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Key Concepts of
Economic Efficiency
Economic efficiency
can be defined as the achievement of maximal health benefits
with a fixed amount of resources. In allocating resources
for a given health care intervention, efficiency is described
by health economists as the point at which marginal costs equal
marginal health benefits.
Inefficient use
of resources
Use of the intervention at levels beyond the point at which marginal
costs equal marginal health benefits is considered inefficient
in that the extra health benefits gained are valued lower than
the costs of their production.
Use of the intervention
at levels before the point at which marginal costs equal marginal
health benefits is considered to be inefficient because, as use
of the intervention is expanded, the extra benefits gained are
still greater than the extra costs to provide the intervention.
Efficient use of
resources
In allocating resources among competing health care interventions,
the point of efficiency occurs when the extra health benefits
gained from the last dollar spent are the same for all interventions.
If the extra health benefits gained were unequal, a reallocation
of resources would produce more benefits in total.
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