ENVIRONMENT
Engineering economy
• Demand
• - is 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 result in a greater than proportionate increase
in sales.
Inelastic Demand – occurs when a decrease in the
selling price produces a less than proportionate increase
in sales.
Unitary Elasticity of Demand – occurs when the
mathematical product of volume and price is
constant.
Competition, Monopoly and
Oligopoly
• Competition
- Perfect Competition occurs in a situation where a
commodity or service is supplied by a number of vendors
and there is nothing to prevent additional vendors entering
the market.
• Monopoly
- is the opposite of perfect competition. A perfect monopoly
exists when a unique product or service is available from
a single vendor and that vendor can prevent the entry of
all others into the market.
• Oligopoly
- exists when there are so few suppliers of a product or
service that action by one will almost inevitably result in
similar action by the others.
The Law of Supply and
Demand
• The Law of Supply and Demand
• Simple Interest
- is calculated using the principal only, ignoring any interest
that had been accrued in preceding periods. In practice,
simple interest is paid on short – term loans in which the time
of the loan is measured in days.
(a) Ordinary simple interest is computed on the basis of 12
months of 30 days each or 360 days a year
1 interest period = 360 days
INTEREST AND MONEY TIME
RELATIONSHIPS
(b) Exact simple interest is based on the exact number of
days in a year, 365 days for an ordinary year and 366 days for a
leap year.
1 interest period = 365 or 366 days
Problems:
1.Determine the ordinary simple interest on P700 for 8 months and 15 days if
the rate of interest is 15%
2.Determine the exact simple interest on P500 for the period from January 10
to October 28, 1996 at 16% interest
3.What will be the future worth of money after 14 months, if a sum of P10,000
is invested today at a simple interest rate of 12% per year?
INTEREST AND MONEY TIME
RELATIONSHIPS
• Cash Flow Diagrams