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The article briefly describes the development of health economics and defines its most important areas of research (e.g. subjective and objective valuation of health; demand for and supply of health services; health insurance; planning, regulation and management; evaluation of health systems; and microeconomic evaluation). Regarding economic evaluation, the article emphasises the choice of comparators, the assessment of costs and effects, the various types of economic analyses, average vs incremental cost-effectiveness, usage of trial data vs modelling as well as sensitivity analyses. It discusses the question of generalisability and introduces a check list to assess quality and results of published studies.