Go to The Economics of Health Care
Unit 1. The problems of health care Page 6
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 iii. Scarcity - a theoretical approach (cont'd)

Figure 3
Getting more treatment

There are only two ways that society can get more treatment:

  1. By improving the productivity of the factors of production, so that the same quantity of factors produces more treatments.
    For example, Figure 3 shows surgeons being able to produce either 20 heart bypass or 20 other operations. Increased productivity of surgeons carrying out heart bypasses results in the PPF pivoting outwards e.g. to 28 heart bypasses or 20 other operations.

  2. By increasing the quantity of the factors of production.
    The initial position in Figure 3 is again 20 heart bypass or 20 other operations. When more surgeons are allocated to all operations then the PPF shifts outwards e.g. to 24 heart bypass or 24 other operations.
The cost of more treatment

Figure 4
The PPFs we have been using relate to choices between different types of health care. But we can equally use PPF analysis to illustrate the trade-off between health care and all other goods. Such a PPF is shown in Figure 4.

It is unlikely that society would choose either point A or B, but they and all points between are feasible. The question is how does society decide between them.

Now look at these (check the status bar for information)

iv. Trade-offs
Further questions

Question Answer
Imagine a PPF shifts outwards. Which one of these is true?

A. The economy has become more efficient.
B. The economy has become more productive at producing one of the goods.
C. More resources have been devoted to the production of both goods.
D. The opportunity cost of production is zero.