Xeco-212-a New House Decision Final Paper

A New House - Decision

XECO/212

A New House - Decision

The economy either weak or strong affects the lives of all people around the world. Consumers make financial decisions based on the strength of the economy. One of these decisions affected by the economy is the purchase of a home. One should use the basic principles of economics to analyze the market and decide if the time is right to make such a large financial investment

Before one decides to purchase a new home one should apply some of the basic principles of economics. Decisions as important as buying a home come at a cost to all parties involved. Everyone living in the home will have to make trade-offs. Consumers will deplete their savings but have a new home to show for it. Family members working outside the home may have to commute further daily but at the end of the day time off spent in the new home will be more enjoyable because of the amenities it may have like a pool, workout room, or game room.

Giving up one thing to gain another is another economic principle. A consumer is using his or her savings to purchase the home so the plan to buy new furniture or a take the family vacation to Disney may need to be postponed. If the new home is a longer distance from jobs meaning they will have a longer commute, the consumers will need to consider the benefit of the additional space or the more comfortable living environment as what they are gaining from the sacrifice of the commute.

Incentives and economic activity also play a role in the decision to purchase a home. Government programs or tax incentives help consumers decide to invest their money; they may be more willing to make an investment if the benefits can be realized at income tax time. The strength of the economy is usually the reason government and its agencies offer incentives. If the economy is weak and the housing market is down, rebates or income tax credits may be offered to boost home sales.

The government also has a...