one of them causes a
decrease in the demand for the other.
61
2B. Supply
SUPPLY
• The quantity of a good or service that producers
are willing and able to sell at each of a range of
prices.
• S = f(P), ceteris paribus
 Factors affecting supply
 The good’s own price
 The prices of inputs used in its production
 The technology of production
 Taxes and subsidies
 The number and size of firms in the market
 Unexpected events
 Substitutes and complements

64
 Law of Supply
Says that an increase in a good’s own price will
result in an increase in the amount supplied,
holding constant all the other determinants of
supply.

The Law of Supply says that supply curves are

positively sloped.
 The supply curve means:
 You pick a price, such a p0, and the supply curve
shows how much is supplied.

supply
own price

p0

Q0
quantity supplied
66
 EQUILIBRIUM PRICE DEFINED

• The equilibrium price of a good is:

• a price at which quantity supplied equals quantity
demanded.
• a price at which excess demand equals zero.
• At the equilibrium price there is no net
tendency for price to change.

67
 EQUILIBRIUM PRICE

 Excess demand exists when, at the current price,

the quantity demanded is greater than quantity
supplied.
 Excess supply exists when, at the current price, the
quantity supplied is greater than the quantity
demanded.
EQUILIBRIUM PRICE
• When there is excess demand for a good, price will tend to
rise.
• When there is excess supply of a good, price will tend to
fall.
• When excess demand equals zero, price must be the
equilibrium price, and we say the market is in equilibrium.

• If you want to find out the price at which a market is in

equilibrium, then look for the price where the excess demand
is zero. 69
 SUPPLY/DEMAND SUMMARY

• Market price serves as the adjustment mechanism to

move markets to equilibrium.
• Price changes in response to the existence of excess
demand or excess supply.
• Changes in demand and changes in supply lead to
changes in equilibrium prices and quantities.

70
 ELASTICITY

 elasticity measures the degree of responsiveness of

demand to the changes in its determinants
 the responsiveness of one variable to changes in another
variable.

71
Measures of Elasticity

–Price elasticity of demand

– Income elasticity of demand

–Cross elasticity of demand

PRICE ELASTICITY OF DEMAND

Measures the responsiveness of quantity

demanded to changes in a good’s own price.
The price elasticity of demand is the percent
change in quantity demanded divided by the
percent change in price that caused the change in
quantity demanded.
73
Interpretation…
The demand is inelastic if 0<|ED|<1
The demand is elastic if 1<|ED|<∞

The demand is unit elastic if |ED|=1

Єd is ~ ∞ demand is perfectly elastic
Єd is ~ 0 demand is perfectly inelastic.
 Use the midpoint formula again.

 Elasticity =

 % change in Q =

 % change in Q =

 For the quantities of 10 and 7, the % change in Q is

approx. -35.3 percent. (3/8.5 times 100)

23/06/23 BY: Muluye. Molla 75

NOW COMPUTE ELASTICITY

% change in p = 22.22 percent

% change in Q = -35.3 percent

E = -35.3 / 22.22 = -1.6 (approx.)

76
 Calculating Price elasticity of Demand

P What is the price elasticity of

demand between A and B?
Q2–Q1
%ΔQ ½(Q2+Q1)
B
ED = %ΔP
= P2–P1
Midpoint
$26
C ½(P2+P1)
$23
$20 A 10–14
½(10+14) -.33
= 26–20 = .26 = 1.27
D ½(26+20)
Q
10 12 14
23/06/23 BY: Muluye. Molla 77
7-77
ELASTICITY…

If demand is elastic, total expenditures will change in the

opposite direction from a change in price.
If demand is inelastic total expenditures on a commodity
will change in the same direction as a change in price
In economics elasticity refers to the ratio of the relative
change in a dependent to the relative change in an
independent variable
Cross Elasticity of demand

• Refers to the change in demand of a product

[x] to price change for another product [y].
• The %change in demand on a good if the
price of an other good changes with one %.
 Determinants of price elasticity of demand
Close Substitutes: If a product can be easily substituted, its demand is elastic.

If a product cannot be substituted easily, its demand is inelastic, like gasoline.

Luxury Vs Necessity: Necessity's demand is usually inelastic because there are

usually very few substitutes for necessities.

Luxury product, such as leisure sail boats, are not needed in a daily bases. There
are usually many substitutes for these products. So their demand is more elastic.
Determinants…

Price/Income Ratio::

• The larger the percentage of income spent on a good, the

more elastic is its demand.

• A change in these products' price will be highly noticeable as 

they affect consumers' budget with a bigger magnitude

• The smaller the percentage of income spent on a good, the

less elastic is its demand.

Determinants…
time since price change
Short time
• no time to adjust,
• demand is inelastic
Long time
• time to adjust,
• demand is elastic
Demand and Supply in Health Care

Every individual has a need for health care in the form of

health promotion, prevention, cure or rehabilitation.
This need is not always translated into a demand for health
care particularly in developing countries for various reasons
Health need is transformed into a health care demand for
example when a patient seeks a medical care.
Demand for Health Care…
The following factors influence the demand for health care:
 Need (as perceived by the patient)
 Patient preferences;
 Income;
 Price/user charge;
 State of health
 Travel cost and waiting time
 Quality of care (as perceived by the patient).
Reasons Why Need For Health Care Far Exceeds The
Effective Demand For It Includes
Affordability
Geographical accessibility
Availability
Acceptability
Cost of time off from work and costs of waiting.
The demand for health care is generally inelastic.
meaning that any increase in user fees will result in a less
than proportionate drop in demand
Demand for health care
 Michel Grossman developed a model of demand for health
care. This model sees health as both

 Consumer purchase goods and services for the utility

 If the commodity demanded by consumers is good health, then

health can be produced by goods and services purchased in the
market as well as by the time devoted to preventive measures

 Demand for health care is derived from the more basic demand
for health

06/23/2023 Anteneh L. 86
 A model of demand for health care

 Demand analysis seeks to identify which factors are most

influential in determining how much people are willing to
purchase goods and services

 The purpose of demand analysis for health care is to determine

those factors which affect a persons utilization of health
services

06/23/2023 Anteneh L. 87
 Grossman’s demand model…

 According to this model every one inherits a stock of health

when born

 As peoples’ age advances there is an increase in rate of illness

and in the utilization of health services.

 Health depreciated overtime, however an investment is

required to sustain health

 The stock of health can be sustained by investment to maintain

health., such as use of health services and health promoting
activities
06/23/2023 Anteneh L. 89
 Grossman’s demand model
 Health care demand being derived from the demand for health

 The demand for health care will increase with increases in

person’s income

 Education may have a negative effect on the demand for health

care, because more highly educated people are presumed to be
more efficient in producing health

06/23/2023 Anteneh L. 90
Need, Demand & Supply Overlap

1= unmet need
2= health provider/ institution can
supply but clients can’t afford it
3= clients have the need, willing &
able to buy, but there is no supply
4= demanded & supplied, but
medically unnecessary. E.g extra
ultrasound
5= Optimal place; where the patient
gets what they need…
Group Discussion/5minutes/
What are the roles of government in health
care?
 Why do government set involved in health
care?
What are the economic justifications for
market failure?
Government’ Role in Health Care

 Financing
 Delivery
 Regulation
 licensure,
 Guide line setting
Market Structure
Market Structure…

Four broad market structures have been

identified by economists:
Perfect competition
 Monopoly
 Monopolistic competition
 Oligopoly
Perfect Competition
Assumptions of perfect competition are:

Large number of buyers and sellers, therefore firms

are price-takers/ no single buyer or seller can affect

the price/.

No barriers to entry (also implies free mobility of

factors of production).
Assumptions…
Identical/homogeneous products.
Perfect information/knowledge.
Perfect competition can be thought of as all the firms
are fully subject to the market forces of demand and
supply.
Demand is infinitely/perfectly/ elastic
Advantages of Perfect Competition

High degree of competition helps allocate

resources to most efficient use
Firms operate at maximum efficiency
Consumers benefit
What is Market Failure?
Market failure occurs when freely functioning
markets, operating without government
intervention, fail to deliver an efficient or optimal
allocation of resources.
The failure of an unregulated market to achieve
an efficient allocation of resources..
Economic Justifications For Market Failure
• Nature of goods (public goods)

• Externalities (Positive and negative)

• Natural monopolies

• Imperfect competition

• uncertainty and imperfect information

• Asymmetry of information

• Health care as free market

Unique chx of Health Care Market
The unpredictable & irregular nature of demand for health care

Product uncertainty

Health care commodity is a non-homogeneous product

asymmetry of information; supplier induced demand

The presence of externalities

Some health care services have the characteristics of ‘Public

goods’
Public goods are in varying degrees non Rivalries in
consumption, non-excludable in use or both

Externality Cost or benefit arising from an individual’s

production or consumption decision which indirectly affects
the well-being of others.
• Positive Externality: One person’s consumption of good
increases the other people’s utility with out them having to
pay for it’
• Negative Externality: One person’s consumption of good
decreases the other people’s utility with out them receiving
any compensation
• These externalities causes healthcare markets to be
inefficient.
Public Good;

• A good that is nonrival and nonexclusive

• Nonrival: one individual’s consumption of the good doesn’t

affect any other individual’s consumption of the same unit
of the good.
• Nonexclusive: it is not possible to exclude any one from
consuming the good.
unit 3
Health and development
objectives
• Define economic growth and development

• Describe the difference between economic

growth and development
• Explain the relationship between health and
development
• Identify economic indicators and economic
growth
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Economic Growth and Economic Development

 Difference b/n Economic growth and

Economic development?

• There is no development with out

economic growth. Do you agree?

108
 Economic growth Vs Economic Development

Economic growth
 Economic growth is a measure of the value of output of goods
and services within a definite time period

 It can be defined as an increase in a country’s productive

capacity, identifiable by a sustained rise in real national income
over a period of years

Economic Development
 Economic development is an increase in the standard of living
in a nation's population with sustained growth from a simple,
low-income economy to a modern, high-income economy
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Sources of Economic Growth
capital
labor
ideas and
new technology
 Sources of Economic Growth
 According to Robert Solow/Nobel Prize winner in Economics growth
comes from adding more capital, labor, ideas and new technology. Thus,
the main source for economic growth are:

 Increase in labor productivity: which accrues from greater efficiency in

the use of factors of production (obtained through better technology,
improved organization of production and so on).

 Increases in the amount of capital available come from net

investment/which includes investment in plants, equipments, and in the
skills and expertise of the labor force/human capital.

 Technological progress/driving force for long-run growth in labor

productivity via making possible additional output from existing
111 factors of
1. Gross Domestic Product (GDP)

 The total market value of finished goods and

services produced within the territory of a given
economy during a given time period, usually a
year.

112
Measuring Economic Growth
 There are different concepts in measuring National
Income/economic growth such as:

1. Gross Domestic Product/GDP: the market

value of all final goods and services produced
within the domestic territory of a country in a
given time period/ usually one year.

113
 Measuring Economic Growth…

2. The total value of goods and services produced using

resources owned by residents of a nation wherever in the
world those resources are located. – in other words,
national income.

3. GDP/GNP per head/per capita: Takes account of the size

of the population

114
 Measuring Economic Growth..

Real GDP Vs Nominal GDP

 Nominal GDP :- is the monetary value of currently produced goods and services
measured at current prices

 Nominal GDP is not useful to compare a country’s economic performance

overtime/WHY???

 Because higher prices bias the GDP measurement of production upward over time.

 Real GDP:- is the monetary value of currently produced goods and services measured
at constant price ( base year price ).

115
 Parameters of Development

1. Rising share of industry, along with the failing

share of agriculture in GNP and increasing
percentage of people who live in cities rather than
the country side.

2. Passing through periods of accelerating, then

decelerating population growth, during which the
age structure of the country changes dramatically

116
 Parameters of Development…

3. Change in consumption patterns as people no longer

spend all their income on necessities but instead move on
to consume durables and eventually to leisure-time
products and services

4. Meeting the needs of the present without compromising

the ability of future generations to meet their own needs
(sustainability)

5. Participation (mainly) by the citizens of the country in the

process as well as the benefit.
117
 Parameters of Development…

 While development involves much more than a

rise in per capita income, there can be no
development without economic growth.


118
Health Implications of Economic Development
 Health and Development

Perspectives of Health
1. Health as a right

2. Health as consumption good

3. Health as an investment; illness may affect overall

production, either through absenteeism or by lowering
productivity through its debilitating effects.
 Health and Development
…
 Based on economic grounds, good health raises levels of
human capital, and this has a positive effect on
individual productivity and economic development.

 On the other hand, bad. health is a major cause of

poverty because serious illness makes people to become
poor since they drop out of the labor market.

 According to WHO(2010) report, Income together with

education is a key determinant of health.

121
 Health and Development….

 Taking life expectancy as an indicator of health,

Bloom Canning, and Sevilla (2004) also found
positive and significant effect health on
development.

o They suggest that each extra year of life
expectancy leads to an increase of 4% in GDP.

• According to Gyimah and Wilson (2005) About 22 to 30
percent of the growth rate is attributed to health capital.

122
The state of individual health may be influenced by a number
of factors such as;
Poverty,
Level of education,
Food intake,
Access to clean water,
Sanitary and housing conditions etc

Thus, wider primary health care concepts suggests that

broader interventions, including community
empowerment and anti-poverty measures, are
necessary to promote health.

123
 On the other hand the Economist Intelligent unit
2011 stated that higher income promotes
 Accessibility to improved health facilities,
 Better nutrition,
 Clean water and sanitation,
 Education and medical care .

124
Health Economic Development
 The interaction b/n health and economic growth is a two-way
phenomenon with
 health being both influenced by and influencing economic
development.
 If there is Economic growth, there is an improvement in health or
Poor health is associated with low economic growth.
 If the citizens of a nation are healthy, they will be productive by
that it brings economic growth.
 If the health of individuals become poor, the cost of health care
increases and the economic growth become retarded
 HEALTH AND …

Therefore, the relationship between health and

economy show a two-way interaction.

Health Economy

126
reading assigment
 Sources of poverty
 Attacking poverty and inequality
Thank You!!