Cost-effectiveness studies are rising in importance as means for justifying expenditures on health interventions and as guides for making treatment and resource allocation decisions. However, the term "cost-effective" often is used erroneously, attributed to therapies that have not been subjected to rigorous cost analysis or comparison to an appropriate alternative. Health economic studies include cost-of-illness, cost-minimization, cost-effectiveness, cost-utility, and cost-benefit analyses. Each of these types of analyses differs in what it measures and under what circumstances its use is appropriate. This article describes the different types of economic studies, using examples to highlight their key features, and provides a summary of the key components of an economic analysis including perspective, cost and outcomes measurement, time horizon, cost-discounting, and sensitivity analysis.