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A cost benefit analysis of attending university

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Nikol Stirland

on 27 August 2013

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Transcript of A cost benefit analysis of attending university

Year

*Direct Costs of University*

Opportunity Costs (Lost Wages)
Year One
$ 8,000 $16,000
Year Two

$ 8,500 $16,500
Year Three

$ 9,000 $17,000

Total $25,500 $49,500
Level 1 Level 2 Level 3 1-3 Years 4 Years
$18,322 $23,381 $32,954 $51,654 $59,911
High school (NCEA)
Tertiary
AN ECONOMIC MYSTERY
"When it takes, at least, an additional three years, and seventy-five thousand dollars in costs and lost earnings, why would Hine want to go to university?"
Average Earnings of Females by Educational Attainment
Hine's Choice
Hine plans to attend university and study to become a primary school teacher. Listed below are the costs of her choice.
*Includes room, board, tuition, books and supplies, personal expenses and projected inflation for each year.
The total cost of Hine's decision (Uni costs + opportunity costs) =
Is the tassel worth the hassle??
Opportunity Cost- the second best choice that people give up when they make their best choice.
Best choice
Second best choice that you gave up (opportunity cost)
Analysing the costs and benefits of tertiary study
Your future career path:
1-What type of work would you like to do?
2-Why?
3-What kind of training or study will you need to do after finishing high school?

1. People economize. People choose the alternative which seems best to them because it involves the least cost and greatest benefit.
2. All choices involve cost. Cost is the second best choice people give up when they make their best choice.
3. People respond to incentives. Incentives are actions or rewards that encourage people to act. When incentives change, people's behavior changes in predictable ways.
4. The consequences of choices lie in the future. The important costs and benefits in economic decision making are those which will appear in the future. Economics stresses making decisions about the future because it is only the future that we can influence. We cannot influence things that have happened in the past.
Handy Dandy Guide (HDG)
1- People choose to go to university because they think it involves the least cost and greatest benefit (increased earnings) in the long run. Not doing any tertiary training or study costs more in lost wages in the long term.
2- The cost of deciding to go to uni is the opportunity cost of lost wages (money that you could have been earning instead of studying).
3- The incentive or reward for staying in school longer is eventually being paid a higher wage. If wages change, people's behaviour will change (e.g. if you can leave school earlier and still earn the same amount of money, some people will do that).
4- The decision to attend uni is based on a benefit that Hine will see in the future- higher wages in future jobs.
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