CHUKWUEMEKA ODUMEGWU OJUKWU UNIVERSITY

FACULTY OF EDUCATION
SCHOOL OF POSTGRADUATE STUDIES IGBARIAM CAMPUS

NAME: UZUEGBU UCHECHUKWU

REG NO:
COURSE CODE: EDM 807

COURSE TITLE: EDUCATIONAL FINANCE

Assignment

1. What is economic principles and principles of

economy?
2. Outline Gregory Makiwe’s 10 principles of economic.
3. Application of economic principles to solving issues in
educational finance.

LECTURER: PROF. U. UGHAMDU

DATE: SEPTEMBER, 2025

1
ECONOMIC PRINCIPLES

Economic principles are fundamental concepts that guide economic decision-

making and behavior. These principles provide a framework for understanding
how individuals, businesses, and governments make choices about allocating
resources and responding to incentives.

Key Characteristics of Economic Principles

1. Universality: Economic principles apply to all economic systems and

societies.

2. Rationality: Economic principles assume that individuals and organizations

make rational decisions based on available information.

3. Scarcity: Economic principles recognize that resources are limited, and

individuals must make choices about how to allocate them.

4. Opportunity Cost: Economic principles consider the value of the next best
alternative that is given up when a choice is made.

Examples of Economic Principles

1. Supply and Demand: The price and quantity of a good or service are
determined by the intersection of supply and demand curves.

2. Opportunity Cost: The value of the next best alternative that is given up when
a choice is made.

3. Comparative Advantage: Individuals or countries should specialize in

producing goods or services for which they have a lower opportunity cost.

4. Diminishing Returns: As more resources are added to a production process,

the marginal output will eventually decrease.

2
Importance of Economic Principles

1. Informed Decision-Making: Understanding economic principles enables

informed decision-making in personal and professional contexts.

2. Efficient Resource Allocation: Economic principles help individuals and

organizations allocate resources efficiently.

3. Predicting Market Trends: Economic principles can help predict market

trends and make informed investment decisions.

By understanding economic principles, individuals and organizations can make

more informed decisions and achieve their goals more effectively.

APPLICATIONS OF ECONOMIC PRINCIPLES

Economic principles have numerous applications in various fields, including:

Business

1. Decision-making: Economic principles help businesses make informed

decisions about production, pricing, and resource allocation.

2. Market analysis: Understanding supply and demand, market structures, and

consumer behavior helps businesses develop effective marketing strategies.

3. Cost-benefit analysis: Businesses use economic principles to evaluate the

potential costs and benefits of investments, projects, and policies.

Policy-making

1. Fiscal policy: Governments use economic principles to design fiscal policies,

such as taxation and government spending, to stabilize the economy.

3
2. Monetary policy: Central banks use economic principles to set interest rates
and regulate the money supply to control inflation and promote economic
growth.

3. Regulatory policy: Governments use economic principles to design

regulations that promote competition, protect consumers, and address market
failures.

Personal Finance

1. Budgeting: Individuals use economic principles to make informed decisions

about budgeting, saving, and investing.

2. Investment decisions: Understanding risk and return, diversification, and

opportunity cost helps individuals make informed investment decisions.

3. Consumer behavior: Individuals use economic principles to make informed

decisions about consumption, saving, and debt.

Education

1. Resource allocation: Educational institutions use economic principles to

allocate resources efficiently and make informed decisions about budgeting and
spending.

2. Policy evaluation: Educational institutions use economic principles to

evaluate the effectiveness of policies and programs.

3. Student decision-making: Students use economic principles to make informed

decisions about their educational and career choices.

Other Fields

4
1. Healthcare: Economic principles are used to evaluate the costs and benefits of
healthcare interventions, policies, and programs.

2. Environmental policy: Economic principles are used to design policies and

regulations that promote environmental sustainability and address
environmental externalities.

3. International trade: Economic principles are used to understand the benefits

and costs of international trade, including comparative advantage and trade
agreements.

By applying economic principles, individuals, businesses, and governments can

make more informed decisions and achieve their goals more effectively.

ECONOMIC PRINCIPLES IN EDUCATIONAL CONTEXT

Economic principles play a crucial role in educational decision-making and

resource allocation. These principles help educational institutions and
policymakers make informed decisions about budgeting, spending, and resource
allocation.

Applications of Economic Principles in Education

1. Resource Allocation: Economic principles help educational institutions

allocate resources efficiently and make informed decisions about budgeting and
spending.

2. Policy Evaluation: Economic principles are used to evaluate the effectiveness

of educational policies and programs.

3. Student Decision-Making: Economic principles help students make informed

decisions about their educational and career choices.

5
4. Investment in Education: Economic principles are used to evaluate the returns
on investment in education, including the benefits of education for individuals
and society.

Consequences of Not Applying Economic Principles in Education

1. Inefficient Resource Allocation: Without economic principles, educational

institutions may allocate resources inefficiently, leading to waste and
inefficiency.

2. Poor Policy Decisions: Ignoring economic principles can lead to poorly

designed policies that fail to achieve their intended goals.

3. Suboptimal Student Outcomes: Failing to apply economic principles can

result in suboptimal student outcomes, including lower academic achievement
and reduced economic opportunities.

4. Reduced Economic Growth: Underinvesting in education or allocating

resources inefficiently can reduce economic growth and prosperity.

Examples of Economic Principles in Education

1. Opportunity Cost: The cost of attending college includes not only tuition but
also the opportunity cost of foregone wages.

2. Supply and Demand: The demand for certain skills and knowledge in the
labor market can influence the supply of educational programs and courses.

3. Diminishing Returns: Adding more resources to an educational program may

not always lead to proportional increases in student outcomes.

By applying economic principles, educational institutions and policymakers can

make more informed decisions and achieve better outcomes for students and
society.

6
GREGORY MANKIW'S 10 PRINCIPLES OF ECONOMICS

Here are the 10 principles of economics according to Gregory Mankiw:

How People Make Decisions

1. People Face Tradeoffs: Individuals must choose between alternatives, giving

up something to gain something else.

2. The Cost of Something Is What You Give Up to Get It: Opportunity cost is
the value of the next best alternative given up when making a choice.

3. Rational People Think at the Margin: Rational individuals make decisions

based on marginal costs and benefits.

4. People Respond to Incentives: Individuals are motivated by rewards and

penalties.

How People Interact

5. Trade Can Make Everyone Better Off: Voluntary trade can benefit all parties
involved.

6. Markets Are Usually a Good Way to Organize Economic Activity: Markets

can efficiently allocate resources.

7. Governments Can Sometimes Improve Market Outcomes: Government

intervention can address market failures.

How the Economy as a Whole Works

8. A Country's Standard of Living Depends on Its Ability to Produce Goods and

Services: Productivity determines a country's standard of living.

7
9. Prices Rise When the Government Prints Too Much Money: Excessive
money printing can lead to inflation.

10. Society Faces a Short-Run Tradeoff between Inflation and Unemployment:

There is a tradeoff between inflation and unemployment in the short run.

These principles provide a foundation for understanding how individuals,

businesses, and governments make decisions and interact with each other in the
economy.

APPLYING GREGORY MANKIW'S PRINCIPLES OF ECONOMICS IN

NIGERIA'S EDUCATIONAL SYSTEM

Here are some real-life examples of applying Gregory Mankiw's principles of

economics in Nigeria's educational system:

1. People Face Trade-Offs

- Example: A student deciding between studying for an exam or attending a

party. In Nigeria's educational system, students often face trade-offs between
academic and extracurricular activities.

- Application: Educational institutions can help students understand the

importance of prioritizing tasks and managing time effectively to achieve their
academic goals.

2. The Cost of Something is What You Give Up to Get It

Example: The cost of attending a private university in Nigeria includes not only
tuition but also the opportunity cost of foregone wages or other educational
opportunities.

8
Application: Educational institutions can help students understand the concept
of opportunity cost and make informed decisions about their educational and
career choices.

3. Rational People Think at the Margin

Example: A student deciding whether to take an extra course based on the

marginal benefits and costs. In Nigeria's educational system, students often
make decisions based on marginal analysis.

Application: Educational institutions can encourage students to think critically

and make informed decisions by considering the marginal benefits and costs of
their choices.

4. People Respond to Incentives

Example: Students working harder to achieve good grades if they know it will
lead to better job opportunities or higher education prospects.

Application: Educational institutions can use incentives such as rewards and

recognition to motivate students to achieve their goals.

5. Trade Can Make Everyone Better Off

Example: International students benefiting from studying abroad, and host

institutions benefiting from cultural diversity.

Application: Nigerian educational institutions can facilitate international

partnerships and exchange programs to benefit students and faculty.

6. Markets Are Usually a Good Way to Organize Economic Activity

9
Example: Online courses providing an efficient way to deliver education to a
large number of students.

Application: Nigerian educational institutions can leverage technology to

provide online courses and reach a wider audience.

7. Governments Can Sometimes Improve Market Outcomes

Example: Governments providing subsidies to make education more accessible

to low-income students.

Application: Nigerian governments can work with educational institutions to

develop policies and programs that promote access to education.

8. A Country's Standard of Living Depends on Its Ability to Produce

Goods and Services

Example: Countries with strong education systems tend to have higher

standards of living.

Application: Nigerian educational institutions can focus on developing skills

and knowledge that are relevant to the labor market.

9. Prices Rise When the Government Prints Too Much Money

Example: Inflation reducing the purchasing power of students and affecting

their ability to afford education.

Application: Nigerian educational institutions can help students understand the

impact of economic policies on their financial situation.

10. Society Faces a Short-Run Trade-Off between Inflation and

Unemployment

10
Example: Policymakers balancing the need to control inflation with the need to
reduce unemployment.

Application: Nigerian educational institutions can help students understand the

complexities of economic policy-making and the trade-offs involved.

ECONOMIC PRINCIPLES FOR SOLVING EDUCATIONAL

FINANCIAL PROBLEMS

Here are some key economic principles and how to apply them to solve
educational financial problems:

1. Opportunity Cost

Definition: The value of the next best alternative given up when a choice is
made.

Application: Prioritize spending based on educational goals. For instance,

investing in teacher training might mean diverting funds from infrastructure
development. Weigh these trade-offs to allocate resources effectively.

2. Supply and Demand

Definition: The price and quantity of a good or service determined by the

intersection of supply and demand curves.

Application: Understand market trends and adjust resource allocation

accordingly. If there's high demand for STEM education, allocate more funds to
develop relevant programs and infrastructure.

3. Cost-Benefit Analysis

Definition: Evaluating the potential benefits and costs of a decision.

11
Application: Conduct cost-benefit analyses to evaluate the effectiveness of
educational investments. This ensures resources are allocated to initiatives that
provide the greatest benefits, such as improving student outcomes or enhancing
educational quality.

4. Diversification of Revenue Streams

Definition: Reducing reliance on a single source of funding.

Application: Explore alternative funding sources, such as public-private

partnerships, grants, and crowdfunding, to provide financial stability and
flexibility.

5. Prioritization of Expenditures

Definition: Allocating resources based on priority needs.

Application: Allocate funds to essential areas, such as ¹:

Teacher Salaries and Benefits: Ensure competitive compensation to attract and

retain high-quality educators.

Infrastructure Development: Invest in modern facilities and technology to

enhance learning environments.

Curriculum and Instructional Materials: Fund updated resources to reflect

current educational standards and needs.

6. Efficient Resource Allocation

Definition: Minimizing waste and maximizing value.

Application: Implement cost-saving measures, such as:

Energy Efficiency: Implement green initiatives to reduce utility costs.

12
Centralized Procurement: Streamline purchasing processes to negotiate better
deals with suppliers.

Technology Integration: Leverage technology to enhance educational outcomes

while reducing costs.

7. Long-Term Financial Planning

Definition: Developing a financial plan that aligns with educational goals.

Application: Forecast future financial needs and proactively address potential

funding gaps. Develop a long-term financial plan that outlines financial goals
and objectives.

8. Public-Private Partnerships

Definition: Collaborating with private entities to fund educational projects.

Application: Partner with private entities to fund initiatives, such as

infrastructure development, technology integration, and specialized programs.

By applying these economic principles, educational institutions can optimize

their financial resources, improve educational outcomes, and achieve long-term
sustainability.

13