Engineering Economics Flashcards
measures the responsiveness of demand to change in income
Income Elasticity Demand (YED)
Normal good
YED > 0; increased income leads to higher demand
Luxury good
YED > 1; increased income leads to bigger percentage increase in demand
Inferior good
YED < 0; increased income leads to fall in demand
Lead time
time taken for vendor to fulfill your order
Safety stock
extra quantity of product stored in the warehouse to prevent out-of-stock situation
Reorder point
specific level at which stock needs to be replenished
Economic order quantity
calculated ideal number of units you should order (cost of involved is minimal and number of units is optimal)
Consumer vs producer goods and services
Consumer - directly used to satisfy needs
Producer - used to produce consumer goods and services
Utility
- satisfaction/pleasure from consumer goods and services
- power to satisfy human goods and needs
- measured in terms of value and expressed in medium of exchange (price)
Competition
form of market structure where number of suppliers is used to determine type of market
Different market situations:
a. Perfect competition
b. Monopolistic competition
c. Monopoly
d. Monopsony
e. Bilateral monopoly
f. Duopoly
g. Duopsony
h. Oligopoly
i. Oligopsony
j. Bilateral oligopsony
Format: seller-buyer
a. Perfect competition: many - many (same product)
b. Monopolistic competition: many - many (similar product)
c. Monopoly: one - many
d. Monopsony: many - one
e. Bilateral monopoly: one - one
f. Duopoly: two - many
g. Duopsony: many - two
h. Oligopoly: few - many
i. Oligopsony: many - few
j. Bilateral oligopsony: few - few
Return on Investment
ratio of net profit over total cost of investment
Benefit-cost ratio
ratio of benefits to cost of project; B/C > 1 is accepted
Payback period
create a table for either simple or discounted and locate breakeven year (positive); liquidity over profitability
