||"The Federal Reserve is
a complex organization, and many Americans understand
very little about how it carries out its duties and
impacts their lives, let alone how it is evolving in
the changing environment. Yet, this understanding can
contribute significantly to public well-being and to
the Federal Reserve’s policy goals as well. The
Federal Reserve has been long committed to enhancing
public understanding of its activities, the economy,
and the financial system through a variety of outreach
programs and educational materials."
- Janet Yellen, President, Federal
Reserve Bank of San Francisco.
Cost of Health Care: Is there an explanation?
This month's issue of Econ Ed and the Fed highlights
economic research published in a recent issue of the FRBSF
Economic Letter1. More
Life vs. More Goods: Explaining Rising Health Expenditures provides possible explanations for the rising cost of health care in the United States.
After completing this month's activities, your students
will understand the following economic concepts: Law of Diminishing
Marginal Returns, opportunity cost, and utility.
This Economic Letter discusses the rising cost of health care in the United States and explores the Law of Diminishing Marginal Utility. The article focuses on people's preferences as one posssible explanation behind rising health care expenditures. The article's research reaches a surprising conclusion: the rise in health care costs could be attributed to the natural course of economic growth. "As we get richer and richer, one of the most valuable uses of our income is to increase the quality and quantity of our remaining lives."
1Economic Letters are short essays on current
and pertinent economic topics from the Federal Reserve Bank
of San Francisco's Economic Research Department. For letters
on a variety of other topics and/or to subscribe, please
visit our FRBSF
Economic Letter web page.
Econ Ed and the Fed is a publication of the Federal
Reserve Bank of San Francisco. Reaching approximately
10,000 educators throughout the western U.S., it’s
provided as part of the Fed’s
commitment to economic and financial education.
Views expressed are not necessarily those of the Federal
Reserve Bank of San Francisco or the Federal Reserve
System. Articles may be reprinted or reproduced if
the source is credited. Please send a copy of the reprinted
materials to the editor.
Andrea Davis, Editor
Contributors to this issue: Gary Zimmerman, Economist, Yelena Takhtamanova, Economist, Renee Courtois, Research Analyst, and Jody Hoff, Economic Education and Public Programs Manager, and Darcy Horak, Economic Education and Public Programs Specialist.