Opportunity Cost How Markets Work

Opportunity Cost

How Markets Work

All economic decisions involve opportunity costs: no one can have 'it all,' contrary to the message conveyed by some popular commercials in the media. An undergraduate degree, for example, is a substantial investment of time and money. With the rare exception of an individual who goes back to college later in life to obtain a second baccalaureate, most people can only obtain one BA or BS degree, thus they must choose very carefully where and how they achieve it. "When economists refer to the 'opportunity cost' of a resource, they mean the value of the next-highest-valued alternative use of that resource" (Henderson 2009). In other words, a student cannot simultaneously work full-time and get an online degree from the University of Phoenix, and also obtain a more traditional degree from the University of Arizona, going to school full-time. Any university student will sacrifice the other goods and services that could be bought with tuition dollars, as well as the time devoted to obtaining that degree. The time could have been spent working, pursuing a hobby, or engaged in other meaningful pursuits (travel, fitness, learning a musical instrument).

A University of Phoenix online degree enables an undergraduate to get his or her degree at a relatively low cost, while still working at the same time. Even if the student must pay full tuition, he or she will not have the added burden of dorm room costs, a meal plan, and activity fees (the cost of your online degree, 2009, Votech). Additionally, the University of Phoenix can handle a higher volume of students, due to the fact it is an online institution, so it can enroll more students to 'spread' its costs around and charge less. Plus, a highly competitive student can often more easily obtain scholarships and an attractive financial aid package. In general, if a talented student goes to a high-quality but slightly less competitive institution, he or she is more apt to receive merit-based aid, as well as more generous need-based aid.

However, there is a substantial opportunity cost in going to an online school that must not be discounted. The student will experience the loss of the full college experience, of spending time in a dorm room, talking about classes with friends afterhours, having face-to-face contact with professors, and obtaining valuable experience from internships and extracurricular activities s organized through the auspices of the college. Brick and mortar universities offer attractive networking opportunities for students that are not as easily utilized online.

Of course, it might be argued by a dedicated University of Phoenix student that the experience of working while attending classes is just as valuable as being a member of a university lacrosse team, university newspaper, or debate team. Furthermore, the maturity and responsibility of juggling work and school can be beneficial, and is something that more traditional university students must sacrifice. University of Phoenix students can still discuss their course matter online with students and faculty, and may be better able to see the relevance of learning in the real world, since they are a part of that world as workers. Furthermore, students can spend more time with their families while attending school.

Merit-based aid to attend a university clearly seems to be an example of an 'efficient' market -- the best student is given the most attractive opportunity to make use of the degree. It could be argued that in general, it is an opportunity cost for society, and not 'equitable' that students who are not wealthy are not able to solely focus on their studies, even though working can give great benefit to the student. At some schools, the terms of need-based aid also often demands that a student work a part-time work study job and wealthier students do not have to do so.