Determinants of Demand for Education

The determinants of demand for education can be viewed both from the perspectives of private as also the societal demands. The benefits that accrue to the individual (or society) contributing to an increase in the productive capacity of the individual (and/or resulting in a productive return to the society), is treated as ‘investment’. From this perspective, the money spent on education by an individual or family is ‘private investment’ while the expenditure made by the state on education (or other social services for productive purposes) is public investment. An individual or his family invests in education in anticipation of some future benefits/returns. Likewise, the investment on education by the government (or the society) is also made keeping in view the benefits to the economy or the community in general. The latter is particularly important as the limited resources available with the government need to be judiciously allocated among the different sectors of the economy. Further, even within the education sector, the different levels (e.g. elementary, secondary, technical/professional, higher education, etc.) merit differentiated allocations in order to serve the long term growth objectives of the economy.

The investment decisions on education, be it from the individual’s (i.e. private) or the government’s (i.e. public/societal) side, are thus based on certain expectations and calculations. Such expectations/calculations are made with due regard to the factors of needs and aspirations of the individuals and the society. They are therefore dynamic in their nature and spirit. From this point of view, as the decisions on investment in education contribute to the generation of demand for educational facilities, thereby determining its supply, such intuitive factors like perceived needs, expectations, aspirations, etc. constitute the dynamics of demand and supply of education. The factors contributing/influencing the determination of private/social demand are, however, varied. They, therefore, merit to be considered separately.