Question

What is meant by the term "opportunity costs"? With regards to health economics, what is the relationship between the concepts of opportunity costs and production efficiency?

Answer 1

The opportunity cost gives the trade-off between two alternatives. Ity gives the value of opportunity forgone when one alternative is chosen over other. In moving from one efficient production point to another, the opportunity cost is the amount of resources forgone to reach the other productive state. There is sacrfice involved as the resources are scarce and the objective is to maximise efficiency given these resources. In health economics, health care resources are scarce and often not enough to meet the health care needs of a large group of people. Thus, moving from one productive efficient point to another involve high opportunity cost.