Actitivity 1e: Should you go to university?
- Opportunity cost is defined as the value of the next best alternative foregone. For example, if a person decides to go to university, they give up the opportunity to earn a full-time wage from working.
- Possible opportunity costs associated with attending university
- Loss of income from working
- Loss of learning from on-the-job training
- May have to give up social/leisure activities when there are busy periods such as exams or when assignments/essays are due
Possible Costs
Possible Benefits
- Opportunity costs (mentioned above)
- Stress
- Financial costs (have to pay for part of degree either up front or when start earning)
- Costly for government to subsidise higher education which means that all taxpayers face higher taxes
· Increased productivity in the workplace
· Increased innovation in the future
· New discoveries
· Greater satisfaction from work
· Increased international competitiveness for Australian firms
· Positive externalities (discussed in Chapter 3)
· Increased dynamic efficiency as employees are more responsive to market changes
- The spending on education may be ill-directed at times. There is a certain degree of freedom for students to choose the course that best meets their individual needs. In some cases, however, there is not enough education in some areas and too much in other areas. For example, there is a shortage of Maths teachers in Australia but an excess supply of law graduates.
- Generally speaking, spending on higher education leads to increases in productivity and so more goods and services can be produced per hour. Educated people may be more able to utilise their skills to identify the most productive methods of production. Their education may also lead to new inventions and innovative production techniques that are associated with greater volume of production per hour.
- If more of the population has an education that is associated with a broad range of competencies and an increased capacity to engage in critical and creative thinking, then they may be more adaptive and able to move into different areas of production. This will be important as demand will change over time and people will need to have the capacity to retrain and implement their skills in different areas.