Thinking like an economist: The basic vocabulary of the field - Admission/Application Essay Example

Vice Chairman Jim Saxton of the US Congress Joint Economic Committee reported that the amount of education of a person determines his earning capacity; and that the more he learns, the more he absorbs new information, technology and new skills easily. This is particularly true since I believe that when the human capital is developed, his productivity level is improved, he turns out a good output of work that in turn increases his value and earnings. I also think that the amount of education one has acquired determines the gap in the income of professionals and the lowly-educated employees.

For instance, Vice Chairman Saxton presented in his committee report saying that professionals earn around $80,000 per year while the high school graduates earn the average of $26,300 per annum. This amount of pay tends to increase along with the length of time spent by the employee in the company because of bonuses and longevity pay. Aside from the remunerations there are also non-cash benefits from investing in education to increase human capital. In a highly competitive labor market, those with higher education are preferred by employers because they contribute to the over-all productivity of the company.

Thus, it can be concluded here that education is significant factor that improves the life of a person. 2. Does your college tuition fully reflect the opportunity cost to you of taking the course? What is your personal opportunity cost of taking this course?  When I go to college naturally, I spend money for tuition fee for taking the college course I want. In enrolling in college, I lost the opportunity to earn income that other high school graduates do. Opportunity cost is the comparison of alternatives of going to college or to work.

In most cases, there is a need to assess the costs and benefits of the options taken, and the benefits of foregone opportunity. When I choose the alternative of going to work, it means I have to give up college education and forego the opportunities that go with it. Let us take an example of my personal opportunity cost in taking this through some assumptions. Suppose that the amount of going to college for one year is $5,000. In assessing the opportunity cost, we must add to $5,000 the amount of foregone opportunity of working.

We should consider the lost opportunity to earn $20,000 a year if I worked full time. So the actual cost of going to college is $5,000 for direct expenses of going to college and the $20,000 of foregone salary, so it is $25,000. When we consider the cost and benefit, it would show that going to college has a long term benefit because as shown in Vice Chairman Saxton’s study, the earnings of a college graduate is twice as much higher than a high school graduate. Simply put, when I finish college, my earnings bracket is $46,000 as against $26,000 of those with lower education.

By the above example, opportunity cost to me, means that the choice I make will give me the maximum value of earning twice if I choose college education over the short term benefit of earning wages right after high school graduation. 3. Does a reduction in trade barriers cause a country to move closer to its production possibilities curve or does it cause the production possibilities curve to shift outward? What factors would cause the production possibilities curve to shift outward (economic growth)?

Trade barriers are government restrictions placed by the government to protect their domestic production. Common trade barriers according to WiseGeek are