A New House Final Project

A New House Final Project - A New House Decision Loretta...

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A New House – Decision Loretta Campbell Principles of Economics Eugene Kaufman Loretta Campbell 04/09/2011
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Purchasing a home is a big decision, and a person has to take the economic conditions into consideration. Economic theories are used daily in decision making and purchasing a home is no different. Initially many people believe the decision is simple and does not require much thought. However, the decision to purchase a home requires a lot of thought and time. People use economic theories either consciously or subconsciously to decide whether they will or will not make a decision. When making a decision as important as purchasing a home, a person has to think about the present as well as the future. Most people have to save money to make a down payment on a home or afford to make upgrades to home if need be. Many questions come into play when making this important decision. If a person has children or plan on starting a family you need to make sure you are purchasing a home in a safe neighborhood. With the gas prices steadily increasing one would want to consider the distance of my home from work and my children’s school. All of the necessities that need to be considered makes purchasing a home an essential decision. Economics has 10 principles however, only a few can be applied to the decision of purchasing a new house. The very first principle of economics “people face tradeoffs” is used in the decision making process to purchase a home. This principle means to get one thing; you have to give up something else. Making decisions requires trading off one goal against another (Slembeck, Tilman 2001). With the decision of purchasing a house you have to give up time and savings for the down payment to get the home of your choice. Every decision comes at a cost and purchasing a home is no different. The tradeoff faced when using your saving to purchase a home is that money could have been used to purchase other things that are needed. It is important to weight out the pros and cons of making the decision to purchase a new home. A benefit would be that you would have a home that you will someday own and be able either sell for a profit or pass down to your children. Another economic principle that relates to the decision to purchase a new home is “the cost of something is what you give up to get it” decision-makers have to consider both the obvious and implicit costs of their actions (Slembeck, Tilman 2001). The cost opportunity refers to the value of the next best alternative which one has to give up. Explicit and implicit cost is involved when making an economic decision on purchasing a home. The total money that is spent on purchasing the home is explicit cost. The loss of non-monetary cost such as the
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A New House Final Project - A New House Decision Loretta...

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