ECO 605 Discussion 2.1: Inputs and the Production Function
ECO 605 Discussion 2.1: Inputs and the Production Function
A fixed input is an input that does not vary with output. An example could be a tire shop with four stationary vehicle lifts. The amount does not change over time (Hicks, 2021). A variable input is an input that could vary in number during a period of time. The amount can be increased or decreased in a short period of time (Hicks, 2021). With the tire shop example, a variable input could be the number of mechanics working. The number of mechanics can be increased or decreased. Production function is a quantitative relationship showing how outputs change when the number of inputs change (Hicks, 2021).
Fixed input examples could be a portable/mobile X-Ray machine and an office that a provider rents out for his/her practice. These inputs’ prices do not change quickly and do not vary with output.
Variable input examples could be healthcare workers, temperature probe covers, surgical masks, and antibiotic medications. These inputs can increase or decrease during a short period of time depending on how many patients come through the door. If there was a major disaster that harmed many people, an increase in healthcare workers would be necessary due to the increased number of injured people. During the Covid-19 pandemic, the number of temperature probe covers and surgical masks used increased due to safety screenings at check-in desks. If there was a large e.coli outbreak in an area, there would be an increased need for antibiotics.
Reference
Hicks, L. L. (2021). Economics of Health and Medical Care. Jones & Bartlett Learning.
Discussion 2.1: Inputs and the Production Function
- Define the terms fixed input, variable input, and production function.
All of these relate to the input-output production function where differing amounts will produce different results.
Fixed input does not change over time. Examples of a fixed input would be a building, an office space of four walls, an examination room. No matter what is made, this remain the same from beginning to end of results produced.
Variable input is variable and can vary over time. Examples of variable inputs would be the number of persons involved to produce or provide a service, or the quantity of items used to provide or produce products or services.
Production function is the greatest/ maximum amount you get from the amount placed in to derive the output.
- Provide an example of two fixed inputs and four variable inputs of a medical treatment, medical device, or pharmaceutical.
Two fixed inputs for producing medical grade level 3 masks would be the facility building and the insurance paid.
Four variable inputs for medical grade level 3 masks would be the overall number of employees, the specialized machines available to produce masks, specialized employees trained for piecing and boxing of the medical grade level 3 masks, along with the materials/supplies needed to produce the medical grade level 3 masks.
Hicks, L. L. (2021). Economics of health and medical care. (7th ed.), pages 71-77. Jones & Bartlett Learning. ISBN-13: 9781284183535
Discussion 2.1
The term fixed input refers to an aspect of production that is static in the short term or production period. That is, it cannot be changed as a facility attempts to change the quantity produced (Hicks, 2021). For example, physician time is considered to be fixed per forty-hour work period. There are only so many patients a provider can see in a week’s time. Clinical space, at least as it refers to a lease, is fixed depending on the timeframe in the lease. The office cannot increase space leased due to a change in demand for office visits, the term of the lease is fixed.
A variable input is an aspect of production that can be modified as a facility attempts to change the quantity of output in a production period. The most common example of this is labor. In healthcare, labor is not a blanket term as certain disciplines are specialized for tasks. In an office, this would be the number of nurses you need staffed to support administrative and clinical functions (Hicks, 2021). The front desk or scheduling team would be another division of labor that would fluctuate based on office visit demand. Another example would be immunizations. If there would be more immunizations due to flu season or well child exams, an office would need to increase syringes, band aids, alcohol wipes, etc. These costs will vary based the number of vaccines administered and the anticipated number of vaccines to be administered (Klassen & Yoogalingam, 2019). Therapeutic supplies and in clinic medications, such as nebulizer treatments or depo, are additional examples of variable costs. If a practice stops or starts this process the quantity of these supplies will change. If a provider goes on leave or vacation and there is no one to complete examinations, then the demand for ancillary labor and supplies would decrease. An office might skip that month of office supplies, gloves, vials for blood draws, reduce the number of nurses need at that location or hours, etc. These supplies are driven by use and without someone there to use them, additional supply would be excess and impact the clinic’s bottom line.
Production function is the synopsis of what goes into the process (Hicks, 2021). This is a delicate balance because only one of the inputs can vary based on demand. When additional variable inputs are added to this process it is called the Marginal product. This concept is important because scheduling additional staff to meet the increase of patient visits will need to be leveraged for the increase in revenue those visits will bring when considered against the added cost of additional staff (Klassen & Yoogalingam, 2019). The changes in these variables will impact the output and cause a shift in the production and these shifts can be both an upward meaning more input yields more output, or have a downward trend where less output is generated.
Hicks, L. (2021). Economics of health and medical care. Jones & Bartlett Publishers
Klassen, K. J., & Yoogalingam, R. (2019). Appointment scheduling in multi-stage outpatient clinics. Health care management science, 22(2), 229-244.
The term fixed input is a type of input that remains constant over time. It is an input that cannot be increased in amount during production (Hicks, 2021). It is usually associated with capital. The term variable input is a type of input in which the amount can change over time (Hicks, 2021). There is flexibility in the demand for this type of input. The amount of variable input can either increase or decrease depending on the situation. Lastly, production function is essentially a summary of the maximum amount of output that can be produced from x number of inputs (Hicks, 2021). It indicates the maximum amount of output that can be produced from a given amount of input. An example of two fixed inputs are machinery within healthcare, and hospital rooms. Machinery such as an MRI machine, or a CT scanner would be fixed input. The amount of hospital rooms within a hospital is fixed input as well. Hospital rooms cannot easily be increased or decreased at any given moment. An example I find relatable to the fixed input of hospital rooms is the impact the pandemic has had on our hospitals. We often hear in the news how hospitals have reached maximum capacity and how elective surgeries were paused because of limited hospital space etc. An example of four variable inputs are hospital staff, covid-19 vaccines, dexamethasone (covid-19 treatment medication), and N95 masks. These items have been greatly increased in recent years therefore are a prime example of variable input. Hospital staff, specifically registered nurses have never been in higher demand with the amount of turnover and burn out that this pandemic has caused. COVID-19 vaccines were initially scarce in amount, making it almost impossible to schedule a vaccine appointment. In recent months, the vaccine amount has increased greatly, making ease of access to obtaining a vaccine consumer friendly. Dexamethasone the COVID-19 treatment pharmaceutical has increased in demand for treating patients that are symptomatic and positive for COVID-19. And N95 masks have increased greatly in production for all the front-line staff that need N95 masks to keep themselves safe while treating patients with COVID-19.
References:
Hicks, L. L. (2021). Economics of Health and Medical Care (7th ed.). Jones & Bartlett Learning.