A New House-Economy - it So in this case the consumer would...

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A New House – Economy Marginal cost refers to the change in cost over the change in quantity while marginal benefits refer to the change in benefits over the change in quantity. A consumer will use marginal cost and benefits as a determining factor on whether they should purchase a home or not. The strength of the economy could affect marginal benefits and marginal costs associated with a decision to buy a home. It may seem like a good idea to a consumer to purchase a home during economic growth because they will feel like they are making the right decision. The consumer will not worry much about the mortgage cost or inflation because of the current economic situation is in good standings. So he or she will believe that the marginal benefits outweigh the marginal cost. However in rougher times such as a recession a consumer may think that purchasing a new home is not the best decision because of all the risk associated with
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Unformatted text preview: it. So in this case the consumer would believe that the marginal cost outweigh the marginal benefits. The removal of the tax deduction on mortgage interest will reduce demand for houses since it reduces the benefits which consumers can enjoy with the purchase of a new house. There are also other economic policies that can hinder a consumer’s decision to purchase a new home. When the government increases taxes the consumer will then have less disposable income and don’t believe they are able to afford all of the cost that comes with purchasing a home. When this happens the demand on homes also decreases. If the government increases the budget on government spending and benefits that will attract investments and promote economic growth. Then consumers will be able to purchase new houses that can increase the demand for houses. Loretta Campbell 03/24/2011...
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