Four-quadrant Diagram

Definition

Health Economics

  • Usually refers to a four-quadrant figure showing the construction of a health frontier in a two-person world from a budget constraint, two production functions and an assumed initial distribution of health. Used to analyse alternative constructs of equity and how they relate to efficiency. In the figure, a fixed budget for health care is assumed as indicated in the bottom left-hand quadrant, which can be spent either all on A or all on B(XA = XB) or otherwise divided between them along XAXB. Each individual has an initial endowment of health indicated by E in the top right-hand quadrant (A here assumed initially less healthy than B). The health frontier shows the maximum additional health attainable for either A or B given the health of the other and given the budget constraint, the production functions and the initial endowment.
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