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.