lecture 1: introduction to eng econ

• economics

  It is a science which deals with the attainment of the maximum fulfillment of society’s unlimited demands for goods and service.
• engineering economy

  is the discipline concerned with the economic aspects of engineering, and involves the systematic evaluation of the costs and benefits of proposed technical and business projects and ventures.
• consumer goods and services

  are those products or services that are directly used by people to satisfy their wants. Examples are food, clothing, shelter or home, etc.
• producer goods and services

  are used to produce consumer goods and services or other producer goods. Examples are buildings, machines, factories, etc.
• Necessities are those products or services that are required to support human life and activities, that will be purchased in somewhat the same quantity even though the price varies considerably.
• luxuries

  are those products or services that are desired by humans and will be purchased if money is available after the required necessities have been obtained. It can also be defined as those products that have an income-elasticity of demand greater than one. This implies that as income increases, more income will be spent on these products. Examples are appliances, entertainment, vacations, etc.
• utility

  refers to the satisfaction or pleasure derived from the consumer goods and services. This also means the power to satisfy human wants and needs. The concept of utility is subjective and varies from person to person, as individuals have different preferences, tastes, and priorities.
• demand

  is the quantity of a certain commodity that is bought at a certain price at a given place and time. It can also be defined as the want or desire or need for a product using money to purchase it.
• elastic demand

  refers to a situation where a small change in price results in a relatively large change in quantity demanded. In other words, consumers are very responsive to changes in price. This typically happens when there are many substitutes available for a product or when the product is considered non-essential.
• inelastic demand

  occurs when a change in price results in a proportionally smaller change in quantity demanded. Here, consumers are less sensitive to changes in price. This usually happens with essential goods or products with few substitutes.
• unitary elasticity of demand

  occurs when the percentage change in quantity demanded is equal to the percentage change in price. In other words, the responsiveness of consumers to price changes is exactly proportional.
• competition

  is a form of market structure where the number of suppliers is used to determine the type of market.
• market

  is the place where the vendors or the sellers and vendees or the buyers come together.
• perfect competition

  This occurs when a commodity or service is supplied by numerous vendors, and there are no barriers to prevent other vendors from entering the market. Each vendor's product is identical to the others, and prices are determined solely by supply and demand forces. Examples in the Philippines include the agricultural sector, where numerous farmers supply identical crops like rice or corn to the market.
• monopoly

  This is the opposite of perfect competition. A perfect monopoly arises when a single vendor controls the entire supply of a unique product or service and can prevent the entry of any competitors into the market. The vendor has significant control over prices and can operate without fear of competition.
• monopsony

  A large construction company that is the only buyer of a specific type of raw material, such as specialized steel beams, from local suppliers. The company has significant power to dictate the price it's willing to pay.
• bilateral monopoly

  A situation where a labor union representing workers negotiates wages and working conditions with a single employer, such as a major manufacturing plant in a rural area where employment options are limited.
• duopoly

  The competition between Smart Communications and Globe Telecom in the mobile telecommunications market. These two companies dominate the industry and compete fiercely for market share.
• duopsony

  Two major supermarket chains, SM Supermarket and Robinsons Supermarket, dominate the grocery retail sector in a specific region. Local farmers who supply produce to these supermarkets have limited bargaining power.
• oligopoly

  The banking sector in the Philippines, where a few major banks such as BDO, Metrobank, and Bank of the Philippine Islands (BPI) control the majority of the market share and influence interest rates and lending practices.
• oligopsony

  A few large seafood processing companies that dominate the market for purchasing fish from local fishermen in coastal areas. These companies can dictate prices and terms to the fishermen due to limited alternative buyers.
• bilateral oligopoly

  A scenario where a handful of pharmaceutical companies negotiate drug prices and terms with a few large hospital chains in the Philippines. Both sides have significant market power, leading to negotiations that heavily influence pricing and distribution.
• price-demand relationship

  This relationship describes how the demand for a product or service changes in response to changes in its price, assuming all other factors remain constant.
• price-supple relationship

  This relationship describes how the supply of a product or service changes in response to changes in its price, assuming all other factors remain constant.
• law of supply and demand

  asserts that in a market characterized by perfect competition, the price of a product will settle at a point where the quantity supplied by producers matches the quantity demanded by consumers. In other words, equilibrium is reached when supply equals demand, leading to an optimal price for the product. This equilibrium price is where the forces of supply and demand are balanced, leading to market stability.