I - Intro to Engg. Econ.

Engineering

The profession in which a knowledge of the mathematical and natural sciences is applied for the benefit of mankind.

Engineering Economy

Involves the systematic evaluation of the economic merits of the proposed solutions to engineering problems.

Consumer Goods and Services

Products that are directly used by people to satisfy their wants.

Producer Goods and Services

Used to produce consumer goods and services.

Necessities

Products or services that support human life.

Luxuries

Products of services that are desired by humans and will be purchased if money is available.

Demand

The quantity of a certain commodity that is bought at a certain price at a given place and time.

Elastic Demand

Occurs when a decrease in selling price result in a greater than proportionate increase in sales.

Inelastic Demand

Occurs when a decrease in the selling price produces a less than proportionate increase in sales.

Unitary Elasticity of Demand

Occurs when the mathematical product of the volume and price is constant.

Perfect Competition

Occurs in a situation where commodity and services is supplied by a number of vendors where there is nothing to prevent additional vendors entering the market.

Monopoly

The opposite of perfect competition. Exists when a unique product or service is available from a single vendor.

Oligopoly

Exists when there are so few suppliers of a product that action by one will almost inevitably result in a similar action by the others.

Supply

The quantity of a certain commodity that is offered for sale at a certain price at a given place and time.

Law of Diminishing Returns

States that the increase in variable factors will result in less than a proportionate increase in output.

Fixed Costs

Costs that are unaffected by changes in activity level. Insurance, taxes, general management, etc.

Variable Costs

Costs that varies in total with the quantity of output and other measures of activity level.

Incremental Costs / Revenue

Additional costs that results from increasing an output of a system by one or more units.

Direct Costs

Costs that can reasonably measured and allocated to a specific output or work activity.

Indirect Costs

Costs that are difficult to allocate to a specific output or work activity.

Overhead Costs

Consists of plant operating costs that are not direct labor or direct material.

Standard Costs

Planned costs per unit of output that are established in advanced of a actual production or service delivery.

Cash Costs

Involves payment of cash. Estimated from the perspective established for the analysis and are the future expenses incurred for the alternatives being analyzed.

Book Costs

Costs that do not involve cash payments but rather represent the recovery of past expenditures.

Sunk Costs

Costs that have occurred in the past and has no relevance to estimates of future cost and revenue.

Opportunity Cost

Incurred because of the use of limited resources.

Life Cycle Costs

Summation of all the costs related to a product, structure, system, or service during its life span.