CHAPTER 1: BASIC ECONOMIC PRINCIPLES Flashcards
One of the social sciences which consists of that body of knowledge dealing with people and their assets or resources.
ECONOMICS
Defined as the sum total of knowledge which treats of the creation and utilization of goods and services for satisfaction of human wants.
ECONOMICS
Branch of economics which involves application of definite laws of economics, theories of investment, and business practices to engineering problems involving cost.
ENGINEERING ECONOMY
May be considered to mean the study of economic problems with concept of obtaining max benefit at the least cost
ENGINEERING ECONOMY
Involves the study of cost features and other financial data and their applications in field of engineering as bases for decision.
ENGINEERING ECONOMY
Engineering economy seeks to discover _______which hinder success of a project.
limiting factors
Considers all factors affecting economy of project w/c can be reduced to specific monetary values.
The Economy Analysis
- Determine methods and sources of financing project, either through equity capital or borrowed capital, or combination of both.
- Follows economy analysis, it is dependent upon the latter for necessary data
Financial Analysis
- Determine all aspects of project w/c can’t be reduced to monetary values
Intangible Analysis
Factors expressed in monetary values
Tangible Factors
Factors that are difficult or impossible to express definitely in terms of monetary values. Also called Irreducable Factors.
Intangible Factors
Type of competition where a certain product is offered for sale by many vendors/suppliers. No restriction from entering the market.
- Perfect Competition
- Opposite of perfect competition
Monopoly
It is when unique product or service is available only from single supplier.
- single vendor can control supply and price of product or service
- Perfect monopoly
- There are few suppliers and any action will affect the course of action of others
Oligopoly
- Amount of money or its equivalent given exchange for it.
Price
A limited locality where certain goods such as those that are perishable are sold.
Local Market
Where certain goods sold all over the country said to have this.
National Market
Where goods that are exported to other countries.
World Market-
Goods Consumed/used directly by people, things & services w/c satisfy human needs.
Consumer Goods
- Produce goods and services for human consumption, like lathes, generators, tools, ships, buses, airplanes.
Producer Goods
- Quantity of certain commodity that is bought at a certain price at a given place and time.
Demand
Stated that the demand for a commodity varies inversely as the price of the commodity, though not proportionately.
Law of Demand
Type of demand when decrease in selling price will cause greater than proportionate increase in the volume of sales.
Elastic Demand
Type of demand when decrease in selling price will cause less than proportionate increase in sales.
- Inelastic Demand
It is when the mathematical product of price and volume of sales remain constant regardless of price change.
Unitary Elasticity of Demand
It is the capacity of commodity to satisfy human want.
- Utility-
It states that an increase in the quantity of any good consumed or acquired by individual will decrease the amount of satisfaction derived from that good.
Law of Diminishing Utility
- Utility of the last unit of the same commodity which is consumed or acquired.
Marginal Utility
____ is the last unit of similar commodities consumed or acquired.
- Marginal Unit-
The supply of a commodity varies directly as the price of the commodity, though not proportionately.
Law of Supply
It states that when free competition exists, the price of a product will be that value where supply is equal to the demand.
Law of Supply and Demand
Originally applied in agriculture, correlating input of men, fertilizers, and other variable factors to the output in crops or harvest.
Law of Diminishing Returns
Amount received from sale of an additional unit of a product.
- Marginal Revenue
Additional cost of producing more unit.
- Marginal Cost- a
A common measure of financial efficiency
rate of return
