NAME: CHERRY D.
CRIETA DATE: AUGUST 15, 2024
YEAR & SECTION: BSCE 2A PROBLEM SET NO. 1
EVALUATION:
1. Discuss the principles of Engineering Economics and give specific examples.
As engineers, we often face complex decisions that require careful consideration of multiple factors.
That's where engineering economics comes in – a vital tool that helps us make informed choices by
weighing economic, technical, and societal aspects.
Develop Multiple Alternatives. Imagine you're designing a transportation system for a busy city. You
might consider alternatives like buses, light rail, or ride-sharing services. By exploring multiple options,
you can compare their pros and cons and make a more informed decision.
Focus on the Differences. When choosing between two manufacturing processes, you'd want to
evaluate the differences between them. For instance, you might compare production speed, material
waste, and energy consumption to determine which option is more efficient.
Use a Consistent Viewpoint. When evaluating different energy sources for a power plant, it's essential
to assess both options from the same perspective – whether it's financial or environmental. This
ensures that your decision is based on a consistent set of criteria.
Use a Common Unit of Measure. To compare different options, convert all relevant factors into a
common unit – usually monetary. For example, when comparing maintenance costs for different
aircraft engines, express them in dollars per flight hour.
Consider All Relevant Criteria. When selecting construction materials for a bridge, you wouldn't just
focus on cost. You'd also consider factors like durability, maintenance requirements, and
environmental impact.
Make Uncertainty Explicit. When evaluating a new product development project, you might assess
market volatility or regulatory changes that could impact its success. Acknowledge these uncertainties
and factor them into your decision-making process.
Revisit Your Decisions. Continuously review and update your choices as new information becomes
available. For instance, during a construction project, you might reassess material selections based on
evolving requirements or changes in market conditions.
By applying these principles, engineers can make well-rounded decisions that balance economic
efficiency with broader considerations.
2. State the law of demand and supply under the conditions of perfect competition.
When there's perfect competition in the market, the demand and supply of a good or service are
equal at a certain price. This means that the number of people who want to buy something is the same
as the number of people who are willing to sell it. If the price is too high, there will be more people
who want to sell than buy, which means there's a surplus. To fix this, producers will make less and the
price will go down until its right. If the price is too low, there will be more people who want to buy
than sell, which means there's a shortage. To fix this, producers will make more and the price will go
up until its right. This process keeps going until the price reaches the perfect balance, where the
number of people who want to buy and sell is equal.
3. Illustrate the price-supply-demand relationship
Demand Curve: As the price of a good or service increases, the quantity demanded by consumers’
decreases. This is because higher prices make the good or service less affordable to consumers (The
demand curve slopes downward, meaning that as the price increases, the quantity demanded
decreases).
Supply Curve: As the price of a good or service increases, the quantity supplied by suppliers increases.
This is because higher prices make it more profitable for suppliers to produce and sell the good or
service (The supply curve slopes upward, meaning that as the price increases, and the quantity
supplied increases).
Equilibrium: The point at which the demand and supply curves intersect is called the equilibrium point.
At this point, the quantity demanded by consumers equals the quantity supplied by suppliers (The
intersection of the demand and supply curves determines the equilibrium price and quantity, which is
the point at which the market is in balance and there is no tendency for prices to change).
4. Discuss competition, monopoly and oligopoly.
The market structure of competition is characterized by the presence of numerous firms producing
similar products or services. Each firm endeavours to sell its product or service to customers, and in
this environment, no single firm possesses the power to influence the market price or output. In a
competitive market, there are numerous buyers and sellers, which fosters a dynamic and responsive
market.
In contrast, a monopoly is a market structure where a single firm produces a product or service for
which there are no close substitutes. In this scenario, the single firm has complete control over the
market and is able to dictate its own prices and output.
An oligopoly, on the other hand, is a market structure where a small number of firms produce
similar products or services. Each firm has some degree of control over the market, and there are few
firms producing similar products or services. This market structure is characterized by interdependence
among firms, which can lead to both positive and negative outcomes.
In conclusion, competition, monopoly, and oligopoly are three distinct market structures that
exhibit unique characteristics and outcomes. While competition is often regarded as the most
desirable form of market structure due to its ability to foster innovation and efficiency, oligopolies can
also lead to positive outcomes such as coordination and innovation. However, monopolies are often
viewed as undesirable due to their lack of competition and potential for exploitation.
5. Give specific example where the law of diminishing returns can be applied.
The law of diminishing returns states that as the quantity of a variable input (such as labor or
capital) is increased, while holding the quantity of other inputs constant, the marginal output will
eventually decrease. This is because the additional input is not as productive as the earlier inputs, and
the benefits of additional input are offset by the increasing costs of managing and coordinating the
larger workforce or equipment.
Example, a construction company can build 10 houses per month with 5 workers. If they hire 10
more workers, they can build 12 houses per month. However, if they hire 20 more workers, they can
only build 13 houses per month. This is because the additional workers are not as productive as the
earlier workers, and the marginal product of labor has decreased.
