ECEA110 FE Concepts

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Questions and Answers

What does the law of supply and demand state?

Prices are fixed regardless of supply and demand

Demand does not influence prices

Prices are determined by the relationship between supply and demand (correct)

Supply has no impact on prices

Which term describes a scenario where the quantity demanded changes significantly due to a small change in price?

Monopoly

Perfect competition

Inelastic demand (correct)

Oligopoly

In a situation where supply is less than demand, what term is used to describe this condition?

Surplus

Shortage (correct)

Perfect competition

Equilibrium point

What does the profession of engineering involve, according to the Accreditation Board for Engineering Technology?

Utilizing materials and forces of nature economically Signup and view all the answers

According to the Principles of Engineering Economy, what is essential when evaluating alternatives?

Using a consistent viewpoint Signup and view all the answers

What should be explicit in the evaluation of proposed engineering solutions?

Risk and uncertainty Signup and view all the answers

What is the primary focus of Engineering Economy when evaluating proposed solutions?

Systematic evaluation of economic merits Signup and view all the answers

Which of the following is NOT considered a type of Marketing?

Consumer Goods Marketing Signup and view all the answers

Which of the following does NOT fall under the category of Consumer Goods?

Technology gadgets Signup and view all the answers

What type of demand exists when there is an equal change in price and quantity demanded?

Unitary Demand Signup and view all the answers

Which factor does NOT influence demand?

Production Cost Signup and view all the answers

What does Perfect Competition refer to in the market situation?

A market with no restrictions on new vendors and a large number of suppliers Signup and view all the answers

What is the main characteristic of Inelastic Demand?

Lesser change in quantity demanded in response to price change Signup and view all the answers

What is the role of a seller in the market?

Sell products, goods, or services in exchange for money Signup and view all the answers

How do buyers benefit in a perfect competition market?

By enjoying reduced prices as a result of competition Signup and view all the answers

What is the result when the supply and demand are equal according to the law of supply and demand?

Equilibrium is achieved Signup and view all the answers

What is the effective rate of interest?

The actual or exact rate of interest on the principal during one year Signup and view all the answers

What does the nominal rate of interest specify?

The rate of interest and the number of interest periods in one year Signup and view all the answers

What is the result of compound interest?

Interest on the principal and accrued interest Signup and view all the answers

What is Perpetuity?

A series of equal cash flows occurring over an infinite number of periods Signup and view all the answers

What is the rate of interest that specifies the rate of interest and a number of interest periods in one year?

Nominal Rate of Interest Signup and view all the answers

What is simple interest calculated on?

Only the principal Signup and view all the answers

What is the assumption made in Ordinary Simple Interest?

Each month contains 30 days and each year has 360 days Signup and view all the answers

What type of interest is calculated on the principal plus total amount of interest accumulated in the previous period?

Compound Interest Signup and view all the answers

What is the purpose of depreciation in terms of capital investment?

To provide for the recovery of capital invested in physical property Signup and view all the answers

What is the value of a property that is determined by a disinterested third party?

Fair Value Signup and view all the answers

What is the price that can be obtained from a property after it has been used?

Salvage Value Signup and view all the answers

What is the term for the decrease in value of a fixed asset due to wear and tear?

Physical Depreciation Signup and view all the answers

What is the year when the scrap value is equal to the book value?

Salvage Year Signup and view all the answers

What is the purpose of the Sinking Fund Method?

To present the idea of annuity in computing depreciation Signup and view all the answers

What is the primary purpose of depreciation in terms of capital recovery?

To provide for the recovery of capital which has been invested in physical property Signup and view all the answers

What is the main cause of depreciation?

Physical Depreciation Signup and view all the answers

What is the main reason for Functional Depreciation?

Obsolescence of the asset Signup and view all the answers

What is the term for the length of time during which a property is capable of performing the function for which it was designed and manufactured?

Physical Life Signup and view all the answers

What is the term for the length of time during which a property may be operated at a profit?

Economic Life or Useful Life Signup and view all the answers

Which method of determining depreciation uses the year’s digit (in reverse order) to compute for depreciation?

Sum-of-Years' Digit Method Signup and view all the answers

Study Notes

Law of Supply and Demand

Prices are determined by the relationship between supply and demand.
A shortage occurs when demand exceeds supply.

Engineering Profession

Involves utilizing materials and natural forces economically.
It requires systematic evaluation of economic merits when assessing alternatives.
Risk and uncertainty must be included in evaluations of proposed solutions.

Marketing Concepts

Types of marketing do not include consumer goods marketing; rather, marketing strategies are emphasized.
Consumer goods encompass clothing, household items, and food; technology gadgets are not considered consumer goods.

Demand Elasticity

Unitary demand exists when there is an equal change in price and quantity demanded.
Inelastic demand is characterized by lesser changes in quantity demanded despite price change.
Demand is influenced by factors such as price expectation, income, and population, but production cost does not influence demand.

Market Structures

Perfect competition allows many suppliers with no barriers to entry.
The seller's role is to sell products, goods, or services in exchange for money.
Buyers benefit in perfect competition through reduced prices due to competition.

Interest and Economics

Effective interest rate reflects the actual rate on principal over one year.
Nominal interest rate specifies interest rate compounded for a year.
Compound interest includes interest calculated on both principal and accrued interest.

Depreciation Concepts

Depreciation provides for the recovery of capital invested in physical property.
Fair value is determined by a disinterested third party.
The decrease in value due to wear and tear is termed physical depreciation.

Recovery and Value Assessment

Salvage value is the price obtained from a property post usage.
The Sinking Fund Method is utilized to compute depreciation, illustrating annuity concepts.
Functional depreciation often results from asset obsolescence.

Life and Capacity of Assets

Physical life refers to the duration a property can perform its designed function.
Economic or useful life is the time during which a property can operate profitably.

Depreciation Methods

The Sum-of-Years’ Digit Method calculates depreciation using declining digits.
The Straight-Line Method and others offer different strategies for assessing depreciation based on usage and life expectancy of assets.

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Description

Explore the fundamental principles of supply and demand, and how they influence pricing. Additionally, delve into the engineering profession and its emphasis on economic evaluation and risk management. This quiz will test your understanding of these crucial concepts in economics and engineering.