A New House Rules

A   New   House   Rule

                                                    A   New   House   Rule

People   respond   to   incentives   that   is   one   of   the   principle   meaning   that   rational   people   compare   costs   and   benefits,   then   changes   in   either   one   may   change   decisions.   An   example   of   an   incentive   that   people   respond   to   are   changes   in   the   prices   and   in   general   people   are   more   likely   to   buy   something   if   it   is   cheaper,   like   houses.   When   an   action   becomes   more   costly   then   there   is   an   incentive   to   switch   to   other   choices   to   make   their   means   and   all   actions   have   substitutes.   Sometimes   people   will   encounter   emergencies   with   costs   that   are   beyond   the   cash   they   have   available,   so   in   this   situations,   they   may   consider   getting   a   cash   advance   to   ease   the   pressure   of   liquidity   in   the   present. Marginal   benefits   would   be   when   buying   a   home   is   the   travel   to   from   work   and   if   the   house   has   been   on   the   market   a   long   time,   because   you   might   get   a   better   deal   for   that   home. Marginal   benefits   are   what   people   are   will   to   give   up   in   order   to   obtain   one   more   unit   of   a   good   and   marginal   costs   of   purchasing   a   home   is   the   taxes   in   that   area   and   maintaining   the   home   and   while   marginal   costs   refers   to   the   value   of   what   is   given   up   in   order   to   produce   that   additional   unit.   Addition   units   of   a   home   should   be   produced   as   long   as   marginal   benefits   exceeds   marginal   costs.   It   would   not   be   inefficient   to   purchase   a   new   home   when   the   marginal   benefit   is   less   than   the   marginal   costs,   because   there   is   really   no   savings.


Razzi, E., & McCormally, K. (1996). Buying a home in a buyer's market. Kiplinger's Personal Finance Magazine, 50(4), 64

(n.d). Buying a Home. Everyday Finance: Economics,...