The following table represents the costs and benefits of four alternative clinic

Question

The following table represents the costs and benefits of four alternative clinical programs designed to treat a single disease. Benefits are measured in terms of number of lives saved. What are the cost-effectiveness ratios for Programs A, B, C, and D? Which is the best program? In terms of number of total lives saved? In terms of cost per life saved? Compare alternative pairs, A & B, B & C, C & D. What can you say given the information provided? Which program would you favor as a manager? Provide sound economic reasoning. Compare alternatives B & D. How might you argue in favor of alternative D?

Explanation / Answer

Program Cost effective ratio

A 100000/10 = 10,000

B 100000/12 = 8333.33

C 20000/12 = 16666.66

D 200000/15 = 13333.33

2 .IN terms of no. of life best program is D

In terms of cost effective rattio is A

3. Among A&B , B is better than A both in terms of  no. of life saved and in terms of cost effective ratio .

Among B&C, B is  is good in terms of cost effective ratio , and Both are same in terms of no. of life saved.

   Among C&D ,  D is better than C both in terms of  no. of life saved and in terms of cost effective ratio

4 As a manager , whose role is to minimize the cost and maximize the profit will choose B as thee best option as it minimizes the cost per person.

5. One can argue in favour of D as by choosing D alternative you can save the maximum life , and the value of 3 more lifes saved by increasing the cost are far more valueable to the society than the increasse of cost.

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