ECO 605 Discussion 2.1 Inputs and the Production Function FRANK
ECO 605 Discussion 2.1 Inputs and the Production Function FRANK
Fixed inputs, variable inputs, and production functions are economic approaches used in the business operational processes. They aid in the determination of the operational efficiency or a given firm. In healthcare economics, these concepts are critical in the in enhancing the understanding of the investment decisions and the business model to use.
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Fixed input is an input in the production of services and goods that do not change in the short run.Fixed inputs are an important part of the production process because they help producers keep costs down. For example, when a company needs to produce 10 cars per day in order meet demand but can only afford tools that allow them achieve this output level with ease and efficiency – then these become fixed-in nature (Ochalek et al., 2021).
Variable inputs are inputs that keep changing in the course of operation or production processes (Konings, 2020). The production process often gives companies the opportunity to change their input by using different materials or changing what is being put into a product. For example, if you are making clothes and need fabric for the design but not necessarily always in stock at your store then this would be an instance where variable inputs come into play. Instead of purchasing all fabrics from one source (which could lead them running low), producers may purchase just enough so they have options when it comes time on picking which color might look best next season.
The production function refers to the economic equation that expresses the correlation between the quantities of the factors used in the production process and the amount that have been obtained. In other words, the production function shows how many factors of productive capacity are used over time (Sharma et al., 2020). In healthcare operational processes, fixed inputs include worker’s salaries, utilities, and the maintenance costs. On the other hand, variable inputs include cost of medication, medical supplies, diagnosis, and therapeutic supplies.
References
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Bahuguna, P., Guinness, L., Sharma, S., Chauhan, A. S., Downey, L., &Prinja, S. (2020). Estimating the unit costs of healthcare service delivery in India: addressing information gaps for price setting and health technology assessment. Applied health economics and health policy, 18(5), 699. https://doi.org/10.1007/s40258-020-00566-9
Konings, J. G. L. (2020). Price Cost Margins and Fixed Costs. https://research.nu.edu.kz/en/publications/price-cost-margins-and-fixed-costs
Ochalek, J., Claxton, K., Lomas, J., & Thompson, K. M. (2021). Valuing health outcomes: developing better defaults based on health opportunity costs. Expert Review of Pharmacoeconomics& Outcomes Research, 21(4), 729-736. https://doi.org/10.1080/14737167.2020.1812387
Sharma, A., Tomar, R., Chilamkurti, N., & Kim, B. G. (2020). Blockchain based smart contracts for internet of medical things in e-healthcare. Electronics, 9(10), 1609. https://doi.org/10.3390/electronics9101609
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Week 2: Healthcare Production and Costs
This week, the focus is on the healthcare provider. Healthcare providers need resources to deliver a treatment or procedure. The purchase of these resources represents costs for healthcare providers. We will examine the relationship between the output of healthcare providers and the costs incurred to produce these services.
Review a list of all items due this week in your course’s syllabus.
Lesson 1: The Production Function
This lesson will describe the production function for a good or service and will describe how a production function gives the relationship between inputs and outputs.
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Learning Outcomes
By the end of this lesson, you will be able to:
• Define the terms fixed input, variable input, and production function.
• Identify fixed and variable inputs in the medical field.
• Identify factors that shift a production function.
• Determine how a production function shows the relationship between inputs and outputs.
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Before attempting to complete your learning activities for this week, review the following learning materials:
Learning Materials
Read the following in your Economics of Health and Medical Care textbook:
Chapter 5, “Health Care Production and Costs†(pp. 71–77)
These pages provide additional references to the production function and other issues related to it.
The Production Function Media Presentation
Complete The Production Function (Links to an external site.) media presentation. Select Begin to start. Select CC for Closed Captioning.
The Production Function Transcript
DISCUSSION QUESTIONS
Discussion Guidelines
Initial Post
• Define the terms fixed input, variable input, and production function.
• Provide an example of two fixed inputs and four variable inputs of a medical treatment, medical device, or pharmaceutical.
Response Post(s)
Follow up your initial post by giving examples of possible factors that would shift the production function for at least two of the treatments, devices, or pharmaceuticals provided by your peers.
Submission
Post your initial and follow up responses and review full grading criteria on the Discussion 2.1: Inputs and the Production Function page.