Health economics investigates how scarce resources are used, or should be used, to satisfy health wants. Although in high-income countries 10% or more of wealth is spent on healthcare, resources are still scarce compared with the potentially unlimited want for physical, psychological, and social health.

The health market is not a competitive market in which price setting resolves differences between demand and supply, among others because insurance interferes with the relation between price and demand; new healthcare providers are often not free to enter the market and patients do not have perfect information about their needs. As a result, active decision making may be necessary to prevent supply of inefficient healthcare. Health economics intends to provide information on the economic aspect of such decision making.

Health economics ...

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