A New House-Rediness

A New House-Readiness

Check Point-Week One

There are many principles that play a major role in my decision to purchase a new home. Principles of how people make decisions, how people interact, and how the economy, as a whole, works will all play a huge role in this major purchase.

In terms of how people make decisions, I think facing trade-offs, thinking at the margin, and responding to incentives all fit into buying a home. Facing trade-offs requires a potential homeowner to evaluate the difference between their needs and their wants and what they are willing to trade in order to save for such a large purchase. Rational people do the best they can to achieve their goals, so thinking at the margin can help any potential homeowner stay focused on their goal of owning a home. Naturally, people respond to incentive so when the government introduced the $8000 tax credit for purchasing a home in our economy, many families jumped on the opportunity.

Principles surrounding how people interact, reveal that trade can make everyone better off. Individuals trade their knowledge, talent, and skills for monetary compensation in order to achieve the goals they set out to. Markets are a good way to organize economic activity by offering jobs and compensation to those individuals looking to achieve economic and financial security. Finally, government backing and support can often change the outcome of a market. As previously stated, when the government supported and encouraged individuals to purchase homes, they created incentive.

Understanding how the economy, as a whole, works will prepare future homeowners for the things that could happen and the outcome of not purchasing within ones means. Society faces a short-run trade-off between inflation and unemployment thus creating fear for future homeowners because the business cycle is so unpredictable.