This is an era of rapid change in health care systems and clinical practice. In the face of increasing national health care expenditures, physicians are confronted with an increased demand to justify practices and to show the value of their services. Hepatologists are being required to show that their practices are both effective and cost-effective. This has led to an expanding body of literature examining the cost-effectiveness of medical practices. To evaluate these economic analyses the reader must be familiar with the concepts used in economic analysis and have a clear understanding of both how these analyses are performed and how the results can be applied to clinical practice. The purpose of this article is to provide the reader with the essential concepts for evaluating economic analyses in the medical literature and to provide published criteria for performing and critiquing an economic analysis. The terms used in economic analysis are outlined and defined. The criteria for performing an economic analysis are listed. Examples are given to emphasize the key points.