economics writing

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ECON 317 SPRING 2020 – INDIVIDUAL ASSIGNMENT 4 TO BE SUBMITTED VIA COURSESPACES BY 11:59 PM ON FEBRUARY 11th, 2020

Name (First, Family) Last 3 digits of Student ID#

TO SPEED UP MARKING, PLEASE ANSWER THE QUESTIONS IN THE FORMS AND SPACES PROVIDED. THE T.A. RESERVES THE RIGHT TO NOT MARK ANY QUESTIONS THAT ARE NOT ANSWERED IN THE EXPECTED LOCATIONS. By submitting this assignment you agree to the following honor code, and understand that any violation of the honor code may lead to penalties including but not limited to a non-negotiable mark of zero on the assignment: Honor Code: I guarantee that all the answers in this assignment are my own work. I have cited any outside sources that I used to create these answers in correct APA style.

Marking scheme – Make sure you answer all the questions before handing this in!

Question Marks

1 a 12

2

a 3

b 3

c 3

3

a 3

b 3

c 3

4

a 2

b 2

c 4

Total 38

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1. [Reading] Read the following article: John, T. M., Millum, J. & Wasserman, D. (2017). How to Allocate Scarce Health Resources Without Discriminating Against People with Disabilities. Economics and Philosophy, 33, 161- 186. Retrieved from https://doi-org.ezproxy.library.uvic.ca/10.1017/S0266267116000237 The choice of this article (as opposed to other candidates for this assignment’s reading) was inspired by a current ECON 317 student who is interested in both philosophy and economics. a. (12 marks) Write a 3-2-1 report using the form on the ECON 317 Coursespaces site. 2. [Standard Gamble] Answer the following calculation questions, putting your answer in the spaces provided. Show your work (among other things, it allows us to give you part marks). You will find Lecture 10 and the associated required readings very useful for this question. a. (3 marks) You are using a standard gamble to evaluate the QALY weight of a health state H, which is chronic and preferred to death. The respondent tells you they are indifferent between the following two options: Option 1: Spend the rest of their life in health state H. Option 2: Take a pill that has a 43% chance of restoring them to perfect health for the rest of their life, and a 57% chance of killing them instantly. QALY weight for state H: __________ Work:

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b. (3 marks) You are using a standard gamble to evaluate the QALY weight of a health state H, which is chronic and worse than death. The respondent tells you they are indifferent between the following two options: Option 1: Die instantly. Option 2: Take a pill that has a 75% chance of restoring them to perfect health for the rest of their life, and a 25% chance of leaving them in state H for the rest of their life. QALY weight for state H: __________ Work: c. (3 marks) You are using a standard gamble to evaluate the QALY weight of a health state H, which is temporary and better than death. The respondent tells you they are indifferent between the following two options: Option 1: Spend the rest of the year in state H. Option 2: Take a pill that has a 25% chance of restoring them to perfect health for the rest of the year, and a 75% chance of leaving them in state S for the rest of the year. State S has a known QALY weight of 0.24. QALY weight for state H: __________ Work:

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3. [Time Trade-Off] Answer the following calculation questions, putting your answer in the spaces provided. Show your work (among other things, it allows us to give you part marks). You will find Lecture 10 and the associated required readings very useful for this question. a. (3 marks) You are using a time trade-off method to evaluate the QALY weight of a health state H, which is chronic and preferred to death. The respondent tells you they are indifferent between the following two options: Option 1: Spend 17 years in perfect health, and then die. Option 2: Spend 50 years in health state H, and then die. QALY weight for state H: __________ Work: b. (3 marks) You are using a time trade-off method to evaluate the QALY weight of a health state H, which is chronic and worse than death. The respondent tells you they are indifferent between the following two options: Option 1: Die instantly. Option 2: Spend 8 years in perfect health, then spend 2 years in health state H, then die. QALY weight for state H: __________ Work:

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c. (3 marks) You are using a time trade-off method to evaluate the QALY weight of a health state H, which is temporary and better than death. The respondent tells you they are indifferent between the following two options: Option 1: Spend 8 years in state S, which has a known QALY weight of 0.43. Option 2: Spend 4 years in health state H, then spend 4 years in perfect health. QALY weight for state H: __________ Work: 4. [Discounting] Answer the following calculation questions, putting your answer in the spaces provided. Show your work (among other things, it allows us to give you part marks). You will find Lecture 11 very useful for this question. a. (2 marks) It is currently year 0. The social discount rate is 5% per year. Calculate the present value of 10 QALY received in Year 20. Give your answer to two decimal places (e.g. 3.33). P = ____________________ Work:

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b. (2 marks) It is currently year 0. The relevant discount rate is 2% per year. Calculate the year 10 value (future value) of $100 today. (Put another way: if you save $100 today, and your savings account pays you 2% interest per year, how much money will you have ten years from now?) Give your answer to the nearest cent (e.g. $3.33). F = ___________________ Work: c. (4 marks) It is currently 2020. A new treatment is being developed that is expected to provide benefits equivalent to 1,000 QALY in 2030. Researching this treatment is expected to cost a total of $1,000, $500 of which were paid five years ago (2015), and $500 of will have to be paid in 2025. Calculate the $/QALY of this treatment in present value terms. Discount QALY by 5 % a year, and costs by 10 % a year. Give your answer to the nearest cent (e.g. 3.33 $/QALY). (Hints: Find the present value of the costs, then find the present value of the QALY. Divide the present value of the costs by the present value of the QALY. Note that if the present is 2020, then 2015 is in the past, and 2025 is in the future.) $/QALY in present worth terms: ___________________ Work: