1) “The expansion of higher education involves an opportunity cost to both the government and

students” suggests that there are costs of improving higher education to students and governments.
An opportunity cost is the next best alternative forgone, which normally arises due to lack of scarce
resources, such as time and materialistic goods.

In Extract 1, there is evidence for the government funding for students’ education fees as it states
“universities additionally receive, on average, £8200 of funding for each student from the
government”. This poses an opportunity cost for the government, as this money could be spent on
improving quality of healthcare, or other public goods and services.

The extract also states that the government increased the “maximum allowed student contribution
from £3375 to £9000 per year”. This poses an opportunity cost for students as the students could
spend their contribution money on something else. In addition, students could even get a job and
earn a higher income over the period of time they were meant to be studying.

2) A production possibility frontier depicts the maximum combination of 2 goods and services that
can be produced given full employment of all resources, in their current state.

Increased government spending on higher education will result in an increase in productivity, as the
labour workforce will become more educated and so will have more service or tertiary workers. This
will allow the production possibility frontier to shift outwards, as shown below, as the economy will
be more productive and so will move closer to full employment. However, this depends on the time
lag and how long it takes. The labour workforce will not immediately shift to a service of tertiary
based one, as this process takes time. Therefore, the effects of government spending on education
can only be seen a few years afterwards.

More spending on higher education will also lead to more migrants into the UK, as students and
workers will see the UK as a good place to study or work as an educator. This will also shift the PPF
curve outwards, as the maximum number resources will increase, as the total number of labour will
increase. This increase in maximum resources will move the economy closer to full employment, as
shown by the PPF above. However, this depends on whether other governments around the world
decide to do the same thing. If lots of other countries decide to dedicate a large proportion of their
spending on education, the magnitude of the UK doing the same will be diminished. But if this does
not occur, foreigners may be more attracted to migrate to the UK to seek jobs or a better education.