Engineering Economy

Question 1

is the analysis and evaluation of the monetary consequences by using the theories and principles of economics to engineering applications, designs and project.

Answer 1

Engineering Economy

Question 2

It may also be defined as the study of problems involving economic solutions with the concept of obtaining the maximum productivity or reward at least cost or risk.

Answer 2

Engineering Economy

Question 3

It is the study of the desirability of making an investment

Answer 3

Engineering Economy

Question 4

It is defined as any tangible economic product (soap, car, shirts, tools, machines, etc.) that contributes directly or indirectly to the satisfaction of human wants.

Answer 4

Good or commodity

Question 5

Is defined as any tangible economic activity (hair dressing, insurance, banking, catering, etc.) that contribute directly or indirectly to the satisfaction of human wants

Answer 5

Service

Question 6

Economists classify goods and services as either ____________ or _________

Answer 6

“consumer goods and
services” or “producer goods and services.”

Question 7

Are those products or services that are directly used by people to satisfy their wants. Examples are houses, cars, clothes, appliances, food, books, movies, medical and dental services etc.

Answer 7

Consumer goods and services

Question 8

also satisfy human wants but indirectly in as much as they are used to produce the consumer goods and services. Examples are services are factory buildings, machine tools, airplanes, ships, buses, etc.

Answer 8

Producer goods and services

Question 9

Goods and services are divided into two types:

Answer 9

necessities and
luxuries

Question 10

refer to the goods and services that are required to support human life, needs and activities

Answer 10

Necessities

Question 11

is defined as any product that has an income-elasticity of demand less than one. This means that as an income rises, proportionately less income is spent on such products. Examples of necessity products include basic foodstuffs like bread and rice, clothing, etc

Answer 11

Necessities product or staple product

Question 12

Are those goods and services that are desired by human
and will be acquired only after all the necessities have been
satisfied

Answer 12

Luxuries

Question 13

is defined as any product that has an incomeelasticity of demand greater than one. This means that as income
rises, proportionately more income is spent on such products

Answer 13

Luxury product

Question 14

refers to the exchange mechanism that brings together the sellers and the buyers of product, factor of production or financial security. It may also refer to the place or area in which buyers and sellers exchange a well-defined
commodity.

Answer 14

market

Question 15

is defined as the basic consuming or demanding unit of a commodity. It may be an individual purchaser of a good or service, a household (a group of individuals who make joint purchasing decisions), or a government.

Answer 15

Buyer or consumer

Question 16

Is defined as an entity which makes product, good or service available to buyer or consumer in exchange of monetary consideration.

Answer 16

Seller

Question 17

(also known as atomistic competition) refers to the market situation in which any given product is supplied by a very large number of vendors and there is no restriction against additional vendors from entering the market.

Answer 17

Perfect competition

Question 18

Perfect competition is a type of market situation characterized by the
following

Answer 18

• Many sellers and many buyers
• Homogenous products
• Free market-entry and exit
• Perfect information
  *Absence of all economic friction

Question 19

Since there is a large number of sellers and a large number of buyers, each seller and buyer will become sufficiently small to be unable to influence the price of the product transacted

Answer 19

Many sellers and many buyers

Question 20

The products offered by the competing sellers are identical not only in physical attributes but are also regarded as identical by the buyers who have no preference between the products of various producers.

Answer 20

Homogeneous products

Question 21

There are no barriers to entry or impediments to the exit of the existing sellers.

Answer 21

Free market-entry and exit:

Question 22

All buyers and all sellers have complete information on the prices being asked and offered in all other parts of the market

Answer 22

Perfect information

Question 23

There is a total absence of economic friction including transport cost from one part of the market to another

Answer 23

Absence of all economic friction

Question 24

Perfect Competition Example

Answer 24

• Farmer’s Market
• Online Shopping

Question 25

is the opposite of perfect competition.

Answer 25

Monopoly

Question 26

Monopoly is characterized by the ff:

Answer 26

* One seller and many byers - A market comprised of a single supplier selling to a multitude or small, independently-acting buyers. * Lack of substitute products - There are no close substitutes for the monopolist’s product. * Blockaded entry - Barriers to entry are so severe that it is impossible for other sellers to enter the market.

Question 27

Monopoly examples

Answer 27

* Luxottica * Meta (Facebook) * Google

Question 28

if the single vendor can prevent the entry of all vendors into the market

Answer 28

perfect monopoly

Question 29

is a market situation where economies of scale are so significant that costs are only minimized when the entire output of an industry is supplied by a single producer so that supply costs are lower under monopoly than under perfect competition and oligopoly.

Answer 29

natural monopoly

Question 30

exists when there are so few suppliers of a product or service that the action of one will inevitably result in a similar action by the other suppliers.

Answer 30

Oligopoly

Question 31

Oligopoly is characterized by the ff:

Answer 31

* Few seller and many buyers - The bulk of the market supply is in the hands of a relatively few sellers who sell to many small buyers. * Homogeneous or differentiated products - The products offered by the suppliers may be identical or more commonly, differentiated from each other in one or more respects. These differences may be of a physical nature, involving functional features, or may be purely “imaginary” in the sense that artificial differences are created through advertising and sales promotion. * Difficult market entry - High barriers of entry which make it difficult for new sellers to enter the market.

Question 32

Oligopoly Examples

Answer 32

* Cellular Networks & Internet Providers (ISP - Globe, Smart, PLDT, Converge * Operating Systems of Device - Microsoft Windows, Apple iOS, Google Android, Linux

Question 33

is the need, want or desire for a product backed by the money by the money to purchased it. In economic analysis, demand is always based on “willingness and ability to pay” for a product, not merely want or need for the product.

Answer 33

Demand

Question 34

Factors that affect Demand:

Answer 34

* Product price * Buyer Income * Buyer preference * Buyer expectation * Available substitutes * Complementary products * Market size

Question 35

is the amount of a product made available for sale

Answer 35

Supply

Question 36

Factors that affect Supply:

Answer 36

* Production capacity * Production costs * Competitors * Availability of materials * Supply chains

Question 37

The law of supply and demand may be stated as follows:

Answer 37

“Under conditions of perfect competition, the price at which any given product will be supplied and purchased is the price that will result in the supply and the demand being equal.”

Question 38

is the point in which supply and demand curves meet on a graph.

Answer 38

Equilibrium price

Question 39

The four stages in the product life cycle are:

Answer 39

1. Introduction - requires significant marketing efforts 2. Growth - sales revenue usually grows exponentially from the takeoff point 3. Maturity - price undercutting and increased promotional efforts are common as companies try to capture customers from competitors 4. Decline - sales of the product start to fall and profitability decreases