A New House - Decision

A New House – Decision

Economics affects out decisions and behaviors in our everyday lives. We use economic theories everyday whether we realize we are doing it or not, to make big decisions, we excised to either go with it or against it. This also goes into play when we decided that we are going to buy a new house or not. Here we will evaluate how economics will help in making the final decision in buying a new home.

The decisions to buy a house is one of the biggest decision a person will make in their lives, and it's a decision that should be made with plenty of thought, and research. This is due to the fact that homes are very expensive, and one's savings account will be diminished very quickly. The demand of homes are largely price elastic. The economic theory says that that larger the income a purchase is, the higher the price elastic will be. For this instance the purchase of a home will require the buyer to spend a lot of money, and this will lower the purchasing power of the buyer when making that decision to buy a new house. With that being said, this new home purchase will cause the buyer(s) to go from a familiar environment to one that is a unfamiliar environment, and this is a very scary life-changing event in one's life. These are all factors a buyer will face when making that decisions to buy a home, and something that looks so easy, is actually a very difficult decision to make.

There are several principles of economics that can be used at the time of making the decision to buy a home. The trade-offs would be one principle that the buyer would have to look at. All decisions made will come with a cost, as no part a home buying would be free. Here the decision to buy a new home will take a lot of the money the buyer has saved up in their savings. The tradeoff would be the buyer not buying a house, and spending the same amount of money on something else. An example would be putting away the money they would have used on the purchase of a new house, on their child furthering of their education in the future. This is when the decision will need to weighed out, and the goods and bads of either buying a house or saving for a child education has to be weighed out. Which will get a better return in the future, will need to be asked.

The opportunity cost would be the next economic principle that will be applied to a purchase of a new home. This will include the explicit and implicit costs. The explicit cost would be the total money spent on the buying of the new house, whereas the implicit cost would things such as loosing great friends (neighbors), which is non-monetary cost. They could also use the marginal cost and benefits which would be another use of a principle of economics. The buyer will generally only make that decision when the marginal benefits are greater or equal to the marginal cost. The marginal benefit could be the location