GE 301

ENGINEERING ECONOMY The Money Side of Engineering

3 lecture units

An Introduction by

George Y. Chao Jr. Assistant Professor

Department of Chemical Engineering

University of Santo Tomas

Engineer X:

"Money matters will be handled by

someone else. It is not something

I need to worry about."

True? ______

False? ______

Material

Electrical

Conductivity

(Sm-1)

Notes

Silver 6.30 107 Best electrical conductor of any known metal

Copper 5.69 107 Commonly used in electrical wire applications

due to very good conductivity and price

compared to silver.

Annealed

Copper 5.80 107

Referred to as 100% IACS or International

Annealed Copper Standard. The unit for

expressing the conductivity of nonmagnetic

materials by testing using the eddy-current

method. Generally used for temper and alloy

verification of aluminium.

Gold 4.52 107 Gold is commonly used in electrical contacts

because it does not easily corrode.

Aluminum 3.5 107 Commonly used for high voltage electricity

distribution cables

Which conductor should be used for electrical cables?

Money also matters for engineers.

An engineer routinely face two

important questions regarding

his design of a process or

equipment:

Does it work? Is it technically sound?

How much does it cost? Is it profitable? Is it economically sound?

GE 301

ENGINEERING ECONOMY The Monetary Side of Engineering

3 lecture units

Textbook: Engineering Economy

by Hipolito Sta Maria, 3rd edition

Interest and Money-Time Relationships

Depreciation

Methods for Making Economy Studies

Comparing Alternatives

Engineering Economy Definitions

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 will

ensure the best use of capital. (Sta Maria 3rd edition)

Involves the systematic evaluation of the economic merits of proposed solutions to

engineering problems. (Sullivan 11th edition)

ResourcesResources

Land Labor Capital

LAND

All gifts of nature, such as: water,

air, minerals, sunshine, plant and

tree growth, as well as the land

itself which is applied to the

production process.

LABOR

The efforts, skills, and knowledge

of people which are applied to the

production process.

Dollar Bills

CAPITAL

Real Capital (Physical Capital )

Tools, buildings, machinery -- things which have been produced which are used in further

production

Financial Capital

Assets and money which are used in the production process

Human Capital

Education and training applied

to labor in the production process

Origins of Engineering Economy

Pioneer: Arthur M. Wellington, civil engineer

latter part of nineteenth century;

addressed role of economic analysis in engineering projects;

area of interest: railroad building

CONSUMER GOODS AND PRODUCER

GOODS AND SERVICES

Consumer goods and services are those that are directly used by people to satisfy

their wants;

Producer goods and services are those used in the production of consumer goods

and services: machine tools, factory

buildings, buses and farm machinery are

examples;

Necessities versus Products or services

that are required to

support human life and

activities

Purchased in somewhat the same quantity by

consumers even if the

price varies significantly

Luxuries

Products or services that are desired by

humans

Purchased only if money is available after

the required necessities

have been obtained

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 results in a

greater than

proportionate increase

in sales.

Inelastic demand occurs when a decrease in

selling price results in a

less than proportionate

increase in sales.

Demand Elastic demand occurs

when a decrease in

selling price results in a

greater than

proportionate increase

in sales.

Inelastic demand occurs when a decrease in

selling price results in a

less than proportionate

increase in sales.

Price

Dem

and

Necessities

Luxury

Demand the quantity of a certain

commodity that is

bought at a certain

price at a given place

and time.

Supply the quantity of a certain

commodity that is

offered for sale at a

certain price at a given

place and time.

Engineering Economy Assignment number 1

1. Differentiate competition, oligopoly,

and monopoly.

2. State the law of supply and demand.

Explain briefly.

3. State the law of diminishing returns.

Explain briefly.