ENGINEERING

ECONOMY
THE ECONOMIC ENVIRONMENT
 ENGINEERING
ECONOMY
is the analysis and the 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 is at the
heart of making decisions.
 Consumer goods and services are
Consumer and those products or services that are
directly used by people to satisfy their
Producer wants.
Goods and Producer goods and services are
used to produce consumer goods and
Services services or other produces goods.
 Necessities are those products or services
that are required to support human life
and activities that will be purchased in
somewhat the same quantity even though
Necessities and the price varies considerably.
Luxuries Luxuries are those products or services
that are desired by humans and will be
purchased if money is available after the
required necessities have been obtained.
DEMAND

Is the quantity of a certain commodity

that is bought at a certain price at a
given place and time. Desire without
actual purchase of the commodity does
not constitute demand.
 LAW OF DEMAND
The demand for a commodity varies inversely as the price of the
commodity, though not proportionately.
 Inelastic demand occurs when
Elastic demand occurs when a
a decrease in selling price will
decrease in price result in
cause a less than
increase in the volume of the
proportionate increase in
demand.
demand.

Unitary elasticity of demand occurs when the mathematical

product of volume and price is constant.
Competition

Perfect Competition occurs when a certain

product is offered for sale by many vendors
or suppliers, and there is no restriction
against other vendors from entering the
market.
Monopoly

A monopoly 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.
Oligopoly

Oligopoly exists when there are so few

suppliers of a product or service that action
by one will almost inevitably result in similar
action by the others.
SUPPLY

Is the quantity of a certain commodity

that is offered at a certain price at a
given place and time. Unless a certain
good is actually offered for sale, it does
not constitute a part of the supply.
 LAW OF SUPPLY
The supply for a commodity varies directly as the price of the
commodity, though not proportionately.
Law of Supply
and Demand
Law of Diminishing Returns

"When the use of one of the factors

of production is limited, either in
increasing cost or by absolute
quantity, a point will be reached
beyond which an increase in the
variable factors will result in a less
than proportionate increase in
output."