Question

1) The following article discusses whether college is “worth it,” which has recently become a hot topic of conversation. I want you to discuss the importance of college education for your own job prospects and how education shifts the production possibilities frontier. We all know it takes time to complete a college degree but how will your PPF look different over time? What is the relationship between education and investment in the PPF analysis?

Read this article and answer the questions above.

5 Reasons College Is Still Worth It (https://www.forbes.com/sites/reynagobel/2015/02/28/5-reasons-why-college-is-still-worth-it/#3c16196c42c2)

Answer 1

A production–possibility frontier (PPF) is a curve which shows various combinations of set of two goods which can be produced with the given resources and technology where the given resources are fully and efficiently utilized per unit time. One good can only be produced by diverting resources from other goods, and so by producing less of them.

Using PPF for showing a trade-off between education and investment and after considering facts from the article. Please refer to the below graph.

X axis shows Investment & Y axis shows Education. The constraint is of resources, which are limited.

1) Point A is the area within PPF region , which means that the investment in education is not appropriate given the level of education available in the colleges. There is more room for investment i.e. more investment can be made to achieve a higher level of education.

2) Point X is outside the PPF curve means with the given level of investment it's impossible to reach or attain the level of education. For example: the student can get an admission to a local Texas A & M college and not MIT with all the possible resources available with him.

3) Point C will not be an appropriate choice, as this means that the student is spending ample but not on education but could be other things or have landed up in a wrong college and spending a lot on taking supplementary tuition to understand the subjects as the faculty is not good. He is saving the investment or resources by not opting for college at all and thinking that the resources could be used in some business or alternative.

4) Point B would also be a not right choice , as it shows the student's anticipation to get a higher level of level of education with a low level of investment. Though such an investment can be increased by taking a financial aid or an education loan. But student is quite pessimistic over the taking a financial burden without any paying capacity.

5) Point D will be the most optimum point( the tangent is touching the PPF curve on only one point) or education level which a student can achieve with the given level of investment. Even if, the investment/resource level is not suitable, a student should take a financial loan/aid to achieve a good level of education. Because, a good level of education would enable to achieve a higher standard of life. The good education would give a long run return to life and things which makes life meaningful. To source funds a student can do part-time jobs in colleges. This would enable students to understand their career opportunities better.