A New House

A New House – Decision
Ashleigh DeGlopper
May 25, 2011
Principles of Economics
Joyce Williams Maxwell

The housing market is always changing and the economy is to blame for this.   It is important to understand the ten principles of economics to be able to make a strong decision such as whether or not to purchase a house.   There are a few principles that apply more to the process of buying a house.   The second principle says that the cost of something is what you give to get it (N. Gregory Mankiw).   The third principle says that rational people think at the margin (N. Gregory Mankiw).   The fourth principle says that people respond to incentives (N. Gregory Mankiw).   The ninth principle says that prices rise when the government prints too much money (N. Gregory Mankiw).   Finally, the tenth principle states that society faces a short-run trade-off between inflation and unemployment.   Each of the ten principles are important, but I have chosen to use these five to show how they are important in the final decision of buying a house.
It is important to explain why these principles are important and how they relate to this situation.   What is meant by the second principle is that you may have to make sacrifices when it comes to the house that you want.   The opportunity cost is very important because it pertains to what you will have to give up in order to obtain the house you want.   It is important to first look at what you are able to afford and then decide what you are looking for in that price range.   Money is not always the only thing that you have to give up to obtain something you want.   The opportunity cost can pertain to anything that you have to sacrifice.   In order to afford a new house it is important for a person to do everything they can to save up for what they want.   This involved the third principle because people that think at the margin use their resources to rationally make the appropriate decisions needed to obtain what they want.   This...