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.

Reference:

Razzi, E., & McCormally, K. (1996). Buying a home in a buyers market. Kiplingers Personal Finance Magazine, 50(4), 64

(n.d). Buying a Home. Everyday Finance: Economics, Personal Money Management, and Entrepreneurship

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