ENG 213 Engineering Economy - Vocabulary Flashcards

Vocabulary flashcards covering key terms from the lecture notes on engineering economy.

Engineering economics

The analysis and evaluation of factors that affect the economic success of engineering projects to recommend the best use of capital.

Physical environment

The natural world and physical laws that govern production of goods and services.

Economic environment

The monetary and value-based context in which products and services gain worth and utility.

Efficiency (physical)

Output divided by input; a measure of physical performance, typically less than 1.

Efficiency (economic)

Worth divided by cost; a monetary measure of performance that can exceed 100%.

Worth

The value of a product or service expressed in economic terms.

Cost

The monetary expense required to produce or obtain a product or service.

ABET definition of engineering

The profession in which knowledge of math and natural sciences is applied with judgment to develop ways to utilize materials and forces of nature for mankind's benefit.

Engineering vs science

Engineering is the application of scientific knowledge; an art of adapting knowledge to meet human needs.

Consumer goods and services

Goods or services directly used by people to satisfy wants.

Producer goods and services

Inputs used to produce consumer goods and services.

Utility

The power to satisfy human wants; the satisfaction derived from an object.

Value

The worth attached to an object or service, defined in terms of utility and exchange, not simply cost or price.

Value and utility relation

Utility is the satisfaction from an object; value is the monetary appraisal of that utility.

Demand

The quantity of a commodity that buyers are willing and able to purchase at a given price.

Elastic demand

Demand that rises more than proportionally when price falls; inverse relation between price and quantity demanded.

Inelastic demand

Demand that rises less than proportionally when price falls; price changes have a limited effect on quantity.

Unitary elasticity

A condition where the product of price and quantity is constant (unit elastic).

Supply

The quantity of a commodity offered for sale at a given price and place.

Law of supply and demand

In perfect competition, price adjusts so that supply equals demand at equilibrium.

Market

The exchange mechanism where buyers and sellers trade goods, services, or factors.

Buyer

The basic consuming unit; a person, household, or government that purchases.

Seller

An entity that provides a product or service in exchange for money.

Diminishing returns

With limited factors, increasing inputs yields less than proportional increases in output beyond a point.

First cost (initial cost)

Upfront investment to capitalize property, including transportation, installation, and taxes to place asset in service.

Operating and maintenance cost

Ongoing costs to operate and maintain a system (labor, materials, etc.).

Fixed cost

Cost that remains constant over a wide range of output and is not a function of output.

Variable cost

Cost that changes with the level of output.

Incremental cost

The cost of increasing output by one or more units.

Marginal cost

The additional cost of producing one more unit.

Sunk cost

A cost incurred in the past that cannot be recovered.

Necessities

Goods or services required to support life; typically inelastic with respect to income.

Luxuries

Goods or services beyond basic needs; demand tends to rise with income.

Income elasticity (necessities)

Necessities have income elasticity of demand less than 1.

Income elasticity (luxuries)

Luxuries have income elasticity of demand greater than 1.

Demand–price relationship

As price decreases, demand generally increases; as price increases, demand decreases.

Perfect competition

Market condition where price is determined by the equilibrium of supply and demand; many buyers and sellers, price takers.

Monopoly

Market structure with a single seller that has price-setting power.

Oligopoly

Market structure with a few firms that are interdependent in pricing.

Plan for engineering economy studies

A four-step plan: Creative step, Definition step, Conversion step, and Decision step.

Creative step

Initial phase of economy studies focusing on generating ideas and possibilities.

Definition step

Step defining the problem and objectives clearly.

Conversion step

Step translating data and estimates into economic terms.

Decision step

Step selecting a course of action based on analysis.