XECO/212 – Principles of Economics
June 5, 2011
A New House – Readiness
When considering the purchase of a house of the 10 principles of economics that would play a major role in my decision they would be as follows:
The trade-off between the difference in the amount of a house payment compared to what I was paying for a studio apartment. For this lesson I am assuming the rent for a studio apartment would be considerably lower than a house payment. Also in many instances there would be additional costs association with the ownership of home such as added utilities, property taxes and insurance, things that I might not be required to pay for a rented residence.
Another principle would be what I would be giving up with the purchase of a house compared to the studio apartment. In a studio apartment, or residence that is rented or leased, the owner and/or landlord would be responsible for the maintenance and repairs of the apartment, whereas once purchased I would then become the responsible party. In this case I would be giving up the freedom of depending on someone else for the maintenance and/or repairs, the cost of these would then become my personal responsibility. This would not only cost me financially, but in some cases it would also cost me my time.
As most people have a goal of owning their own home at some point in their future, the marginal cost of this decision would be that I would be making an adjustment to my plans regarding the purchase of a home, deciding to make the purchase now instead of in the future. The marginal benefits of purchasing the home would be more space for my growing family and the investment of owning real estate instead of paying rent to someone else.