CE40/E01

SEAT NUMBER: NOVEMBER 12, 2019

CHUA, Chantal Noelle Victoria F. SIGNATURE:
2015101960 CE-3

ACTIVITY

CPR # 1

Terminologies to be defined:
1. Economics to process, or to resale them.
- It is not just about money making or 6. Necessities
the distribution of money, economics - These are goods that the consumer
is a broad discipline that allows will buy regardless of the changes in
people to understand historical their income. Samples are food,
trends, headlines and to create clothing, etc.
predictions in the coming years. 7. Luxuries
2. Engineering Economy (and who is the - These products are not necessarily
Father?) needed but are wanted by
- It Is the application of economic consumers either for its quality or to
techniques in operational level to sustain their wealth status. Examples
evaluate designs and engineering are designer bags, luxurious cars,
alternatives. etc.,
- The father of Engineering Economy is 8. Demand
Eugene L. Grant who published the - It is an economic principle referring
first Engineering Economy textbook. to a consumer's desire to purchase
3. Engineering Economic Analysis (and goods and services and willingness
who is the Founder?) to pay a price for a specific good or
4. Consumer Goods / Services service.
- These are products or services 9. Supply
bought and used by the consumers. - It is a fundamental economic
5. Producer Goods / Services concept that describes the total
- These products or services are amount of a specific good or service
bought by manufacturing that is available to consumers.
companies to create other products,
 10. Elastic Demand
- It refers to how sensitive the demand
for a good is to changes in other
economic variables, such as prices
and consumer income.
11. Inelastic Demand
- It is when people buy about the
same amount whether the price
drops or rises.
12. Unitary Elasticity
- A situation that occurs when the
price elasticity of demand is equal to
negative one.
13. Perfect Competition
- It is a theoretical market structure in
which the following criteria are met:
All firms sell an identical product (the
product is a "commodity" or
"homogeneous").
14. Monopoly
- A market structure characterized by
a single seller, selling a unique
product in the market.
15. Oligopoly
- It is a market structure with a small
number of firms, none of which can
keep the others from having
significant influence.
16. Law of Supply and Demand
- It is a theory that explains the
interaction between the sellers of a
resource and the buyers for that
resource.
17. Law of Diminishing Returns
- It states that as one input variable is
increased, there is a point at which
the marginal increase in output
begins to decrease, holding all other
inputs constant.
18. Valuation
- It is the analytical process of
determining the current (or
projected) worth of an asset or a
company.

Enumerate and give a brief description for each:

1. Functions and Uses of Engineering Economy
- Value analysis
 It is done to finds its roots in the need for industrial engineers and managers to not only
simplify and improve processes and systems, but also the logical simplification of the
designs of those products and systems.
- Linear Programming
 It is the use of mathematical methods to find optimized solutions, whether they be
minimized or maximized in nature.
- Capital Budgeting
 It is the proper usage and utilization of capital to achieve project objectives.
 - Minimum Cost Formulas
 Time, resources, labor, and capital must all be minimized when placed into any system,
so that revenue, product, and profit can be maximized.
2. Engineering Economy Techniques
- Net Present Value
 It is based on two assumptions. These are: The cash generated by a project is
immediately reinvested to generate a return at a rate that is equal to the discount rate
used in present value analysis.
- Benefit-Cost Analysis
 It is a technique used to compare the total costs of a program /project with its benefits,
using a common metric (most commonly monetary units).
- Rate of Return
 It is the percentage increase or decrease of an investment over a set period.
- Payback Period
 It is used to quickly evaluate the time it should take for an investor to get back the
amount of money put into a project.
3. Engineering Economic Analysis Procedures
- Problem recognition, definition, and evaluation.
- Development of the feasible alternatives.
- Development of the cash flows for each alternative (or of prospective outcomes).
- Selection of a criterion (or criteria).
- Analysis and comparison of the alternative.
- Selection of the preferred alternative.
- Performance monitoring and post-evaluation results: helps to do better analysis and
improves the operation in organization.
4. Intangible Values
- Customer Experience
 It is an approach to business that is completely focused on customer satisfaction.
- Branding
 It is the creation of an identity for products and services that has meaning to customers.
- Intellectual Property
 These are trade secrets, designs, patents, copyrights, and trade dress.
5. Costs
- Fixed costs
 It is a constant value, independent of the output or activity level.
 - Variable costs
 It dependent on the output or activity level.
- Total costs
 It is to provide a product or service over some period or production volume is the total

fixed cost plus the total variable cost.

- Marginal costs
 It is the variable cost associated with one additional unit of output or activity.
6. Overlapping Costs
- Average costs
 It is the total cost of an output or activity divided by the total output or activity in units.
- Breakeven point
 It is the output level at which total revenue is equal to total cost.
- Opportunity costs
 It is the cost associated with an opportunity that is declined.
- Recurring costs
 It is one that occurs at regular intervals and is anticipated.
- Nonrecurring costs
 It is one that occurs at irregular intervals and is not generally anticipated.
- Incremental costs
 It represents the difference between some type of cost for two alternatives.
- Cash costs
 It is a cash transaction, or cash flow.
- Book costs
 It is not a cash flow, but it is an accounting entry that represents some change in value.
- Life-cycle costs
 It refers to costs that occur over the various phases of a product or service life cycle, from
needs assessment through design, production, and operation to decline and retirement.
7. Payments
- It is the transfer of one form of goods, services, or financial assets in exchange for another
form of goods, services, or financial assets in acceptable proportions that have been
previously agreed upon by all parties involved.
References:
Online:
http://www.economicsdiscussion.net/engineering-economics/engineering-economics-
meaning-and-characteristics/21680
https://www.aboutcivil.org/engineering-economics.html
https://www.economicshelp.org/blog/4890/economics/types-of-costs/

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