A New House - Decisi - A NEW HOUSE - DECISION 1 A New House...

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A NEW HOUSE - DECISION 1 A New House - Decision Kenneth R. Ryan XECO/212 September 11, 2011 Angela Smith
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A NEW HOUSE - DECISION 2 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. A 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). I would think this should cause more wealth, in fact, it does the opposite causing a hardship on the whole economy. 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 products. 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. My next decision is whether or not trade can make everyone better off (Mankiw, 2007, p.8). An 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
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A New House - Decisi - A NEW HOUSE - DECISION 1 A New House...

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