Economic Glossary
Adverse selection is the phenomenon that, as an insurance company raises its price, the best risks (those least likely to make a claim) drop out, so the mix of applicants changes adversely. Theoretically, adverse selection in the health sector can be overcome by having a universal health care system that covers everyone, not just those at low risk.
Asymmetric information is a situation in which the parties to a transaction have different information, as when the seller of a used car has more information about its quality than the buyer, or the patient knows more about his health condition than the insurance company.
Correlation is the relationship that results when a change in one variable is consistently associated with a change in another variable. E.g.: positive correlation between GDP per capita and health expenditure per capita.
Demand is the quantity of a good or service that a household or firm chooses to buy at a given price.
The demand curve is the relationship between the quantity demanded of a good and the price, whether for an individual or for the market (all individuals as a whole).
Demographic effects are the effects arise from changes in characteristics of the population such as age, birthrates and location.
Diminishing returns (to scale) is the principle that as one input increases, with other inputs fixed, the resulting increase in output tends to be smaller and smaller
An externality is a phenomenon that arises when an individual or firm takes an action but does not bear all the costs (negative externality) or receive all the benefits (positive externality)
Imperfect information is a situation in which market participants lack information (such as information about prices or characteristics of goods and services) important for their decision-making. E.g.: The United States spends a larger fraction of its national income on health care than most other developed countries, but its figures for life expectancy are lower and