MODULE 1 Flashcards
are goods and services purchased by households for their own consumption.
These are the items and services that people purchase to meet their daily needs, such as
food, clothing, and shelter.
Necessities
are goods and services that are used to produce other goods
and services.
producer goods
This refers to the value that a product or service provides to
the end user or consumer.
Consumer perspective:
This refers to the cost of producing a product or service,
including all the resources and inputs required to bring it to market.
Producer perspective:
is the analysis and evaluation of the factors that will affect the
economic success of engineering projects to the end that a recommendation can be made
which will insure the best use of capital.
Engineering economy
on the other hand, are goods and services that are considered non-essential or
non-critical to survival.
Luxuries,
is the quantity of a certain commodity that is bought at a certain price at a given
place and time.
Demand
Changes in price motivate consumers to buy relatively
cheaper substitutes goods.
Substitution Effect –
Changes in price affect the purchasing power of consumer’s
income.
Income Effect –
as you continue to consume a
given product, you will eventually get less addition utility (satisfaction) from each
unit you consume
The Law of Diminishing Marginal Utility –
If consumers develop a preference for a different
type of good or service, the demand for the original good or service will decrease
and the demand curve will shift to the left.
A change in consumer preferences:
f consumer incomes increase, the demand for normal
goods will increase, and the demand curve will shift to the right. Conversely,
A change in consumer income: I
If the price of a substitute good or service
decreases, the demand for the original good or service will decrease, and the demand
curve will shift to the left.
change in the price of related goods:
is an equation that describes the relationship between the price
of a good or service and the quantity of it that consumers are willing and able to
purchase at that price.
demand function
demand function
Qd = a - bP
is a
measure of how responsive demand is to price changes for a product or service.
Elasticity of demand coefficient (also known as price elasticity of demand)
equation of EDC
(q2-qi/q1)/ (p2-p1/p1
)
occurs when a decrease in selling
price result in a greater than proportionate increase in
sales.
Elastic demand
Elastic demand
EDC > 1
occurs when a decrease in
the selling price produces a less than proportionate
increase in sells.
1.3.2 Inelastic demand
1.3.2 Inelastic demand
EDC < 1
occurs when
the mathematical product of volume and price is
constant.
Unitary elasticity of demand
Unitary elasticity of demand
EDC = 1
occurs when an increase in price has no effect to the
quantity.
1.3.4 Perfectly inelastic
Perfectly inelastic
EDC = 0
occurs when the demand increases but the price remains
unchanged.
Perfectly Elastic
Perfectly Elastic
EDC = ∞
occurs in a situation where a commodity or service
is supplied by a number of vendors and there is nothing to prevent additional
vendors entertaining the market.
Perfect competition
exists
when a unique product or service is available from a single vendor and that vendor
can prevent the entry of all others into the market.
monopoly
exists when there are so few suppliers of a product or service that
action by one will almost inevitably result in similar action of others.
Oligopoly
exists when many companies offer competing
products or services that are similar, but not perfect, substitutes.
Monopolistic Competition
is a basic economic principle that explains how prices
and quantities of goods and services are determined in a market economy.
The law of supply and demand
is a table or graph that shows the relationship between the
price of a good or service and the quantity of it that a producer is willing and
able to supply at that price, holding all other factors constant.
A supply schedule
is a graphical representation of the relationship between the
price of a good or service and the quantity of it that a producer is willing and
able to supply at that price, holding all other factors constant.
supply curve
is a mathematical equation that represents the relationship
between the price of a good or service and the quantity of it that a producer is
willing and able to supply at that price, holding all other factors constant.
supply function
supply function
supply = a+b(price)
is an economic principle that states that as more and
more of a variable input (such as labor or capital) is added to a fixed input (such as land
or a factory), the marginal product of the variable input will eventually decline.
The law of diminishing returns
is an economic principle that states that as more and
more of a variable input (such as labor or capital) is added to a fixed input (such as land
or a factory), the marginal product of the variable input will eventually decline.
The law of diminishing returns
