Bem2209 Economics of Education Revision
Bem2209 Economics of Education Revision
SECTION A (COMPULSORY)
1. a) Difference Between Private and Social Cost of Education (4 Marks)
Private Cost of Education refers to the expenses incurred by individuals or households in acquiring
education. These include:
Tuition fees
Cost of books and learning materials
Transport and accommodation expenses
Opportunity cost of time spent in school instead of working
Social Cost of Education includes both private costs and the expenses incurred by
society/government in providing education. These include:
Government expenditure on public schools, teacher salaries, and infrastructure
Foregone earnings of students who could be working
Public subsidies for educational institutions
Key Difference:
Private cost affects individuals, whereas social cost affects the whole society.
Social cost includes externalities such as the benefits of an educated workforce and economic
growth.
1|Page
4. Community Contributions: Involvement of parents and local organizations in fundraising
efforts.
5. Donor and NGO Support: Seeking financial aid and grants from international organizations
and charitable institutions.
2. Cost-Benefit Analysis
It helps in evaluating the costs (direct and indirect) versus the benefits (private and social) of
educational investments. This is crucial in justifying public expenditure on education and
determining which levels or sectors (e.g., primary, secondary, or higher education) deserve
priority.
7. Financing Education
Economics of Education addresses how education should be financed – whether by
governments, private sector, or individuals. It explores sustainable funding models such as
cost-sharing, grants, and public-private partnerships.
8. Global Competitiveness
A strong education system contributes to a skilled workforce that enhances a country's
competitiveness in the global economy. Understanding this link supports investment in
quality and relevant education.
3|Page
4. Aligning Education with Economic Needs: Ensuring that graduates acquire skills relevant
to the labour market.
5|Page
Resources (such as labour and capital) invested in education could have been used in other
sectors of the economy. Additionally, students spend years in school instead of contributing
to the workforce.
3. Infrastructure and Maintenance Costs
Education requires the construction and maintenance of schools, libraries, laboratories, and
other facilities, which impose long-term financial obligations on society.
4. Teacher Training and Salaries
A well-trained workforce of educators is necessary for effective education, requiring
continuous investment in teacher training, salaries, and professional development.
5. Subsidies and Scholarships
Many governments and institutions provide financial aid, free education, or subsidies to
ensure access to education, which increases public spending.
6. Education-Related Social Programs
Programs such as school feeding initiatives, free textbooks, and health services for students
add to the social costs but help improve educational outcomes.
7|Page
cohesion.
2. Data Limitations – Reliable data on future earnings, employment rates, and
economic trends are often unavailable or inaccurate.
3. Potential Bias Toward Higher Education – Since returns on investment are often
higher for tertiary education, CBA may lead to underinvestment in basic education,
which has broader social benefits.
8|Page
INSTRUCTION: ANSWER QUESTION ONE AND ANY OTHER TWO
QUESTIONS
Question One
(a) Meaning of Concepts in Economics of Education:
1. Opportunity Cost (2 Marks)
o It refers to the value of the next best alternative forgone when making a choice. In
education, it could be the income a student sacrifices to pursue further studies instead of
working.
2. Human Capital (2 Marks)
o It refers to the skills, knowledge, experience, and abilities acquired by individuals
through education, training, and health investments that enhance productivity.
3. Consumption (2 Marks)
o It is the process of using goods and services to satisfy human wants. In education,
consumption may include using educational resources such as books, tuition, and
infrastructure.
4. Investment (2 Marks)
o It refers to the allocation of resources to activities that generate future benefits. In
education, investment involves spending on schooling, training, and research to improve
human capital.
(b) Four Problems Affecting the Financing of Education in Kenya (4 Marks)
1. Inadequate Government Funding – Insufficient budget allocations hinder the expansion
and quality of education.
2. High Cost of Education – Families struggle to afford tuition, books, and uniforms.
3. Inefficiency in Resource Allocation – Mismanagement and corruption reduce the
effectiveness of education funding.
4. Dependence on Donor Funding – Over-reliance on foreign aid makes financing unstable.
(c) Four Types of Unemployment (8 Marks)
1. Frictional Unemployment – Temporary unemployment when individuals are transitioning
between jobs.
2. Structural Unemployment – Mismatch between workers’ skills and available jobs due to
changes in the economy.
3. Cyclical Unemployment – Job losses caused by economic downturns and recessions.
4. Seasonal Unemployment – Joblessness due to seasonal fluctuations in demand, such as in
agriculture.
9|Page
(d) Five Direct Private Costs of Education (10 Marks)
1. Tuition Fees – Payments made to institutions for education services.
2. Books and Learning Materials – Costs for textbooks, exercise books, and stationery.
3. Uniforms and Clothing – Expenses for school attire.
4. Transport Costs – Travel expenses to and from school.
5. Accommodation and Meals – Boarding and food costs for students in residential schools.
Question Two
(a) Difference Between Efficiency and Equity in Education (4 Marks)
Efficiency refers to the optimal use of resources to achieve the best educational outcomes
with minimal waste.
Equity ensures fair access and opportunities in education, addressing inequalities based on
gender, income, or location.
(b) Factors Contributing to Inefficiency in the Education System (10 Marks)
1. High Dropout Rates – Wasted resources when students leave school before completing
studies.
2. Teacher Shortages and Absenteeism – Poor instruction leads to low learning outcomes.
3. Outdated Curriculum – Mismatch between education and labour market needs.
4. Poor Infrastructure – Lack of classrooms, libraries, and sanitation affects learning quality.
5. Corruption and Mismanagement – Funds meant for education may be misused.
(c) Solutions for High Enrolment, Retention, and Graduation Rates in Secondary Schools (6
Marks)
1. Free or Subsidized Education – Reduces financial barriers.
2. School Feeding Programs – Encourages attendance, especially in marginalized areas.
3. Improved Infrastructure – Ensures a conducive learning environment.
4. Community Awareness Campaigns – Encourages parents to prioritize education.
5. Flexible Learning Options – Evening and weekend classes for working students.
6. Stronger Policies Against Early Marriages and Child Labor – Protects vulnerable
students.
Question Three
(a) How Education Helps to Alleviate Economic Problems (10 Marks)
1. Reduces Unemployment – Equips individuals with skills for jobs.
2. Increases Productivity – Skilled workers contribute more to economic growth.
3. Encourages Entrepreneurship – Education fosters innovation and self-employment.
4. Improves Health Outcomes – Educated populations make informed health decisions.
5. Enhances Social Stability – Reduces crime and promotes national unity.
6. Attracts Foreign Investment – Skilled labour force attracts investors.
7. Fosters Technological Advancement – Encourages research and innovation.
8. Reduces Poverty – Higher earnings improve living standards.
9. Increases Tax Revenue – Higher incomes lead to more government revenue.
10. Encourages Gender Equality – Educated women contribute to economic growth.
10 | P a g e
(b) Five Causes of Unemployment in Kenya (10 Marks)
1. Rapid Population Growth – High labor supply exceeds job opportunities.
2. Mismatched Skills – Education system does not align with job market needs.
3. Economic Slowdown – Reduced business activities lead to job losses.
4. Technological Advancements – Automation replaces human labor.
5. Corruption and Nepotism – Employment opportunities are unfairly allocated.
Question Four
(a) Significance of Studying Economics of Education (10 Marks)
1. Resource Allocation – Ensures efficient funding and investment in education.
2. Human Capital Development – Explains the role of education in economic growth.
3. Equity in Education – Addresses social inequalities.
4. Policy Formulation – Guides governments in making informed educational policies.
5. Cost-Benefit Analysis – Helps assess the returns on educational investment.
6. Improving Educational Access – Identifies barriers and solutions.
7. Labor Market Analysis – Aligns education with employment needs.
8. Enhancing Efficiency – Reduces wastage of resources in education.
9. Addressing Unemployment – Provides strategies to create job opportunities.
10. Global Competitiveness – Helps a country develop skilled labor for a global economy.
(b) Five Factors Influencing Demand for Education (10 Marks)
1. Income Levels – Higher family income increases access to education.
2. Perceived Benefits – Expectations of better jobs encourage schooling.
3. Government Policies – Free education policies boost demand.
4. Cultural Beliefs – Societal attitudes towards education impact demand.
5. Quality of Education – Higher quality attracts more learners.
Question Five
(a) Four Methods of Measuring Equity in Education (8 Marks)
1. Gender Parity Index (GPI) – Compares male and female enrollment.
2. Gini Coefficient in Education – Measures inequality in education distribution.
3. Household Income Analysis – Assesses access disparities based on economic background.
4. Geographical Disparities – Evaluates rural vs. urban education access.
(b) Five Effects of Unemployment on the Economy (12 Marks)
1. Low Economic Growth – Less productivity reduces GDP.
2. Increased Poverty Levels – Unemployed individuals struggle financially.
3. Higher Crime Rates – Frustration leads to criminal activities.
4. Reduced Government Revenue – Fewer tax contributions from unemployed citizens.
5. Political Instability – Joblessness can cause social unrest.
11 | P a g e
Question One
(a) Differentiate between education equity and education equality. (6 Marks)
Education Equality refers to providing the same resources, opportunities, and conditions to
all students, regardless of their background. It assumes that treating everyone the same leads
to fairness.
Education Equity focuses on fairness by ensuring that students receive the support they
need to succeed. It acknowledges that some students require more resources due to socio-
economic disparities, disabilities, or other disadvantages.
Example:
Equality: Every student gets the same textbook.
Equity: Students from disadvantaged backgrounds receive additional learning support, such
as free meals, financial aid, or extra tutoring.
12 | P a g e
transport.
3. Scholarships and Bursaries: Organizations like the Constituency Development Fund
(CDF), NGOs, and private donors provide financial aid.
4. Donor Support: International agencies (e.g., World Bank, UNICEF) contribute to education
programs.
5. Community and Religious Support: Faith-based organizations and community groups
assist in financing schools.
Question Two
Discuss inefficiencies arising from the Free Day Secondary Education (FDSE) programme in
Kenya. (20 Marks)
Inefficiencies include:
1. Overcrowding in Schools: Increased enrollment without proportional infrastructure
expansion.
2. Teacher Shortages: FDSE increased demand for teachers, but hiring has not kept pace.
3. Inadequate Funding: Schools receive delayed or insufficient funds, affecting operations.
4. Quality of Education Compromised: High student-teacher ratios lead to less effective
learning.
5. Poor Infrastructure: Many schools lack enough classrooms, labs, and libraries.
6. Hidden Costs: Parents still incur expenses (e.g., uniforms, meals, transport), making
education not entirely free.
7. Mismanagement of Funds: Cases of corruption and poor financial planning in schools.
8. Limited Resources: Schools struggle with shortages of textbooks, desks, and learning
materials.
Question Three
How has the Kenyan government addressed equity issues in education? (20 Marks)
Government Interventions:
1. FDSE Program: Ensures access to secondary education for all students.
2. Bursaries and Scholarships: HELB loans, CDF bursaries, and Wings to Fly program
support needy students.
3. Affirmative Action: Special programs for marginalized groups (e.g., ASAL regions).
13 | P a g e
4. School Feeding Programs: Reduces dropout rates, especially in arid regions.
5. Special Needs Education (SNE): Schools for students with disabilities receive specialized
support.
6. Infrastructure Development: Construction of classrooms, laboratories, and ICT centers.
7. Elimination of School Fees for Public Primary Education: Ensures universal access.
8. Gender Parity Policies: Programs like “Let Girls Learn” encourage female education.
Question Four
(a) Reasons for increased social demand for education in developing countries. (10 Marks)
1. Population Growth: More children require education.
2. Awareness of Education Benefits: Education is linked to better economic and social
mobility.
3. Government Policies: Free and compulsory education policies boost demand.
4. Urbanization: Increases access to schools and educational resources.
5. Labor Market Demands: Employers prefer educated workers.
6. Globalization: Exposure to international education standards influences demand.
7. Parental Aspirations: Parents prioritize education for their children.
8. Technological Advancement: ICT and online learning make education more accessible.
9. Increased Literacy Campaigns: Governments and NGOs promote education.
10. International Influence: Organizations like UNESCO advocate for universal education.
Question Five
Challenges Faced by Education Planners in Developing Countries & Solutions (20 Marks)
Challenges Possible Solutions
Increase government budget for education. Seek donor support.
Inadequate Funding
Implement cost-sharing strategies.
Recruit more teachers. Improve salaries and working conditions. Train
Teacher Shortages
more educators.
Provide school feeding programs. Offer financial support (bursaries,
High Dropout Rates
scholarships). Encourage parental involvement.
Poor Infrastructure Invest in classrooms, ICT, and libraries. Encourage public-private
14 | P a g e
Challenges Possible Solutions
partnerships.
Revise curricula to match job market demands. Promote technical and
Curriculum Irrelevance
vocational education.
Gender Disparities Implement policies to promote girls' education. Address cultural barriers.
Inefficiencies in
Strengthen education policies. Improve monitoring and accountability.
Management
Limited Access in Rural Build more schools. Introduce mobile learning programs. Use technology
Areas for remote learning.
15 | P a g e
QUESTION ONE
(a) Definitions (10 Marks)
1. Cost-benefit analysis – A systematic process of comparing the costs and benefits of a
project or policy to determine its feasibility and profitability.
2. Macroeconomics – The branch of economics that deals with the overall economy, including
national income, inflation, unemployment, and government policies.
3. Microeconomics – The branch of economics that studies individual and business decisions
regarding the allocation of resources and prices of goods and services.
4. Capital – In economics, capital refers to financial assets or physical tools, machinery, and
infrastructure used to produce goods and services.
5. Educated unemployment – A situation where individuals with formal education remain
jobless due to factors such as job market saturation or skill mismatch.
(b) Causes of educated unemployment (5 Marks)
Job market saturation – More graduates than available job opportunities.
Mismatch of skills – Education system not aligned with market demands.
Economic slowdown – Poor economic growth leading to fewer employment opportunities.
Overdependence on formal employment – Limited focus on self-employment and
entrepreneurship.
Technological advancements – Automation reducing demand for some skills.
(c) Government measures to address educated unemployment (5 Marks)
Encouraging entrepreneurship – Youth empowerment programs and funding for startups
(e.g., Youth Enterprise Fund).
Expanding vocational training – Promotion of Technical and Vocational Education and
Training (TVET) institutions.
Job creation initiatives – Investment in infrastructure and industrialization.
Public-private partnerships – Collaboration with private sector for internships and skill
development.
Reviewing curriculum – Emphasizing practical skills and market relevance.
(d) Controversies in education financing in developing countries (5 Marks)
Cost burden on families – High tuition fees limit access to quality education.
Inequality in distribution – Rural and marginalized areas receive fewer resources.
Government budget constraints – Competing needs lead to underfunding of education.
Privatization of education – Commercialization raises concerns over equity.
Corruption and mismanagement – Funds meant for education diverted or misused.
(e) Sources and methods of financing education (5 Marks)
16 | P a g e
Government funding – National budgets and subsidies.
Donor aid and grants – Contributions from international agencies like UNESCO and World
Bank.
Tuition fees – Student payments for education services.
Private sector investment – Corporate sponsorships and scholarships.
Community participation – Local contributions and fundraising.
QUESTION TWO
(a) Factors influencing demand for university education in Kenya (10 Marks)
Population growth – Higher number of students seeking higher education.
Government policies – Free primary and secondary education increasing transition rates.
Economic benefits – Higher education linked to better job prospects.
Technological advancements – Increased need for specialized skills.
Social and cultural factors – Prestige and societal expectations.
(b) Factors increasing supply of primary education in Kenya (10 Marks)
Free Primary Education (FPE) – Introduced in 2003, increasing enrollment.
Increased government funding – More resources for schools.
Teacher recruitment programs – Hiring more teachers to meet demand.
NGO and donor support – Provision of infrastructure and learning materials.
Community participation – Parental involvement in school management.
QUESTION THREE
(a) Contribution of education to national development (14 Marks)
Human capital development – Enhances skills and productivity.
Economic growth – Increases employability and income levels.
Social stability – Reduces crime and promotes civic responsibility.
Technology and innovation – Facilitates research and industrial advancement.
Gender equality – Empowers women and marginalized groups.
(b) Development strategies used by countries (6 Marks)
Investment in education – Expanding access to quality education.
Economic diversification – Reducing reliance on one sector.
Infrastructure development – Roads, electricity, and communication systems.
Industrialization – Encouraging manufacturing and exports.
Agricultural modernization – Enhancing food security and rural incomes.
Foreign investment policies – Attracting international businesses.
QUESTION FOUR
(a) Definitions (6 Marks)
1. Internal efficiency – The ability of an education system to produce graduates with minimal
wastage of resources (dropout and repetition rates should be low).
2. External efficiency – The extent to which education contributes to employment,
productivity, and economic development.
17 | P a g e
(b) Factors negatively affecting education efficiency (14 Marks)
High dropout rates – Students leaving school before completion.
Poor teacher-student ratio – Overcrowded classrooms reducing effectiveness.
Outdated curriculum – Misalignment with job market demands.
Inadequate infrastructure – Lack of classrooms, books, and technology.
Political interference – Frequent policy changes affecting stability.
Corruption and mismanagement – Misuse of educational funds.
Limited access in rural areas – Marginalized communities left behind.
QUESTION FIVE
(a) Equity in education challenges in developing countries (14 Marks)
Gender disparities – Girls facing barriers like early marriages and cultural norms.
Regional inequalities – Rural and marginalized areas underfunded.
Disability inclusion – Limited access for learners with special needs.
Economic disparities – Poor families struggling to afford quality education.
Quality differences – Private vs. public school variations in resources.
(b) Government efforts to promote equity in education (6 Marks)
Free Primary and Secondary Education – Making education accessible.
Affirmative action policies – Scholarships for marginalized groups.
School feeding programs – Encouraging enrollment in low-income areas.
Special needs education support – More funding for inclusive learning.
Gender empowerment programs – Encouraging girls’ education.
18 | P a g e