Tuesday, October 2, 2012

Topic 6: Opportunity Cost of a College Education

After watching the video “The Economics of Higher Education,” answer the following questions:

  • What is marginal analysis and how is it used in making good decisions?
  • What are the marginal costs and marginal benefits of one more year of higher education?
  • Evaluate the argument that college graduates earn $1 million more in their working lives than non-graduates. Is this accurate? Why or why not?
  • Using marginal analysis, explain why some students leave college after one year.
  • How does the information in the video relate to what you have been told by parents and other about going to college? Did watching the video change your mind in any way about getting a college education? If so, how did your thinking change. If not, why do you think that is so?

  • Marginal analysis is the idea that when consumers make decisions, they make decisions about the next unit of something. It is used in making good decisions because it helps you weigh the pros and cons, the cost and benefits, of an action or behavior. It helps us make rational decisions instead of rash decisions so that we can make sure that the marginal benefit exceeds the marginal cost and not the other way around.
  • The marginal costs of one more year of higher education, the opportunity cost, includes money and time. To go to one more year or higher education, you have to pay the tuition fees and any other expense needed. Time is taken into account because you could have been using this time to do other things, such as working to earn money, instead of spending the time learning and not earning a solid income. On the other hand, the marginal benefits may be the social connections and pleasure time, as well as a likely increase in future job pay.
  • The argument that college graduates earn $1 million more in their working lives than non-graduates is very misleading and inaccurate. The statistics of college graduate earnings have been skewed because of a few individuals who are "super earners" who earn a very large amount of money that exceeds that of the average population. Also, there has been research stating that these college graduates would have done as well as they had even if they didn't go to college, which is also known as the selection effect: those who self-select to go into college are already predicted to earn more money.
  • Some student leave college after one year because, by using marginal analysis (may without thinking), these students decided that the marginal benefit of going to college is less than the marginal cost of going to college: the marginal cost outweighs the marginal benefit. Therefore, they drop out. Some of these marginal costs include the time wasted so that people couldn't get a job and start earning money, as well as the tuition fees that have been increasing exponentially through the centuries.
  • The information in the video confirms what my parents and I believed in. We believed that it is not necessary to go to college, and instead, going to work would be more practical. Therefore, this video doesn't change my mind in anyway about getting a college education. After all, we go to college to get a decent job, so we now know that going to college can't get you a decent job, why go?

No comments:

Post a Comment