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What happens in markets for medical care when:

Slides for Class 6: Promoting a better grasp of Pareto Optimality and its application to Health Policy. What happens in markets for medical care when: There are positive and negative externalities linked to consumption ; When consumers’ tastes for health are not predetermined.

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What happens in markets for medical care when:

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  1. Slides for Class 6: Promoting a better grasp of Pareto Optimality and its application to Health Policy What happens in markets for medical care when: There are positive and negative externalities linked to consumption; When consumers’ tastes for health are not predetermined.

  2. How a Society , Abiding by the Assumptions That Underlie Free Market Competition, Reaches Pareto Optimality. • The society consists of 2 households each owning finite amounts of 2 resources - X and Y, and 1 producer that makes and sells 2 services - A and B to the households. • Acting as consumers, both households optimize their utility when their marginal rate of substitution of A for B = Pa/Pb • The producers maximizes profits when it produces where its marginal rate of technical substitution of X for Y = Px/Py and, its marginal cost of producing an additional unit of both A and B is = to the market price or A and B. • The society maximizes its collective well-being when the marginal rate of transformation of A for B is equal to the Pa/Pb. • The Edgeworth box illustrates how the resources X and Y are allocated between A and B and these services are distributed between the 2 households. • Note the difference between this society’s contract curve and the point on that curve where social welfare in that society is at a maximum.

  3. Critiquing Assumptions Associated With the Textbook Model of Market Competition • Assumption 1: There are no negative externalities • Assumption 2: There are no positive externalities • Assumption 3: Consumer tastes are predetermined

  4. Implications for Health Policy • Equalizing Access to Health Services • What comes first, allocation or distribution? • Competition and prevention • Government sponsored Health education • Should cost control be a Public policy?

  5. How would you like skill group organized and managed? • How will the group govern its effort? • How will it structure its work? By tasks? By organizations involved? By experience with the skill area? Others? • Are there special needs or boundaries within which members should work? How might the group manage these challenges?. • What strategies will be used to gather bibliography from journals, books and the Internet? • Use these questions if you choose to write class 7, 1-pager on this topic.

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