A_New_House

Checkpoint: A New House I have just found out that I am going to have a baby. I currently live in a small apartment; this will not be big enough for our new addition, we now need to figure out the best ways to go about buying a new home. I have read the 10 principles in our textbook and I think that Principle one people face trade offs, an example of this would be that my family may have to give up certain things that we spend money on to save for our new home, make sure we have enough funds. We need to make sure that we find a mortgage that we can afford. Principle two, we need to figure out what mortgage is right for our family find something that is affordable and is big enough without going overboard. Principle three, rational people think at the margin, this would apply when purchasing a new home in that we need to stay rational get a home that is in our budget a medium sized nice home in our price range. We need to compare marginal benefits and marginal costs when deciding also. Principal four, people respond to incentives, when buying a home my family will look for incentives like the neighborhood the home is in, what special perks one home may have over another, and then decide do not just go for the appearance see other benefits and incentives are offered. Principle five, trade can make everyone better off, my family and are buying a home from a realtor and getting a loan through our bank everyone is gaining but in different ways, we must make sure that we all benefit in the best possible ways. Principles six, Markets are usually a good way to organize economic activity; we need to make sure the housing market in the area we want to move is in good shape or if another location would be more beneficial. Principle seven, governments can sometimes improve market outcomes, the government does have a say in how this country is operating financially, now would be a good time to purchase a home the housing market prices are down with extra low interest rates, now would be a great time to purchase a home. Principle eight, a country’s standard of living depends on its ability to produce goods and services; I think this applies to my family in deciding what area we want to live in and what we can afford. Principle nine, prices rise when the government prints too much money, I would say that this applies to our country right now. We have given billions of dollars in company bailouts, maybe in a couple years our home may be worth nothing, but that is a chance we might have to take. Principle ten, society faces a short term trade off between inflation and unemployment, my husband and I need to make sure that if one of us lost our job, we could still afford a home, especially with the way unemployment rates are today, many people are struggling! Explain how that influences the marginal benefits and marginal costs associated with the decision to purchase a house. Marginal costs are associated with consuming a good and marginal benefits are the benefits a person receives from purchasing a good. We need to make sure our marginal benefits are greater than the marginal costs!