Economic Principles

Economic Principles

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Economic Principles

The economic principles are used in satisfying unlimited consumer wants with the little available resources. In general, it incorporates a comprehensive variety of economic laws as well as the theories which typically defines or explains how the economy for example of a particular country tries to fulfill the indefinite demand in the market with a finite supply of the available resources. Therefore, some trade-offs plus choices ought to be made. The other description of the economic principles is through the study of the choices which the consumers make typically as well as the elements and actions affecting the choices which they have made. A consumer is referred to as an individual, firm, organization or a governmental body which consumes goods or services (Taussig, 2013). The goods consumed by the customer could be finished goods, unfinished goods or raw goods. On the other hand, the services include for example medical, entertainment and legal among others. This paper discusses and analyzes to an in-depth some of the economic principles for example business trade-offs and presents a proper analysis of the housing sector issues to the economy basing on an article from the New York Times.

Purchasing a new home can either be an exciting experience in an individual’s life or it can result to be a hectic task due to the consequences involved. It includes the reason why an individual is buying the house, for example, it can be for the family, or the individual is purchasing the home for business purposes, for example, buying and then selling the home or the houses at a profit. This is a suitable type of investment since it involves mostly direct contact between the customer and the clients (Glaeser et al., 2018, p.14) However, in this type of business, it is always good to plan well and make reasonable decisions before purchasing or before selling the house. Therefore it is always good for any individual planning to buy to consider several factors before purchasing. Consequently, economic principles play a significant role in helping an individual in the decision-making process which is regarded as one of the essential things before conducting a purchase.

An excellent example to explain this concept is through an article published on November 15, 2018, in The New York Times titled, “Why the Housing Market Is Slumping despite a Booming Economy.” According to this article, home prices are becoming unattainable which is relative to incomes as well as the mortgage rates. This leads to big questions to the economists and for the economy at large on how this imbalance adjusts. The current economy tends to be thriving whereby many individuals or workers are working at higher pay, and this should be considered as the good times for the housing sector at large. However owing to the prosperous thriving of the economy, the housing market has remained soft, and it tends to be dragging back the economy, instead of boosting it forward.

For example in September, the trades of newfangled single domestic-homes were identified to be below by twenty-two percent from their latest high sales which were defined to be in November 2017 (The New York Times, 2018). Also in September, the existing home transactions were designated to be down by ten percent. Nevertheless, the home prices seem to have not deteriorated nationwide, and this is according to the vastly followed indexes. However, it is notable that their percentage of growth has worsened, and thus as more home venders are looking for buyers, they must decrease the asking prices for them to find a potential buyer.

Considering the way in which the housing sector has contributed to the growth of the economy in the past years, this issue need not be taken lightly. This is because it is considered as the leading driver of both affluence as well as indebtedness for the majority of the families and the individuals who have invested in this sector. While looking carefully at the obtained data, it seems that this inconsistency of a healthy economy besides a weak housing market is at the climax, and thus this a clear depiction of a central rule in economics which states that if something cannot go on steadily, it would not. Demographics in one way seems to be favorable for housing demand making the houses to be out of reach. Nonetheless, this does not worry considering that the costs are out of reach which is comparative to wages. Also, the lending principles have persisted to be higher compared to the way they were in the previous housing boom, and this makes it tougher for individuals to be able to buy a home.

According to the principles of economics price movements are the way in which the supply, as well as demand, is equivalent to each other (Goodwin, 2015). However, it is evident that in the housing sector, the adjustment demand and supply to be equal can take some time. The sellers are thus creating more imbalance to this issue as they try to cling onto some prices which are not relative to the buyers as there seem to be fewer buyers who are willing or are capable of paying those costs. The sellers appear to be not realizing that they would not be able to acquire what they believed their house investment was worth about some six months before, and whereby buyers still reflect and regard the homes to be more expensive. Thus according to the economic principles incentives attracts clients and increases buying ability and therefore they should be introduced in the selling of homes especially by the sellers to attract more customers.

In conclusion, it is evident from this discussion that learning and understanding of the economic principles are vital for any business and mainly the economy. As described in the housing sector analysis for the economy to be sufficient demand and supply have to be equivalent. This discussion, therefore, helps in explaining why the transaction volume mainly for the new homes has dropped significantly while the prices have not, and this standoff helps a lot in determining the future economy of the country.

References

Glaeser, Edward, and Joseph Gyourko. “The economic implications of housing supply.” Journal of Economic Perspectives 32.1 (2018): 3-30.

Goodwin, Neva, et al. Principles of economics in context. Routledge, 2015.

Taussig, F. W. (2013). Principles of economics (Vol. 2). Cosimo, Inc..

Why the Housing Market Is Slumping Despite a Booming Economy. (2018). Retrieved from https://www.nytimes.com/2018/11/15/upshot/housing-market-slumping-despite-booming-economy.html