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Questions and Answers

What is a factor that influences demand?

Price Expectation (correct)

Technology used in production

Weather conditions

Price of the product

What is the term for the exchange mechanism that brings together sellers and buyers of a product?

Economy

Industry

Sector

Market (correct)

What is the result of having many sellers and many buyers in a Perfectly Competitive market?

Each seller and buyer has significant market power

Each buyer has significant market power

Each seller and buyer is sufficiently small to not influence the price (correct)

Each seller has significant market power

What is the term for the entity that makes a product, good, or service available to the buyer in exchange for monetary consideration?

Seller Signup and view all the answers

What is the characteristic of products in a Perfectly Competitive market?

Homogeneous products Signup and view all the answers

What is the law of supply and demand?

The theory that prices are determined by the relationship between supply and demand. Signup and view all the answers

What is the primary perspective used in decision making?

That of the owners of the firm Signup and view all the answers

What is the definition of elastic demand?

A change in quantity demanded that is greater than a change in price. Signup and view all the answers

What is the effect of using a common unit of measurement in decision making?

It simplifies the analysis of alternatives Signup and view all the answers

What is the market structure under which the law of supply and demand operates?

Perfect competition. Signup and view all the answers

What is the purpose of considering all relevant criteria in decision making?

To select the alternative that best serves the long-term interests of the owners Signup and view all the answers

What is the equilibrium point in the supply and demand theory?

The point where the supply is equal to the demand. Signup and view all the answers

Why is it essential to make risk and uncertainty explicit in decision making?

To recognize their inherent presence in estimating future outcomes Signup and view all the answers

What is the law of demand?

As prices rise, customers buy less. Signup and view all the answers

What is the characteristic of a good decision-making process?

It can result in a decision with an undesirable outcome Signup and view all the answers

What is the definition of a capital good?

A good used to produce other goods and services. Signup and view all the answers

What is the definition of a necessity in Engineering Economy?

A product or service that is required to support human life and activities Signup and view all the answers

What is the characteristic of a luxury in Engineering Economy?

It is desired by humans and will be purchased if money is available Signup and view all the answers

What is the primary goal of the decision maker in evaluating alternatives?

To select the alternative that best serves the long-term interests of the owners Signup and view all the answers

Study Notes

Factors that Influence Demand

Income, population, taste and preference, price expectation, and price of related goods are factors that influence demand.

Market Situations

A market is a mechanism that brings together sellers and buyers of a product, factor of production, or financial security.
A buyer or consumer is the basic consuming unit of a commodity, which can be an individual, household, or government.
A seller is an entity that makes a product, good, or service available to a buyer in exchange for monetary consideration.

Perfect Competition

Perfect competition is a market situation characterized by many sellers and buyers, homogeneous products, free market-entry and exit, and perfect information.
Key characteristics of perfect competition include:
- Many sellers and buyers
- Homogeneous products
- Free market-entry and exit
- Perfect information
- Absence of economic friction

Types of Goods

Consumer goods satisfy human wants and needs, such as food and clothing.
Producer goods are raw materials and tools used to make consumer goods.
Capital goods are machinery used in the production of commodities in producer goods.

Supply and Demand

Supply refers to the quantity of a good or service available for people to purchase.
Demand refers to the quantity of a good or service that people wish to buy.
The law of supply and demand states that prices are determined by the relationship between supply and demand.
If supply exceeds demand, prices will fall, and if demand exceeds supply, prices will rise.

Types of Demand

Elastic demand exists when a change in price leads to a greater change in quantity demanded.
Inelastic demand exists when a change in price leads to a lesser change in quantity demanded.
Unitary demand exists when a change in price leads to an equal change in quantity demanded.

Decision-Making

A common unit of measurement should be used to simplify the analysis of alternatives.
All relevant criteria should be considered when making a decision.
Risks and uncertainty should be made explicit in the decision-making process.
Decisions should be revisited and re-evaluated as necessary.

Engineering Economy

Necessities are products or services that are required to support human life and will be purchased regardless of price.
Luxuries are products and services that are desired by humans and will be purchased if money is available after necessities have been obtained.

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Description

Understand the factors that influence demand and the definition of market situations in economics. Learn about the impact of income, population, taste, and price on demand and the role of buyers and sellers in the market.