ECN 340 Chapter 5
The New Home Economics
• Family is a “firm”
• Transforms inputs and produces the things wanted by the family
The Marriage Contract
• Marriage is a legally enforceable contract between two people
• It is an open ended contract; not all eventual possibilities are spelled out –Kind of
like a prenup
• Marriage is much like a constitution
• The purpose of dating is to work out provisions of the contract (Some people do
not take enough time to do this)
• Poorly put together contracts soon leas to dissolution
• What are some of the misunderstandings that can occur in a marriage contract?
• What would you include in the contract? whatever is important to you.
• What are the obstacles of taking your spouse to court for breach of the contract?
For example suing him for not cutting the grass. (Misunderstanding has to be
flexible to some degree)
• Divorce is dissolution of the contract, just like a break up of a business (bad
choice of a partner.)
• Investment in a marriage makes it more difficult to breakup. (eg. Kids, furniture
• Living together with the capacity to simply walk out may force the other party to
be more considerate
Cost and Benefits of Marriage
• Making decisions in a family (takes more time/ more difficult than it is on your
• Family decisions require the input from all members eg. Buying a car.
• Costs associated with decision making usually means each partner makes
executive decisions about an issue
• Wives usually decide about the interior of the house and husbands exterior
• Some family members do not get to consume as much of a good as they want eg,
• Apportioning the family income is a (huge) cost.
• The forgone cost of associating with other people (loosing opportunities)
• The forgone choice of a “better” partner
• The list could be extended 2. Benefits
• Production of children
• Family style sex life (one partner) Less chance of STDs
• “Economies of scale in production”One vacuum cleaner, one washer and dry etc.
• Less costly to produce one meal for four people then four separate meals for each.
• Many public goods; they benefit everyone and do not diminish the enjoyment of
others Eg, a picture in the living room may make four or five people happy.