Essay about House Purchase Using the 10 Principles of Economics

Submitted By jaymi410
Words: 1887
Pages: 8

A New House Decision

There are many different things that people take into consideration when deciding to purchase a home. There are many factors that play a major role in helping people to decide if the decision they are making is the right decision for them. The strength of the economy itself can have an effect on the costs of owning a home in numerous ways. One thing is that it will determine what will be paid at the time of purchase by the market price. The strength of the economy will be one of the most important factors for a consumer when they are figuring their interest rate, which in the end will let the buyer know what the total amount to be repaid will ultimately be. Depending on the strength of the economy things like lenders or bank will be affected with the interest rates and down payments that will be made and given as well. The benefits of purchasing a home can be determined by the strength of the government because it will let the buyer know or give them an idea what the future market value of their home will be. Marginal cost is the change in total cost that occurs when the quantity of the product being produced is changed by one unit. “Marginal benefit refers to what people are willing to give up in order to obtain one more unit of a good, while marginal cost refers to the value of what is given up in order to produce that additional unit. Additional units of a good should be produced as long as marginal benefit exceeds marginal cost. It would be inefficient to produce goods when the marginal benefit is less than the marginal cost. Therefore an efficient level of product is achieved when marginal benefit is equal to marginal cost” (Investopedia20120. This is how marginal benefits and marginal cost can be affected by the strength of the government.
People face trade-offs which results in the cost of something they decide to buy is the equivalent to the cost they must give up in doing so. People have to be careful about taking into consideration all the benefits and cost that come with each option that they are weighing out. In other words like I mentioned someone has to give up one thing in order to receive another much like opportunity cost in this sense. “When one is allocating (limited) funds, the trade-off usually involves reduced spending for some purposes in order to be able to spend more for other more urgent purposes”(Dr.Paul M. Johnson1994-2005). For example in deciding to buy a house cost is what makes the decision to give up other things like vacations or items that are not necessities in order to afford the price of the home. Making a decision to purchase something comes with many options. The needs and wants of people are unlimited while the resources or goods are limited, leaving the consumer with choices. When a consumer realizes there are trade-offs that they must face in live, they tend to make better decisions based on this concept.
Many consumers do not make their decisions based on all or nothing. They tend to look at things like marginal changes. What this is is basically changes to their current plans or action. For instance, when deciding to purchase a home, many people might look at the marginal cost of purchasing a home versus renting a home or an apartment. They will then also look at the marginal benefits they will reap from purchasing and owning the home. After taking these things into consideration they are able to make the decision if the end result will be worth the added cost or what they have to give up in order to get something they want will be worth it in the long run.
Making the decision to purchase a home is a big deal and many things need to be taken into consideration like marginal costs and benefits. Both of these things need to be deciphered carefully and all the options should be weighed in order for the consumer to make the best decision for themselves. One thing a consumer might look at is if they have been renting, the monthly payment is going to…