DQ5-1

Responses 5-1

1.

Easy concepts such as opportunity cost, supply and demand, and marginal analysis dictate the decision making of health care providers. Defining some of the terms will help us understand with more clarity the actual decision-making process.

- Opportunity cost is described as "the proceeds lost by forgoing other opportunities" (Cleverley & Cleverley, 2018.) Missing opportunities can impact the well-being of any company with the hope of something better.

- Supply and demand explain the relationship between the seller and the buyer of a popular product. it defines how "the relationship between the availability of a particular product and the desire (or demand) for that product has on its price" (Chappelow, 2019.)

- Marginal analysis "is an examination of the additional benefits of an activity compared to the additional costs incurred by that same activity" (Hayes, 2019.)

Decision making is selecting what is best for the organization to pursue and knowing what people want. This might be beneficial for other businesses, but for hospitals, it is about patient's necessity more than purchasing a product; so, they have to be able to provide all services needed in case of emergency for everyone. Stocking medical items is never a bad idea because there is not controlled of what is going to be required in any procedure due to the individuality of medical processes in patients.

Thanks

Reference

- Chappelow, J. (2019, June 08). Learn about Law of Supply and Demand. Retrieved from https://www.investopedia.com/terms/l/law-of-supply-demand.asp

- Hayes, A. (2019, May 01). Understanding Marginal Analysis. Retrieved from https://www.investopedia.com/terms/m/marginal-analysis.asp

- Parkin, D. (2017, May 09). Principles of health economics including: The notions of scarcity, supply and demand, distinctions between need and demand, opportunity cost, discounting, time horizons, margins, efficiency and equity. Retrieved from https://www.healthknowledge.org.uk/public-health-textbook/medical-sociology-policy-eco

2.

Opportunity Cost:

Taking care of your health is more than just having health insurance, it is taking care of your health and discerning when and if a certain medical suggestion is right for you. Opportunity cost is when you take preventative measures so that your health is guarded and there is less reason for a medical intervention. Opportunity Cost is to do everything you can not to let an illness worsen, allowing an illness to worse can impact negatively everyday life, make you miss work, there are choices and depending on your choices, is the inevitable result. An example on a personal level then concerning health decisions would be: Someone gives up fattening and sugary foods, the result is this individual loses weight, the opportunity cost is, not eating the food and enjoying eating it, (What is an opportunity cost? definition and meaning)

Opportunity Cost then as it relates to the economical betterment of the health industry is to make decisions based on best long-term outcome.

Supply and demand:

In health care (and otherwise) is when there is a demand for something related to that field such as the demand for primary care physicians and the need is supplied, however, when there is not enough to meet the demand, it can drive prices up. When supplies are up, prices go down. At some point too much of a demand means the product will diminish as a result price will rise. Eventually supply and demand will reach an equilibrium.

Marginal Analysis and Opportunity Cost

Marginal Analysis is a formula used by managers often when hiring. For instance, if there is room in the budget to hire another person, marginal analysis tells the manager that an additional worker provides net marginal benefit. This does not necessarily mean this is the right decision. Managers should also understand the concept of opportunity cost. Suppose a manager knows that there is room in the budget to hire an additional worker.(economicurtis, 2012)

All of these terms are relevant to a health care team or manager, because there are many important things to understand about finance and management in relation to the health care industry. (economicurtis, 2012)

What is an opportunity cost? definition and meaning. (n.d.). Retrieved June 14, 2019, from http://www.investorwords.com/3470/opportunity_cost.html

Economicurtis. (2012, July 10). Marginal Analysis Example - Marginal Cost & Marginal Benefit - Intro to Microeconomics. Retrieved June 14, 2019, from https://www.youtube.com/watch?v=tKmzUYttrzY

3.

Opportunity cost is defined in our classroom text book, Economics Of Health and Medical Care (6th Edition) written by Lanis L. Hicks as, “The value of the most valuable alternative course of action given up for the chosen course of action, is used as a measure that does not depend on whether providers are paid in money for their services (Hicks 2014).” An example that the textbook illustrated is an optometrist who performs a service for free in a clinic would still have an office fee which has monetary value. Costs fall into two categories; direct and indirect. Direct costs is money spent while indirect costs are unpaid resource commitments.

Supply and demand is how business begin their start up. To create a business, there must be a demand and then there must be a supply that is given. In the case of healthcare, healthcare is the demand and the supply is the physicians, and clinical staff. There will always be a demand for healthcare because it’s a necessity.

Marginal analysis is defined as the breakdown of decisions into similar forms with ‘yes’ or ‘no’ answers. It examines the additional benefit of an activity compared to the additional cost of the same activity per the website, Principles of Microeconomics. It’s a way for the company to make fiscally responsible decisions.

Healthcare administrators must help guide a healthcare organization into success which can mean generating enough revenue that can be placed back into the company. That means having a substantial amount of knowledge in business and using those concepts for the companies favor. Opportunity cost allow for proper decision making when they can review the benefits of services. Supply and demand allow for company’s to review that is needed and how they can maintain their business is running. Marginal Analysis simplified questions for leaders to decide what is necessary for the company.

Hutchinson, E., & University of Victoria. (n.d.). Retrieved from https://pressbooks.bccampus.ca/uvicecon103/chapter/1-3-marginal-analysis/

Hicks, L. L. (n.d.). Economics Of Health and Medical Care.