ECONOMICS OF EDUCATION: What do we mean by the concept of demand and supply in relation to Education?

CHAPTER FOUR

DEMAND FOR AND SUPPLY OF EDUCATION

4a i). Identify the concept of demand and supply in relation to education

Demand for Education

The Concept of Demand:

Economists define demand as a schedule indicating the amount of a particular good or service that consumers are willing and able to buy at each price in a set of possible prices during a specified time period.

Law of Demand:

A fundamental characteristic of demand is the inverse relationship between price and quantity; that is, as price increases, the quantity demanded decreases, and as price decreases, the quantity demanded increases.

Though the price is a major determinant of the demand of a given commodity, other factors such as tastes, income, and prices of substitute goods and complementary goods also influence demand. Although changes in the price of the good or service determine the corresponding changes in quantity demanded, represented by movements along the curve, changes in the remaining factors determine shifts in demand represented by shifts in the position of the curve.

Shift in Demand

A change in demand refers to shifts in the demand curve resulting from changes in tastes, income, and prices of related goods.

A change in quantity demanded refers to a movement along a given curve and results from a change in the price of the good under discussion with all other factors held constant.

When applied to education, the theory of demand postulates that more education will be purchased at lower prices and less education at higher prices, ceteris paribus.

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FACTORS INFLUENCING DEMAND FOR EDUCATION

  1. Cost [price] of education: This includes both the direct and indirect costs. If the cost is very high, the quantity of demand decreases and vice-versa e.g., FPE and FDSE.
  2. Level of personal disposable income: This is true, more so in developing countries. As long as the level of family disposable income is low, demand for education will be invariably low and vice-versa
  3. Benefits accruing from educational investments: e.g., increased lifetime earnings.
  4. Social reasons; Sometimes demand for a particular educational program is high due to prevailing fashion e.g., current demand for postgraduate degrees by Kenyan teachers.
  5. Peristaltic process: i.e., parental desire for their children to climb higher the academic ladder than they did.
  • SUPPLY OF EDUCATION

Def: Supply is defined as a schedule of various amounts of good or services that producers are willing and able to sell at each specific price in a set of possible prices during a specified time period.

Whereas the price-quantity relationship in demand is an inverse one, in supply it is a direct one. At a higher price more will be supplied; at a lower price, less will be supplied.

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Apart from price, other factors that determine supply are:

  1. Technology
  2. Price of factors of production
  • Price of related goods

Changes in these three factors result to shift in the supply curve.

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Factors influencing the supply of education.

The provision of education in many countries is usually undertaken by the government rather than leave it to market forces of supply and demand. Nevertheless, some of the factors that influence the supply of education are:

  1. Social benefits accruing from education: there are direct and indirect benefits
  • Direct benefits:- increase labor force productivity which leads to economic growth.
  • Indirect benefits: Declining fertility, improved health, increased national cohesion.
  1. Disposable income of the government

The level of disposable income (the budget) available to the government is a direct determinant of the supply of education. Due to the scarcity of resources the supply of education is determined by the budget allocation available to education.

Factors influencing the supply of education.

The provision of education in many countries is usually undertaken by the government rather than leave it to market forces of supply and demand. Nevertheless, some of the factors that influence the supply of education are:

  1. Social benefits accruing from education: there are direct and indirect benefits Direct benefits:- increase labor force productivity which leads to economic growth. Indirect benefits: Declining fertility, improved health, increased national cohesion.
  2. Disposable income of the government

The level of disposable income (the budget) available to the government is a direct determinant of the supply of education. Due to the scarcity of resources the supply of education is determined by the budget allocation available to education.

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