Engineering

Economy
ENG301
Progression of Topics
• Review of some Economic Concepts
• Money vs Time relationship
• Depreciation/ Depletion
• Investment of Capital
• Bonds
• Methods of Economic Studies
• Cost Comparison
• Replacement Analysis
• Break-Over Analysis
• Special Topics
Review of Some Economic Concepts

• Engineering Economy
• 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 ensure the
best use of capital.
• Consumer goods and Services
• Products use by the people to directly satisfy their wants.
• Ex. Food, clothing, health services, etc.
• Producer goods and Services
• Use to produce consumer goods and services
• Ex. Rice mills, textile company, cosmetics company.
Review of Some Economic Concepts (Cont.)

• Necessities
• Are use products or services that are use to provide
human life and are purchase.
• Ex. Rice, mineral life, clothing, shelter.

• Luxuries
• Desired by human and will be purchase after the required
necessities are being purchased, could be either
goods/services.
• Ex. Lipstick, foundation, etc.
Review of Some Economic Concepts (Cont.)

• Perfect Competition
• Occurs in a situation when commodities and service are
supplied with various vendors and having no control in
the number of vendors supplying; the business is free-
willing.
• Agricultural Markets are a perfect example.
• Perfect Monopoly
• Exists when a unique product or service by a single vendor
and that vendor can control the entry of another vendor.
• Ex. Meralco, etc.
Review of Some Economic Concepts (Cont.)

• Oligopoly
• Exist when there are so few supplier of product or service,
all vendors will depend on the main vendor when it comes
to pricing and etc.
• Ex. Shell, etc.
Money VS Time Relationship

• Interest
• The amount of money paid for the use of borrowed
capital or the income produced by money which has
been loaned.
Money VS Time Relationship

• Simple Interest
• The calculated amount using the principal only, ignoring
any interest that had been occurred in the preceding
interest periods.
• I = Pni Where
I = Interest
• F=P+I P = Principal or present worth
• F = P + Pni i = rate of interest per interest period
n = number of interest periods
• F = P( 1 + ni) F = accumulated amount or future worth
Money VS Time Relationship

• Ordinary Simple Interest

• Computed on the basis of 12 months of 30 day each
or 360 days a year
• 1 interest period = 360 days

• Exact Simple Interest

• Based on the exact number of days in a year, 365 for
an ordinary year and 366 days for a leap year.
• 1 interest period = 366 or 365 days