Engineering is a discipline that deals with a system that evaluates services and products in relation to their costs. Engineer is a discipline that applies scientific knowledge for the good of mankind. The two types of engineering system are physical and economic feasibility. The efficiency of systems are evaluated using the formula below;

E= output/ input

This type of efficiency is always less than 1. The economic efficiency, on the other hand, is given the formula below;

Economic E= worth/(cost ) = (out put x value of each unit)/(input x value of each unit)

Economic efficiency is always greater than one so that the system can be justified. When solving problems related to this system, some steps followed are; definition of a problem, finding the alternative solution, and implementation.

In the engineering, economics concepts goods are defined using value and their utility where a value is the worth a certain product is attached while the utility is the ability of the that good to satisfy the needs. The goods are classified into two, consumer and producer goods. Consumer goods are consumed directly such are food, pens, clothes, papers, and bags. Producer goods are used in the production of other goods. Example of such good are vehicles, manufacturing equipment among many others.

An exchange is a concept where utilities are traded by two or more people. This process often increases the utility of goods. One often exchanges goods of less utility so that he or she can acquire goods of higher utility.

Money often has an earning power. This is because money invested today is likely to be of less value in the future. It can, therefore, be said that a dollar is worth different amounts of money depending on time.

Chapter 2

Economics and cost concept

When carrying out an exchange, a buyer will go for an item when he or she thinks that it is of the same value as the money being offered or it has greater value. During the exchange, each party gives out an item that has a lower utility to him or her. Each party in the process gets some of greater value. This is called mutual benefit in exchange. In persuasive exchange, the one offering the items need to explain to the prospect buyer why the buyer needs the item.

Costs in production are classified into the following; first cost, operation cost, maintenance cost, fixed cost, variable cost, marginal cost, incremental cost, and sunk cost. The most common cost are operational cost, maintenance cost, fixed and variable cost. Fixed cost during the production is the cost that remains constant no matter the number of items produced. Variable cost changes depending on the number of items produced. Marginal cost is a combination of both in the utility curve when a breakeven point is being sought. Maintenance cost occurs when the tools or equipment used in the product fail and have to be repaired or replaced. All these costs have to be considered in the production process.

When money is being lent by the large institutions, they charge a rental called interest. An interest rate is how the capital is growing. Inflation is one of the major reasons interest are charged on the money being borrowed. The purchasing power of money is mainly influenced by inflation or deflation. The time value of the has to be established clearly after earning power, and purchasing power of money are considered carefully.