Students have to consider the opportunity cost of going to university. University graduates usually earn more than people who have not gone to university. Having more graduates influences a country's production possibility curve. Some economists suggest that students should pay the full cost of their university courses and accommodation. Others say that the government should pay some or all of the cost.

Mark scheme

Marking points from the official mark scheme (May/June 2015). The mark or mark type is shown in brackets.

1. [2] (a) • opportunity cost is the (next) best alternative forgone (1) • getting a job/earning a living/lower output in the short run (1)
2. [4] (b) • graduates are more likely to be skilled (1) this makes them more productive (1) • graduates are likely to be more highly qualified (1) • graduates are likely to be in higher demand (1) demand for services more inelastic (1) • graduates are likely to be in shorter supply (1) supply more inelastic (1) • graduates may belong to stronger professional bodies/trade unions (1) which have greater bargaining power (1)
3. [6] (c) Up to 4 marks for the diagram: Guox A A 3 GOODY • axes correctly labelled (1) • original curve/downward sloping to the axes and touching the axes (1) • new curve present (1) • shift to the right indicated either by an arrow or labelling (1) Up to 2 marks for the written analysis: • more graduates will increase the skills/productivity of workers (1) • with a higher quality of labour, a country will be capable of producing more/there will be economic growth (1)
4. [8] (d) Up to 5 marks for why they should: • graduates will learn new skills/gain qualifications (1) their employment opportunities are likely to increase (1) they are likely to earn a high wage (1) the private benefits of education are likely to be high (1) • subsidising graduates involves an opportunity cost (1) requiring students to pay the full cost may enable more to be spent on, e.g. health care (1) government has limited finance (1) • subsidising graduates may result in a budget deficit (1) or high taxes (1) • charging the full cost may ensure prospective students consider the opportunity cost to themselves carefully (1) • some graduates may come from relatively rich families (1) and so may not need to be helped (1) • some graduates may emigrate (1) and so other countries may receive the benefit (1) Up to 5 marks for why they should not: • more educated labour force (1) leading to higher output (1) reduced unemployment (1) increased living standards (1) generating external benefits (1) increasing tax revenue in the long run (1) • people from poor families may not be able to afford the cost (1) this could reduce the number of graduates (1) lowering potential output (1) increasing income inequality (1) • there is an argument for the government paying part of the cost (1), e.g. based on the ability to pay (1)