On the other hand, the marginal cost refers to the opportunity cost of acquiring an additional unit of a particular commodity. In the cases of purchasing the house, marginal benefits will refer to the satisfaction derived from a second and subsequent consumption of a commodity (Hirshleifer, Glazer, & Hirshleifer, 2005). The marginal benefit of a house diminishes steadily after acquiring the first unit this is because a person cannot live in two houses simultaneously. This implies that people will tend to spend their money to acquire other items after acquiring their first house. Similarly, first-time homebuyers will consider their first house as an additional unit. In this case, the house will have a higher marginal benefit that compares well with the missed opportunities. The marginal cost of an item refers to the opportunity cost incurred from acquiring an extra unit of a particular commodity. The opportunity cost of a house is, therefore, the cost of missed opportunities resulting from the acquisition of a second and subsequent house. The marginal cost of a house increases steadily after acquiring the first house since a person can only live in one house at a given time. After acquiring, the first house people will consider acquiring other commodities instead of an additional house. Economic Principles of House Purchase.
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Hirshleifer, J. Glazer, A. & Hirshleifer, D. (2005). Price theory and applications: Decisions, markets, and information. London: Cambridge University Press.
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Slembeck, T. (2007). Principles of Economics. Retrieved from http://www.slembeck.ch/principles.html
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