Eco 372 - Product Purchases and the Economy

Product Purchases and the Economy

Christian Scheminant

ECO/372

May 10, 2016

Mr. Michael Kraynik

Product Purchases and the Economy

For this paper I’m going to select buying a home as my product of purchase since I’m currently in the market of selling my existing home and purchasing a new home.  When considering making large financial purchases in today’s economic world, you have to take into consideration the possible long-term effects on your financial situation, current budget or future outcome.  You have to ask yourself if the purchases you want are ideal and are you in a financial position to make such a significantly large purchase.  There are so many factors to consider than just personal obligations or wants, but is it economically sound in today’s market as well. In this paper, I will talk about and try to explain some of the economic indicators such as interest rates and inflation rate as well as job market for the area.  While considering if any of these indicators impact the supply for what I will demand over a two year period.  Also in this paper, I have to answer how I might apply my understanding product, and how I am considering purchasing versus the supply and demand.  Also I need to describe the impact on the price of the home and whether making the purchase should or should not occur or possibly be beneficial to me.  Lastly, I will see if there are any macroeconomic shifts in supply or demand affecting the price of the Home. Thus, leading to the final decision of whether to purchase a new house or not.

Economic Indicators

 With every large purchase, there is cost associated, especially with the purchase of a house.  Two economic indicators, which play a major role in the final decision to purchase or not to purchase a home, are inflation and interest rate.  Inflation is regularly characterized as a constant increase in prices of goods and services.  Supply and demand affects prices, even when inflation is high. So with an excess supply of housing this will decrease the prices, which will cause interest rates to jump.  Buying a new home is commonly looked upon as a good asset and a sound investment regarding inflation.  Also if the demand for houses is high and exceeds the housing supply, than it can increase the prices of houses on or coming onto the market (Anari, A. & Kolari, J. 2002).   This is also known as Demand-pull Inflation which is an increase in demand.  

Demand and Supply over time.

        Well to me the economy has or can affect the supply and demand for my product over a two year period because of the location of where I live and the military job market.  Living close to a military base and in an area that has several military installations within a certain radius, the economy is affect because right now the military is a stable job market in our area.  Every two or three years more people are leaving to go to other duty stations or other job markets if they retire, but yet those billets are always being filled with new personnel coming in.  So this causes a high demand in the housing market for people wanting to buy in the area they work in and supply for them wanting to sell so they can transfer and not have the burden of owning a home and being elsewhere (Laplante, M. D. 2008).