How Could The Strength Of The Economy As A Whole Affect The Marginal Benefits And The Marginal Costs Associated With A Decision To Purchase A Home?


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Danielle Joynson Profile
This issue is a catch-22 in the sense that a depressed economy will not encourage individuals to purchase homes, yet a thriving housing market benefits the economy. With regards to your question, I think the first thing we need to do is distinguish the meanings of marginal benefits and marginal costs.

Marginal Benefits & Marginal Costs
  • A marginal benefit can refer to two different things. It can represent an additional feeling of gratification from a person who has just bought something, and in numerical terms it refers to the extra amount that an individual is prepared to pay for something.
  • Marginal costs refer to the extra amount of money that is paid to produce something. For example, you have a set unit price for producing 50 wooden tables at $500. If you chose to produce one more table which would bring your cost up to $520 then the marginal cost would be $20.
  • The economic recession that occurred towards the end of the 2000s is probably the main reason why the marginal benefits and costs have occurred. Unfortunately due to the massive cut in jobs, people have been unable to find work and the prospect of putting a mortgage down on a house is less than desirable. In addition, the younger generation have been put off purchasing a house due to the exposure of so many foreclosures.
Confidence in the Market
  • Due to the economic retraction, the majority of the population have become less eager to purchase a home because they are worried that they will not be able to make the mortgage payments considering the uncertainty over jobs.

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