Question:

i) Using a simple human capital model explain the rationale for undertaking higher education.

ii) Why do some people vary significantly the amounts of human capital which they acquire?

iii) After graduating from high school, Paul is thinking about enrolling in a one-year course in e-commerce. The direct costs of the course are $1,500 and the opportunity cost is $4,500. Upon completion of the course, he plans to work at Skynet Corporation for three years and then retire. The expected incremental income after completion of training is $2500, $3,000 and $3,500 for the three years he intends to work. The relevant interest rate is 10%. Is the decision to enroll in the e-commerce course rational? Discuss.