A New House Decision

Steven Olsen

Principles of Economics XECO/212

August 12, 2012
Travis Hayes

In the pursuit of the American dream the desire to become a home owner is one of the most stressful decisions one must make as the repercussions of such decision can wield financial dire straits, or prove to be the avenue that leads to long term financial wealth. With the previous living arrangements for my wife, my two sons, and myself confined to a one bedroom apartment, it was time that we moved into a larger home and started thinking about the long term financial wellbeing of our family, which meant buying our first home. In this composition aspects of the economy including Mankiw’s principles of economics (Mankiw, 2007), marginal costs and benefits comparisons, a breakdown of the overall strength of domestic economy including international trade influences, and also consider hypothetical situations or conditions that could have potentially influenced our decision to purchase a home. The first step to researching home ownership was evaluating how prepared we were to make such a daunting decision. Through the use of Mankiw’s economic principles (Mankiw, 2007), we were able to express our concerns in the form of questions, in which enabled us to realize the actual change that was upon us. The principles that directly related to our home purchase included, facing trade-offs, the cost of something is what is given up to get it, people respond to incentives, rational people think at the margin, and governments can sometimes improve market outcomes. Starting with tradeoffs, there were three major tradeoffs that were heavily considered, leaving the conveniences of the city to increase our living efficiencies in the countryside, reallocating financial resources from entertainment to the increased cost of a mortgage, and giving up my wife’s income and