CE40/E03

B3 June 5, 2019
HIDALGO, MA. FAYE F.
2015106231 CEM/2

ACTIVITY

CPR # 1

Terminologies to be defined:
1. Economics
is the study of how people and society choose to employ scarce resources that could have
alternative uses in order to produce various commodities and to distribute them for
consumption, now or in the future

2. Engineering Economy (and who is the Father?)

The application of economic principles to engineering problems, for example in comparing the
comparative costs of two alternative capital projects or in determining the optimum engineering
course from the cost aspect. Eugene L. Grant in 1930 in his book “principles of engineering
economics” and called as the father of engineering economics.
3. Engineering Economic Analysis (and who is the Founder?)
provide a sound understanding of concepts and principles of engineering economy and to
develop proficiency with methods for making rational decisions regarding problems likely to be
encountered in professional practice. Arthur M. Wellington, civil enginee rlatter part of
nineteenth century, addressed role of economic analysis in engineering projects.
4. Consumer Goods / Services
is any commodity that is produced or consumed by the consumer to satisfy current wants or
needs.
5. Producer Goods / Services
goods (such as tools and raw materials) used to produce other goods and satisfy human wants
only indirectly
6. Necessities
Bare essentials required universally for subsistence or survival, or for maintaining a certain
minimum standard-of-living.
7. Luxuries
 a material object, service, etc., conducive to sumptuous living, usually a delicacy, elegance, or
refinement of living rather than a necessity:
8. Demand
Demand is an economic principle referring to a consumer's desire and willingness to pay a price
for a specific good or service. Holding all other factors constant, an increase in the price of a
good or service will decrease demand, and vice versa.
9. Supply
a fundamental economic concept that describes the total amount of a specific good or service
that is available to consumers. Supply can relate to the amount available at a specific price or
the amount available across a range of prices.
10. Elastic Demand
refers to how sensitive the demand for a good is to changes in other economic variables, such
as prices and consumer income. Demand elasticity is calculated as the percent change in the
quantity demanded divided by a percent change in another economic variable. A higher
demand elasticity for an economic variable means that consumers are more responsive to
changes in this variable. Read more: Demand Elasticity
11. Inelastic Demand
economic idea that the demand for a product does not change relative to changes in that
product’s price. In other words, as the price of a good or service increases or decreases, the
demand for it will stay the same. This typically occurs in convenience goods that consumers
need every day.
12. Unitary Elasticity
A situation that occurs when the price elasticity of demand is equal to negative one (-1). For a
business, when a product exhibits unitary demand this means that a given percent shift in the
price of the product results in an equal but opposite percent change in the amount of product
demanded. Hence, a one percent change in price yields a one percent decline in the amount
of product demanded.
13. Perfect Competition
buyers and sellers are too numerous and too small to have any degree of individual control over
prices, (2) all buyers and sellers seek to maximize their profit (income), (3) buyers and seller can
freely enter or leave the market, (4) all buyers and sellers have access to information regarding
availability, prices, and quality of goods being traded, and (5) all goods of a particular nature
are homogeneous, hence substitutable for one another. Also called perfect market or pure
competition.
 14. Monopoly
Market situation where one producer (or a group of producers acting in concert) controls supply
of a good or service, and where the entry of new producers is prevented or highly restricted.
15. Oligopoly
Market situation between, and much more common than, perfect competition (having many
suppliers) and monopoly (having only one supplier).
16. Law of Supply and Demand
The common sense principle that defines the generally observed relationship between demand,
supply, and prices: as demand increases the price goes up, which attracts new suppliers who
increase the supply bringing the price back to normal. However, in the marketing of high price
(prestige) goods, such as perfumes, jewelry, watches, cars, liquor, a low price may be
associated with low quality, and may reduce demand.
17. Law of Diminishing Returns
A concept in economics that if one factor of production (number of workers, for example) is
increased while other factors (machines and workspace, for example) are held constant, the
output per unit of the variable factor will eventually diminish. Although the marginal productivity
of the workforce decreases as output increases, diminishing returns do not mean negative
returns until (in this example) the number of workers exceeds the available machines or
workspace. In everyday experience, this law is expressed as "the gain is not worth the pain."
18. Valuation
process of determining the current worth of an asset or a company. There are many techniques
used for doing a valuation. An analyst placing a value on a company looks at the business's
management, the composition of its capital structure, the prospect of future earnings, and the market
value of its assets

Enumerate and give a brief description for each:

1. Functions and Uses of Engineering Economy
Application of engineering or mathematical analysis and synthesis to decision making in
economics. The knowledge and techniques concerned with evaluating the worth of
commodities and services relative to their cost. Analysis of the economics of engineering
alternatives. Engineers students should prepared themselves with economic empowerment so
that they could manage their wealth, help them in starting their own business or during
managerial period, it is because money is one of important factor in completing a project.
Furthermore, fresh graduates also need to manage their wealth well since a lot of graduates
facing problem because lack of information about the loans that they have made.
2. Engineering Economy Techniques
all relevant criteria Decision making based on several criteria (organisational objectives, e.g.
long term interest) Make risk and uncertainty explicit Identify, define, allocate, and mitigate
Revisit your decisions The initial projected outcomes of the selected alternatives should be
subsequently compared with actual results achieved.
3. Engineering Economic Analysis Procedures
Steps: 1. Problem recognition, definition, and evaluation. 2. Development of the feasible
alternatives. 3. Development of the outcomes and cash flows for each alternative. 4. Selection of
a criterion 5. Analysis and comparison of the alternatives. 6. Selection of the preferred alternatives.
7. Performance monitoring and post monitoring results. Engineering Design Process Activity: 1. 2.
3. 4. 5. 6. Problem/need definition. Problem/need formulation and evaluation. Synthesis of possible
solutions. Analysis, optimisation, and evaluation. Specification of preferred alternatives.
Communication.
4. Intangible Values
total value of an organization as a going concern less the total value of its net tangible assets,
leaving the residual intangible value. This residual value may represent patent, trademark, secret
reserve, goodwill, and the like. In theoretical terms, intangible value is the present value of
excess earning power of an entity over the normal rate of return.
5. Costs
An amount that has to be paid or given up in order to get something. In business, cost is usually
a monetary valuation of (1) effort, (2) material, (3) resources, (4) time and utilities consumed, (5)
risks incurred, and (6) opportunity forgone in production and delivery of a good or service. All
expenses are costs, but not all costs (such as those incurred in acquisition of an income-
generating asset) are expenses.
6. Overlapping Costs
the process of assigning a cost, or a group of costs, to one or more cost objectives. Costs may
be allocated only if they advance the work of the project in the same proportion as the cost. For
example, technical supplies are allocable if they benefit a project. In addition, costs must be
supported by evidence of direct benefit to the project.
7. Payments
is the trade of value from one party (such as a person or company) to another for goods, or
services, or to fulfill a legal obligation.
References
Library Receipt of reference borrowed