Deciding to Purchase a New Home
Purchasing a house is the largest decision a person will make in his or hers lifetime. Understanding what affects interest rates, marginal benefits, marginal costs, the principles of economics will assist a person in making the decision. An additional fact to understand is how does the government affect the positives and negatives of purchasing a new house? Another fact that a person needs to consider and understand are what affects the supply and demand of the housing market. Many factors a person needs to consider and understand before purchasing a new house.
Competitive market is the equalizer of the economy. Competition offers buyers the opportunity to receive the best value for his or hers money. A monopoly is a company that exclusively the seller of a product. Oligopoly is “a market structure in which only a few sellers offer similar or identical product” (Mankiw, p.346, 2009). Each of these markets plays vital roles in the economy.
Two types of competitive market are a perfect competition and monopolistic competition. A perfect competition is described as a large number of buyers and sellers of an identical product. The buyers or sellers do not influence the price of the product. This is because the relation between the buyers, sellers, and the total industry volume the total industry volume. The individual buyers and sellers are essentially price takers. At the ruling price a firm can sell any quantity. Since the market is free entry and free exit, no firm can earn excessive profits in the long run.
The balance between marginal cost and marginal revenue based on output quantity is how a firm maximizes profits based on output. In a competitive market profits are marginal revenue equal to marginal cost based on the quantity output. If a firm’s marginal revenue is higher than the marginal cost, the firm will increase its output to reach that balance between marginal cost and marginal revenue. If the...