A New House-Decision

A New House—Decision

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Axia - University of Phoenix

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Buying a home is one of the most important decisions a person can make in their lives. The principles of economics will be taken into account when weighing the decision to purchase a home. The process requires the comparison of marginal benefits and marginal costs. It also requires that we weigh our own personal advantages and disadvantages related to the decision. I would take my own family’s well being and needs into consideration during this process in my life.

There are five of the principles that are found to be well suited to guiding a

home purchase. The first of these is the principle “People Face Trade-offs”.

Most people have to make choices in their lives if they are going to pay for a new

home. The second principle is “The Cost of Something is What You Give Up to

Get It”. The third principle that is relevant here is “Rational People Think

at the Margin”. There are marginal changes that have to made to reach a

successful action plan in this situation (Mankiw, 2007). The final two principles

that apply here are “People Respond to Incentives” and “Trade Can Make

Everyone Better Off”. There are a wide range of incentives that prompt us to

make a home purchase. Some of these incentives are immediate and some are

long term benefits.

I would want to consider price as one of the biggest elements in my

decision for a home purchase. I want to remain within my own planned budget

when I make this decision. I will not consider that I have a demand for a house

outside my given price range, so I will look for a home that meets my budget

needs as well as meets my other requirements (Mankiw, 2007). In my area,

$150,000 is the average price of a home. I cannot come up with this type of

cash, so I will have to take a mortgage for the property, as most people do. If the

mortgage payment for this home is $1,300 per month and I am paying only

$400 a...