A New House Readiness

Topics: Economics, Decision theory, Marginal cost Pages: 2 (356 words) Published: January 23, 2011
A new house readiness
Jacob Voogd

When making a decision to purchase a new house, one of the economic principles which one must consider will be that people face tradeoffs. If one decides to purchase a new house, he or she will need to give up things such as a holiday, new truck or what they eat which the same amount of money can purchase. In this case, one will need to weigh the priorities. For example, purchasing a new house may make travelling to school and local services more convenient, however it will require one to give up the purchase of a new car which makes travelling to work more inconvenient. Depending on what the decision maker feels is more important, he or she will decide for or against the decision to purchase the house.

One of the principles of economics states that trade can make everyone better off. When trade flourishes, it results in a greater purchasing power. In such a case, marginal costs appear small owing to a better purchasing power among people. In this situation, marginal benefits exceed marginal costs and it would be a good idea to purchase the new house

Another economic principle which one should consider will be to think at the margin. This will involve weighing marginal benefits and costs of the decision. In this case, marginal benefits of purchasing the house will be its close proximity which will be close to schools and local services. In addition purchasing a new house will provide cleaner, larger and newer space which will improve living conditions.

However, marginal costs will include that of lowering one’s disposable income which will lower their ability to purchase other goods such as baby food necessary for the growth of the child. The marginal costs and benefits of the decision to purchase a house will depend on the other factors such as income level. When income level is low, purchasing a new house will greatly affect the disposable income and purchasing power of the decision-maker, hence it is more...
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