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A New House Readiness

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Purchasing a new home is a major decision requiring a substantial financial outlay where the wrong decision could have long-term financial consequences. In addition, two principles that play a major role in this decision include principle number two the cost of something is what you give up to get it, and principle number three rational people think at the margin. In this essay, I will discuss each principal and the roles they play in the decision to buy a house. Furthermore, I will explain how these principals influence the marginal benefits and marginal costs associated with the decision to purchase a home (Mankiw, 2007). The role of principal number two the cost of something is what you give up to get it, puts in perspective what a person must give up to purchase a home. For example, most people have to give up frivolous spending to save money for a down-payment. This includes buying expensive groceries, going on vacations, and buying brand new vehicles. Generally speaking, people give up their normal spending habits and live below their means for a period to buy a home (Mankiw, 2007). Principle number three rational people think at the margin also plays a large role in the decision to buy a home. For instance, people do the best they can to achieve their goals given the opportunities they have. In the case of buying a home people will think at the margin and decide that buying a home is not only a place to live but an investment. Principal number two the cost is what you give up to get it and principal number three rational people think at the margin influences the marginal benefits and marginal costs associated with the decision to purchase a home. For example, some houses are in foreclosure and are examples of how banks think at the margin. For instance, instead of selling the house at the market price banks often sell the house at lower prices to

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