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Related Questions on Engineering Economics
BES 118
Engineering Economics
Engineering Economy
→ is the analysis and evaluation of the monetary consequences by using the theories and principles of
economics to engineering applications, designs and projects.
→ defined as the study of problems involving economic solutions with the concept of obtaining the maximum
productivity or reward at least cost or risk
Important Uses and Functions of Engineering Economy
1. Seeking new objectives for the applications of engineering.
2. Discovery of factors limiting the success of a venture or enterprise
3. Comparison of alternatives as a basis for decision
4. Analysis of investment of capital
5. Determination of basis for decision
Basic Economic Environment and Concept
What is Economics?
Ø the study of wealth
Ø the study of man in the ordinary business of life
Ø the wise use of both money and time
What is Money?
Money is anything that is generally acceptable as a means of exchange and at the same time acts
as a measure and a store of value.
Functions of Money:
1. As a medium of exchange: Goods and services can be exchanged for money, which can be exchanged
for other goods and services.
2. As a unit of account: The units in which money is measured are used as the units in which prices,
financial assets, debts, accounts, etc. are measured.
3. As a store of value: A portion of a person’s income may be used for immediate consumption while
the rest may be held in some form in order to yield future consumption.
Since money grows with time, the money held over a period of time as a store of value or purchasing power.
Good or Commodity is defined as any tangible economic product that contributes directly and indirectly to the
satisfaction of human wants.
Service is defined as any tangible economic activity that contributes directly to the satisfaction of human wants.
Consumer goods and servicesare those products or services that are directly used by people to satisfy their wants.
Producer goods and services also satisfy human wants but indirectly in as much as they are used to produce the
consumer goods and services.
Necessities refer to the goods and services that are required to support human life, needs and activities.
Luxuries are those goods and services that are desired by human and will be acquired only after all the necessities have
been satisfied.