DEPED-QUEZON

COST OF EDUCATION
BY:

BLANDE C. TULLAO
MT-II

edad 331-seminar: economics of education

PROF. DR. WATER F. GALAROSA
INTRODUCTION:
From the point of view of the individuals, costs
refer to the amount of money spent during a
particular period (generally a year) to acquire
education. From the point of view of the state or
the institution, it refers to the expenditure
incurred on education during a year. The term
cost and expenditure are used interchangeably,
but more popularly, we use the term 'cost' and
refer to cost per student pertaining to a particular
level (primary, secondary, higher secondary or
university
Cost per student to the institution/state for a
particular course or level is calculated. But cost
per student in the institution/state may include
expenditure incurred on staff salaries, equipment
and buildings, maintenance costs of apparatus,
library books, sports, etc. From the point of view
of the individual, cost of acquiring education
includes expenditure on books and stationery,
school fees, travel cost and in case of students
making use of hostels, it will also include rent of
hostel accommodation, mess charges, etc,
Meaning of Cost In economics, in
general, the concept of cost comes into
play in the production of goods or
services. It needs to be noted that: (a)
cost may be expressed in terms of
money or in nonmonetary terms; (b)
cost affects a specific economic
transactor : producer, seller, buyer,
consumer, etc.
ACTIVITY:
Likeable Lucie
Students think of an adjective to describe
themselves. The adjective must suit the student
and must also start with the first letter of their
name.
The students have to memorize every name.
The first student just says his name, but the
second and the rest of the students have to
name the previous names before saying their
name. The last students will have to do the hard
work.
ANALYSIS:
1.How did you find the activity?
2.Is it difficult or not?
3.Is it fitted for the elementary pupils or
junior high schools/senior high schools?
4.Will it arouse the interest of the students
for them to be motivated?
ABSTRACTION:

COST?

EXPENDITURE?
Cost of education refers to the
amount of money spent to
acquire or impart education.
Cost is an amount that has to be paid or
given up in order to get something. In
business, cost is usually a monetary
valuation of (1) effort, (2) material, (3)
resources, (4) time and utilities consumed,
(5) risks incurred, and (6) opportunity
forgone in production and delivery of a good
or service.refers to the amount of money
spent to acquire or impart education.
it refers to the expenditure incurred on
education during a year. The term cost and
expenditure are used interchangeably, but more
popularly, we use the term 'cost' and refer to
cost per student pertaining to a particular level
(primary, secondary, higher secondary or
university).
Meaning of Cost of Education :
Something of value, usually an amount
of money, given up in exchange for
something else, usually goods or
services. The education sector, as the
producer of the service of ‘education’
and like any other sector of activity,
theoretically brings into play the same
concepts of cost.
Cost of acquiring education
includes expenditure on books and
stationery, school fees, travel cost
and in case of students making use
of hostels, it will also include rent
of hostel accommodation, mess
charges, etc,
It needs to be noted that: (a) cost may be
expressed in terms of money or in
nonmonetary terms; (b) cost affects a
specific economic transactor : producer,
seller, buyer, consumer, etc.
the output of education is measured
mainly by the number of enrolments
and in the second by the number of
successes, or scholastic performance.
 The Producer and the Consumer of
Education
Producer: the education establishment, the
teacher, the public authority (ministry of
education) a private agency (in the case of
private education) families (who help to bring
up children at home), or any other non-formal
teaching institution.

The consumers are the pupils and students and

also families, which are, in a sense, ‘buyers’ of
education for their children.
Types of Educational costs:
1. Individual/Private
2. Institutional/Public/Social
3. Direct cost
2. Indirect cost
5. Opportunity cost.
1. Individual costs or private costs of
education are those costs of education
incurred by a learner or by his/her
parents/guardians or by the family as a
whole.

Examples: Tuition and examination fees and

other such fees, institutional supplies,
manuals and books, transport, uniforms and
foregone earnings.
Institutional/Public/Social Costs : These costs
concern society and refer to such costs (or
expenditure) as are borne out as a result of all
education and training activities in a society at
a given point of time. Costs incurred at the
institutional level (government, private or
mixed) are called institutional costs or public
costs of education. Public costs are those that
include financing by the government on the
basis of taxes, loans and other public
revenues.
Direct Costs : These are those costs that
are directly visible. They include all
money expenditure incurred on different
items by the student. Direct costs are
expenses that can be separately
identified and charged as part of the cost
of a product, service, or department.
Indirect costs are those costs that cannot be
directly charged to a particular programme,
but are attributed to services, which are
necessary to operate the program. Such
services include, but are not limited to,
accounting, budgeting, payroll preparation,
personnel management, purchasing,
warehousing and centralised data processing.
Opportunity cost is the value of the forgone
alternative - what you gave up when you got
something. The opportunity cost of going to
college is the money you would have earned
if you worked instead. On the one hand, you
lose four years of salary while getting your
degree; on the other hand, you hope to earn
more during your career, due to your
education, to offset the lost wages. Thus,
opportunity cost is the cost of alternatives
foregone.
UNIT COST OF EDUCATION
Unit cost of education means costs per unit
i.e. per student, per graduate, per credit, etc.
Generally, unit in unit costs means the total
number of learners enrolled in a course in a
particular year. Sometimes, it is said that the
number of learners actually attending the
classes should be taken for the purpose of
calculation of unit costs and not the total
number of learners on roll.
unit costs refer to the unit of output i.e.
successful learner or graduate. This is
called effective costs of education. This
type of cost calculation education takes
care of wastage in education too. The
difference between the effective costs
and the normal costs of education reveals
the efficiency of the given level of
educational system.
Thus, we can calculate alternative forms of
unit costs of education. These are as follows :
Cost per learner (unit cost of education) =
Total expenditure/Total enrolment Cost per
learner actually attending the school = Total
expenditure/ No. of student attending classes
Cost per successful learner = Total
expenditure/ Number of passout learners
(effective unit costs of learner) Cost of
education per capita = Total expenditure/Total
population Feature of Unit Costs Analysis
Unit cost is cost per educational Unit,
e.g,, cost per student, cost per school,
cost per teacher, etc. But education has
multiple outputs measured variously in
terms of student achievement, number of
graduates passed, and so on. Hence,
while estimating unit cost, due care
should be taken to avoid ambiguity.
For example, cost per student may imply: a) cost
per student enrolled: b) cost per student actually
attending school; or c) cost per student
successfully completing a given course. The
problem of deciding on the unit cost has to be
solved carefully. Choosing the number of students
may not always be the right thing to do because
all costs do not vary with the number of the
students; for instance, the teachers and their
salaries, the number of square meters of building
space, etc. Hence, cost per teacher or cost per
school should also be considered.
Educational costs may be divided into three
categories:
• Those related to the students;
• Those related to the teachers;
• Those related to buildings and equipment.
Recurring Expenditure and Capital Expenditure
1. Recurring expenditure (or cost) as the name
suggests takes place regularly at certain intervals.
2. Capital expenditure or costs, on the other hand, are
one time investments.
Cost depends on: the level and structure of the
teachers' salaries; the average pupil-teacher ratio at
each level; the non-salary costs of education; and the
capital cost for buildings and other equipments. Of
course, each of these factors are themselves
determined by a number of other factors like
availability of funds, teacher, student enrollment, etc.
EXTERNAL AND INTERNAL EFFICIENCY OF
EDUCATION
If we agree with human capital school and view
education as a productive investment in human
capital, efficiency will become our first
consideration. As Psacharopoulos has pointed
out, ‘the choice of investments must, therefore,
be based on an analysis of the external
efficiency of all competing uses of resources,
from the point of view of society’s objectives, as
well as the internal efficiency of resource use
In order to study the behaviour of costs of
education, we can calculate them along different
dimensions: cost by level (like primary,
secondary, higher education, etc.); cost by region
(like rural and urban); total cost; unit cost; fixed
and variable costs; and average and marginal
costs. The type of cost analysis will depend upon
the purpose for which it is needed. Ideally, the
cost per pupil enrolled and the cost per successful
student should be the same.
This, however, is not usually the case because of
the prevalence of dropouts. Therefore, cost per
successful student is higher than per student
enrolled. The difference is a measure of the
efficiency of the system, as the lower the
difference the more efficient the system. In
economic terms, the concept of efficiency can
easily be defined as the relationship between
inputs and outputs, whereby economic efficiency
is increased by a gain in units of output per unit of
input.
In relation to education, we may say that
various educational outcomes can result from
a variety of different combinations of inputs
such as teachers, buildings, class-size,
curriculum, etc. The problem that confronts
economists and educators, however, is how to
mix the inputs in the right proportions to
achieve the most efficient outcome. But the
problem is further compounded when we ask
ourselves "What output should we measure?
According to Sheenan, it is very difficult to
specify a unit of output "because
educational systems so often in practice
have no single well defined function, so
also they have no single well-defined
indicator of output."
Internal Efficiency : The internal efficiency of
education is improved when more education
outputs are produced at given education
resources or fewer education resources are used
in producing the same amount of education
outputs. Thus educational economic analysis is
centrally concerned with the production of
education outputs and with education costs.
Internal efficiency is concerned with the
relationship between inputs and outputs within
the education system or within individual
institutions.
internal efficiency is at least as important as
external efficiency. Public subsidization itself is
not the objective, and its objective is to foster
economic and social development by improving
education both in quantity and in quality. If
internal efficiency is low, education output may
go down, even with increased public
subsidizations. Under this circumstance, the more
public subsidization, the more wastage.
Consequently, the internal goals of educational
institutions are harmed, so are the wider
objectives of society
External Efficiency : The external efficiency
of education is improved when more
education outcomes are produced at given
education resources or fewer education
resources are used in producing the same
amount of education outcomes. External
efficiency, is judged by the relation between
input and outcome with the objective of
social welfare maximization.
There are four principal sources of inefficiency.
The first is the leakage of resources between the
central government and the school through misuse of
grants, non-appointment of teachers etc.
The second is the leakage of resources within the
school, mainly attributable to student, teacher and
headmaster absenteeism and student drop-out.
The third is the non-recruitment of teachers as well as
deploying teachers to do tasks other than teaching.
The fourth is the allocation of resources within
government schools, where class sizes are largest in
the early grades and smallest in the later grades.
Teachers are the most valuable resource in improving
educational outcomes.
THANK YOU & GOD BLESS!

TO THE DIVINE IN YOU, I BOW

BLANDE E. CORPUZ-TULLAO

blandz