A NEW HOUSE - DECISION
A New House - Decision
In today’s world the 10 principles of economics definitely has a role in my decision to
purchase a home.
Whether it is: People face trade-offs, the cost of something is what you give
up to get it, rational people think at the margin, people respond to incentives, trade can make
everyone better off, markets are usually a good way to organize economic activity, governments
can sometimes improve market outcomes, a country’s standard of living depends on its ability to
produce goods and services, prices rise when the government prints too much money, and
society faces a short-run trade-off between inflation and unemployment (Mankiw, 2007, p.4-13).
With the 10 principles one also has to look at comparing the marginal benefits with the marginal
costs on whether it is a good idea to purchase a home or not.
The strength of the economy can
affect the marginal benefits and the marginal costs and that will affect my decision on whether or
not to purchase a home.
The strength of our economy depends upon the domestic and
international trade as we trade with other countries and with each other in this country.
decision to buy a home depends upon the amount of money saved, the strength of the economy,
and dependability of one’s career.
Thus when I decide to purchase a home I will be looking at
several principles directly relating to my decision.
The first principle of economics in my decision to purchase a home is the ninth principle,
which is prices rise when the government prints too much money (Mankiw, 2007, p.12).
think this should cause more wealth, in fact, it does the opposite causing a hardship on the whole
The next decision would be society faces a short-run trade-off between inflation and
unemployment (Mankiw, 2007, p.13).
The best time to purchase a home is during high
employment, which in today’s world the unemployment rate is high along with high inflation
making it difficult for anyone to depend upon his or her employment longevity.
The next principle that has an effect on my decision is; markets are usually a good way to
organize economic activity (Mankiw, 2007, p.9).
This means an invisible hand guides the prices
and purchases of desired products needed by the public and by the production and costs of these
This all means that if I were to purchase a home I need to have furniture in my home
and groceries for the family to eat, and this is what we call market economy.
If the government
forces an entity (builders, banks) to remain at a certain level without raising or lowering prices or
production, this causes the market value to fall because the invisible hand is no longer there.
next decision is whether or not trade can make everyone better off (Mankiw, 2007, p.8).
example would be if I could sell my new car for the down payment on the home I am
considering to purchase.
If I sell my car; my work, school and grocery store need to be close so I