A New House – Economy

A New House – Economy 1

A New House - Economy

Xeco/212 Principles of Economics

Friday June 3, 2011

2

A New House – Economy

In economics the marginal cost is the change in the total cost that arises when the quantity produced changed. The marginal benefits refer to the change in benefits over the change in quantity. As the economy changes for the better or worse so too does the marginal cost and benefits associated with the purchasing of a new house. During times of economic growth and expansion some home buyers might feel that it is the best time to buy because they are not worried about the economy, there finance are right, they are in a good place socially and economically and want to enjoy good living conditions for themselves. In this situation a home owner might feel that the marginal benefits out weight the marginal cost. This same home buyer in times of recession might feel that it is unwise to purchase a house because their job and the economy is unstable, in such a case the marginal cost outweigh the marginal benefit. This is the way that the majority of people analyze the marginal cost and benefits associated with the purchasing of a new house during both time of economic expansion or recession.

The removal of the tax deduction on mortgage interest could have an effect on the whole economy. Tax deductions are a major factor that goes into a consumer decision to purchase a new house. Many home owners decided that the marginal benefits out weight the marginal cost because of the tax deductions available to home owners. If these tax deductions where taken away from home owners this could mean higher prices in the cost of rent, to mitigate the lost of those tax deductions.

Other government policies and taxes definitely effect a homer buyer’s decision to purchase a new home. For example if the government decided to increase income taxes, the home buyer will have less income available to purchase their new house....