Introduction to Health Economics and Macro/Micro Principles

Vocabulary flashcards covering core concepts of health economics, free market assumptions, market failures, public goods, and externalities from Chapter 1 through Chapter 8.

Microeconomics

The branch of economics that focuses on individual behavior, single decision-makers, or specific organizations.

Macroeconomics

The branch of economics that deals with aggregate structures, performance, and behaviors across whole industries, organizations, or countries.

Health Economics

The application of economic theory to analyze the allocation and distribution of scarce health resources in an efficient and value-aligned manner.

Rational Decision Maker

An economic assumption that individuals make consumption and behavioral choices logically based on a set of principles that make sense to them.

Marginal Analysis

An evaluation of the incremental value or benefit derived from consuming or producing one additional unit of a good or service.

Law of Diminishing Returns

An economic principle stating that as intake or production increases, the incremental benefits eventually decline after reaching a certain point.

Opportunity Cost

The value or unaccounted cost of the next best alternative given up when making a decision.

Capitalism

An economic system centered on individual capital, profit-making, and private control of property according to private interests.

Adam Smith

A renowned economist and philosopher who posited that self-interested individuals drive economic equilibrium via the invisible hand mechanism.

Invisible Hand Approach

An unseen market force that naturally regulates prices, supply, and demand in a free market economy without direct government intervention.

Information Transparency

A condition in a perfect market where both buyers and sellers have complete, symmetric access to all information needed to make informed decisions.

Market Failure

A situation where a free market left to its own devices fails to efficiently allocate goods or achieve desirable public health outcomes, requiring government intervention.

Monopoly

A market condition where a single entity or a small group controls an entire industry or service, leading to reduced competition and higher consumer prices.

Public Good

A resource or service—such as public libraries or education—that is accessible to all, often subsidized or free, and not primarily driven by profit.

Free Rider Problem

An issue associated with public goods where certain individuals consume or benefit from a shared resource without contributing their fair share of the cost.

Externality

A secondary outcome or consequence of producing or consuming a good that impacts third parties without being reflected in market prices.

Negative Externality

A harmful side effect generated by production or consumption—such as pollution—that creates uncompensated costs for society.

Positive Externality

A beneficial side effect of an action—such as vaccinations creating population immunity—that delivers unpriced benefits to society.

Public Option

A government-created health insurance plan designed to compete directly with private insurers in the marketplace to expand access and lower costs.

Subsidies

Financial incentives or state support provided to lower costs and promote activities that generate positive externalities or public goods.