Prepared by: Engr. Rexmelle F. Decapia Jr.RME/Instructor

Technological University of the Philippines- Taguig

Adam Smith (1723-1790)- the study of the nature and causes of national wealth or simply as the study of wealth.

Alfred Marshall (1842-1924) – the study of man in the ordinary business life.

Arthur Cecil Pigou (1877-1959)- the study of economic welfare which can be brought, directly or indirectly, into relationship with the measuring-rod of money.

Lionel Robbins- the science which studies human behavior as a relation between ends and scarce means have other alternatives.

Collins Dictionary of Economics- the study of the problems of using available factors of production as efficiently as possible so as to attain the maximum fulfillment of society’s unlimited demands for goods and services.

Economics Professor and Economist- is the wise use of both money or time or both.

Geoffrey Crowther- is anything that is generally acceptable as a means of exchange (i.e. as a means of settling debts) and at the same time acs as a measure and a store of value.

- Is used as medium of exchange on local, national and international markets has evolved from shells, elephant tusks, animal skins to metallic money (i.e. coins) to paper money after the invention of printing press in 18th century to finally bank money (i.e. currency) with the development of the banking system.

- With the currency system, a standard called “monetary unit” forms the basis of a country’s domestic money supply.

a. As a medium of exchangeGoods and services can be changed for money, which can be exchanged for other goods and services.

b. As a unit of accountThe units in which money is measured (pesos, dollars, pounds, etc.) are used as the units in which prices, financial assets, debts, accounts, etc. are measured.

c. As a store of valueA 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 time, the money held over a period of time as a store of value purchasing power.

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.

- Is the study of problems involving economic solutions with the concept of obtaining the maximum productivity or reward at least cost or risk. It is the study of the desirability of making an investment.

Good or Commodity is defined as any tangible economic product (soap, car, shirts, tools, machines, etc.) that contributes directly or indirectly to the satisfaction of human wants.

Service is defined as any tangible economic activity (hairdressing, insurance, banking, catering, etc.) that contribute directly or indirectly to the satisfaction of human wants.

Consumer goods and services are those products or services that are directly used by people to satisfy their wants.

Example:houses, cars, clothes, appliances, food, books, movies, medical and dental services, etc.

Producer goods and services also satisfy human wants but indirectly in as much as they are used to produce the consumer goods and services.

Example: factory buildings, machine tools, airplanes, ships, buses, etc.

Necessities refer to the goods and services that are required to support human life, needs and activities.

Necessity product or staple product is defined as any product that has an income and elasticity of demand less than one. This means that as income rises, proportionately less income is spent on such products.

Ex: includes basic foodstuffs like bread and rice, clothing, etc.

Luxuries are those goods and services that are desired by human and will be acquired only after all the necessities have been satisfied.

Luxury product is defined as any product that has an income-elasticity of demand greater than one. This means that as the income rises, proportionately more income is spent on such products.

Ex: includes consumer durables like electric appliances, expensive cars, holidays and entertainment, etc.

Market refers to the exchange mechanism that brings together the sellers and buyers of a product, factor of production or financial security. It may also refer to the place or area in which buyers and sellers exchange a well-defined commodity.

Buyer or Consumer is defined as the basic consuming or demanding unit of a commodity. It may be an individual purchaser of a good or service, a household (a group of individuals who make joint purchasing decisions), or a government.

Seller is defined as an entity which makes product, good or service available to buyer or consumer in exchange of monetary consideration.

Perfect Competition (atomistic competition) refers to the market situation in which any given product is supplied by a very large number of vendors and there is no restriction against additional vendors from entering the market.

Characteristics:a.Many sellers and many buyersb.Homogenous productc.Free market-entry and exitd.Perfect informatione.Absence of all economic friction

Monopoly is the opposite of a perfect competition.

Characteristics:a.One seller and many buyersb.Lack of substitute productsc.Bloackaded entryPerfect Monopoly is a market situation where

economies of scale are so significant that cost are only minimized when the entire output of an industry is supplied by a single producer so that supply cost are lower under monopoly than under perfect computation and oligopoly.

Oligopoly exists when there are so few suppliers of a product or service that the action of one will inevitably result in a similar action by the other suppliers.

Characteristicsa.Few seller and many buyersb.Homogenous or differentiated productc.Difficult market entry

Demand is the need, want or desire for a product backed by the money to purchase it. Is based on the willingness and ability to pay for a product , not merely want or need for the product

Price

Demand

1

2

P1

D1

P2

D2

Price

Supply

2

1

S2

D1

S1

D2

Supply is the amount of a product made available for sale.

Price

Units

“Under conditions of perfect competition, the price at which any given product will be supplied and purchased is the price that will result in the supply and the demand being equal.”

Supply

Demand

Price

Supply= Demand

Price

Units

When there is additional supply without an additional demand , a new lower price is established.

Supply

Demand

Old Price

Supply= Demand

New Price

Price

Units

When there is an additional demand without an additional supply, a new and higher price is established.

Supply

Old Deman

d

Old Price

Supply= Demand

New Price

NewDeman

d

Law of Diminishing returns “When the use of one of the factors of production is limited, either in increasing the cost or by absolute quantity, a point will be reached beyond which an increase in the variable factors will result in less than proportionate increase in output.

Output in kW

Inputs in kW