Marginal Benifit

Marginal Benefit

* The Council for Economic Education defines marginal benefit as "the change in total benefit resulting from an action." When purchasing a home, such factors as time and gas saved by living closer to work and the higher quality of education gained from living in a better school districts are marginal benefits. These largely intangible considerations, which may not appear as a bottom-line figure in the purchase, will change the total benefit derived from purchasing one home over another.

Marginal Cost

* The CEE defines marginal costs as "the change in total cost resulting from an action." Maintaining a large yard or needing to install a security monitoring system are examples of expenses to consider when buying a home. These represent the marginal costs associated with a particular home. Such expenses will affect the total cost of the home over the longer term.

Considerations

* When purchasing a home, the total benefit and total cost of the home can only be determined once the marginal considerations have been considered. An important aspect of a marginal benefit or a marginal cost is the loss of purchasing power that can result from either. For example, a marginal benefit such as hardwood floors may become an expense. Hardwood floors may add overall value to a home but, if they bring the price of the home above your budget, the increased mortgage payments for a more expensive home may take away money for clothing purchases or travel. Similarly, installing a security monitoring system may not seem like a large marginal cost, but the rising cost of monthly monitoring fees might begin to create a slight financial burden.

Here's a simple answer, when the economy is down, people stop buying, when sales go down, real-estate prices go down to compensate the sales drop so they can sell the house. When the economy is at a low, then it is best to buy, but watch out for those loans, they can go the other way round and often be very...