The Impact of Increase in the Price of Educational Goods and Services on Demand for Public Education

Price of education affects the demand for education and it is expected that increase in the price of educational goods and services results in low demand for education. Hence, governments make efforts to increase the educational coverage of the population through reducing the education costs and even providing school enrollment subsidies to low-income families. Appropriate economic policies are owed to a clear understanding of decision-making mechanisms within the household in relationship to appropriating resources to different expenditures, including general education. One way of obtaining such understanding would be estimate the price elasticity of demand for public education using the data on urban family income and the Rotterdom demand system. It is worth mentioning that households were classified into ten income groups. Using the data available for the period of 2007-2012, the price elasticities were found to be negative and they abide by the law of demand. The demand for public education in families belonging to groups one to six was elastic (responsive to price changes) and the demand in families belonging to groups seven to ten was inelastic. In fact, demand for education in low-income households (except for group eight) was more elastic than that of the privileged households. Any increase in the price of education decreases, as much as the difference in the educational expenditures, the demand for public education by both the low and high-income groups.