Question

4. The stronger need for higher education to increase one’s employment and income prospects has greatly increased the demand for higher education (more students). Discuss some of the likely effects on the markets for higher education, including tuition costs, supply, demand and quality of instructors, methods of content delivery, quality of education, and the quality of graduates. Considering those effects, what can we say about the return on education investment to graduates?To the firms that hire them? To society at large?

Note : Refer from book MACROECONOMICS, by N Gregory Mankiw.

Answer 1

Yes this is true that to increase income level of people and to increase chances of getting employment has increased the demand for higher education. We will discuss the impacts on each and every factor in details.

Market of Higher Education and their prices: Market of higher education has changed considerably in last few years. There are many reasons of it such as mass of people applying for a single job, so that they can stand different in a queue with higher academics. Some of the jobs really wants some candidates to be an higher graduate as per their job condition is an another reason. Demand for Higher education has increased by a great proportion over supply has increased because it is not possible to build a new college/school in short span of time.

Refer to the diagram, here we have initial Demand and supply curve with equilibrium at E and price and quantity at P,Q respectively. When demand increase from a high rate and supply with less rate, both curves shifted rightwards and we are here with new equilibrium at point E1 and price and quantity at P1, Q1 respectively. Here the quantity of education providing(students enrolled) have increased much higher than the price of education/tuition cost increased.

Quality of instructors in some of the reputed institutes have increased by higher proportion than in some of low class institutes. The reason over here is reputed institutes charge more fees from their students or they are funded such that they have to maintain their standard in market by providing first in class teaching service to their students by hiring creamy layer instructors from market and rest of the instructors goes to other institutes.

Methods of content delivery has changed over the past few years, now schools/colleges have technological driven methods to teach their student. For that technological method they charge a hefty amount from their students in exchange. Now we have video lectures , smart classes to teach students. It is some of the positive impact towards changing our education sector.

Quality of education has increased over the past years. Earlier we had very limited source to study, now we have unlimited ways to study. We have good writers who publish their books and share their knowledge with others.

Quality of graduates, we cannot say directly about them anything that with increase in content delivery and education quality, the quality of education must have increased. I must say it totally depend upon the student whether they are taking advantage of given resources of not.

The return on investment on graduation cannot be concluded because we have plenty of private institutes operation in the market and they just run for their tuition fee and in return they provide nothing. Some of the most reputed institutes provide first class service to students even in very low fees. Some institutes are there who charge very hefty amount but they pay you every penny of it. In India IIMs and IITs are one of them. So nothing can be concluded with the investment on hiring education, it totally depends upon which institute you are studying in.

Firms for sure are in profit because they are getting trained professionals. Firms do not have to spend to spend for their training, they are already well learned and if there is case that there are many students passing out from higher studies then firms have options to select a candidate between many and firms can have a advantage in bargaining of salary(could offer less).

The benefit to society is positive as literacy rate is increasing over the time. As time passes there are many reasons which helps in increasing an economy, literacy rate is one of them.