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Engineering Economy Module 1

This document provides an introduction to key concepts in engineering economy. It defines engineering economy as using mathematical formulas to account for the time value of money and balance costs and revenues over time. It also defines economics, necessities and luxuries, different types of goods and services, supply and demand, factors that influence supply and demand, and different market structures.

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Stevenzel Eala Estella
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246 views13 pages

Engineering Economy Module 1

This document provides an introduction to key concepts in engineering economy. It defines engineering economy as using mathematical formulas to account for the time value of money and balance costs and revenues over time. It also defines economics, necessities and luxuries, different types of goods and services, supply and demand, factors that influence supply and demand, and different market structures.

Uploaded by

Stevenzel Eala Estella
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Module 1

INTRODUCTION TO
ENGINEERING ECONOMY

Engr. Gerard Ang


School of EECE
Definition of Terms
 Engineering Economy – uses mathematical formulas
to account for the time value of money and to balance
current and future revenues and costs.

 Economics – is the science that deals with the


production, allocation and use of goods and services.
The two major subdivisions of economics are:
a. Macroeconomics is the study of the entire system
of economics.
b. Microeconomics is the study of how the systems
affect one business or parts of the economic system.
Necessities and Luxuries
 Necessities – are products or services that are
required to support human and activities that
will be purchased in somewhat the same
quantity even though the prices vary
considerably.

 Luxuries – are products and services that are


desired by humans and will be purchased if
money is available after the required
necessities have been obtained.
Consumer and Producer
Goods and Services
 Goods – is defined as anything that anyone wants
or needs.

 Services – would be the performance of any


duties or work for another; helpful or professional
activity.

 Marketing – refers to the distribution of goods and


services.

 Marketing a Product – refers to the advertising,


and other efforts to promote a products sale.
Different Types of Goods
1. Consumer Goods – are those such as food and
clothing that satisfy human wants and needs.

2. Producer Goods – are those such as raw


materials and tools, used to make consumer goods.

3. Capital Goods – are the machinery, used in the


production of commodities in producer goods.
Supply and Demand
 Supply – refers to how many of a certain good or
services are available for people to purchase.

 Demand – means how many people wish to buy


that good or service.

 Law of Supply and Demand


Under conditions of perfect competition, the price
at which a given product will be supplied and
purchased is the price that will result in the supply
and demand being equal.
Demand
 Demand – it refers to the people’s
willingness to buy a product or service.

 Demand Curve – is the plot or graph of the


quantity demanded versus the price.

 Demand Schedule – is the schedule or


table listing of the quantity demanded with
the corresponding price.
Types of Demand
1. Elastic Demand – exists when there is a greater
change in quantity demanded as a response to a change
in price.

2. Inelastic Demand – exists when there is a lesser


change in quantity demanded as a response to a change
in price.

3. Unitary Demand – exists when there is an equal


change in price and quantity demanded (increase or
decrease).
Factors that Influence Demand
Factors that Influence Demand are:
1. Income
2. Population
3. Taste and preference
4. Price Expectation
5. Price of Related Goods
Supply

 Supply – it is the willingness of a


producer to manufacture goods.

 Supply Curve – is the plot or graph of the


quantity supplied versus the price.

 Supply Schedule – is the schedule or


table listing of the quantity supplied with
the corresponding price.
Factors that Influence Supply

Factors that Influence Supply are:


1. Price of Goods
2. Cost of Production
3. Availability of Resources
4. Number of Producer and Sellers
5. Technological Advancement
6. Taxes
7. Subsidies
Relationship of
Supply and Demand
 Shortage – the supply is less than the
demand.

 Surplus – the supply exceeds the


demand.

 Equilibrium Point – the supply is equal


to the demand.
Market Structures
 Market – is the place where the vendors and buyers meet to
transact.

 Perfect Competition – occurs in a situation where a commodity or


service is supplied by a number of vendors and there is nothing to
prevent additional vendors entering the market.

 Perfect Monopoly – exist when a unique product or services is


available from a single vendor and that the vendor can prevent the
entry of all others into the market.

 Oligopoly – exist when there are so few suppliers of a product or


service that action by one will almost inevitably result in similar
action by the others.

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