The difference in cost benefit analysis and cost effectiveness analysis
1. Explain the differences in your own words of cost benefit analysis and cost effectiveness analysis.
- Take a look at a decision your work has pondered recently or you personally and complete a cost benefit analysis to help make the decision. Please don’t forget to add opportunity costs to the details of the CBA.
*Remember opportunity costs are the costs off the tradeoff. So for example you are taking this class instead of working so the tradeoff is taking this class instead of working and the opportunity costs is the $12/hour your job would’ve paid you. Also maybe since you’re taking this class you can’t go out with friends tonight. How much does that value in as an opportunity costs. You may use a simple T account style format if you wish to make it
- In economics we use margin to help make decision of how much to produce and at what price. This is often known as profit maximization. For example if our organization is making catheters how do we know how much to make? Economist use the Marginal Cost=Marginal Revenue solution. This way we know how much to produce to make most revenue at least costs (p.56). If the organization tries to make more catheters so that they can sell more to increase revenue often times costs go up as well. If you make too many catheters you
reach the diminishing marginal returns where costs begin to increase faster than revenue and you begin to lose $$. So in health care services we find that patients have a marginal benefit to visit doctors and a marginal cost. Look at p.66 in your book and complete question 6(a) only.