Health care economics is one branch of economics that deals with problems like scarcity in the distribution of health care. A general overview of this study includes social issues in healthcare (alcoholism, smoking), health care system, and allocation of funding to public healthcare. Early studies in this field can be attributed to Kenneth Arrow when he published his article titled “ Uncertainty and the Welfare economics of medical care “ in 1963. Nowadays, numerous researches dwelling on health care economics just shows the importance of this issue to modern living.
The study of economics would always be a relationship between supply and demand, and healthcare is no exception to such. First, it must be understood that healthcare is a derived demand since it is affects the result of health and must be directly consumed ( Newhouse, 1996) in order to feel its benefits. Although people would not like the idea of receiving this service, they have no choice when they get sick.
In fact, Evans and Stoddart (1990 ) asserts that “Health care is one the determinants of health and from an economic perspective, it is simply an input into the production of health”. This is the main reason why government should spend on healthcare since healthy citizens are more productive and costs less to society. Even individuals should ideally spend for their own preventive healthcare so they would not get sick thereby reducing downtime in terms of man hours. Unfortunately, people do not prioritize healthcare issues all the time since there are other equally important things to spend for such as food, education and housing. It is only when one’s health is endangered do people pay attention to this issue; thus, people even buy costly medicines when they are really sick. On the other hand, Kowalski’s paper in 2003 revealed that “medical care and prices have an elastic