ABSTRACT
The lowest-cost way of providing services can be determined from the map of isoquants and relative prices of inputs. The important points are that there are almost always choices in how we produce health care, and the lowest-cost method depends on selecting the cheapest of the efficient options. Health care systems are normally subject to many rules and regulations – often these are important sources of safety and protection to the users. The analysis of isoquants and isocost lines provides a framework for analysing the likely relationships between inputs to health care and its costs. Empirical investigation of the patterns of costs can be useful in understanding what is the lowest-cost way of providing services in different circumstances. The purpose of estimating cost functions is to discover more about the relationship between cost and the different ways in which services can be delivered.
