Kristine Georgia Y.

Po

Mine Economics

Economics is the study of people and choice. It is also the study of allocating limited

resources in order to accommodate the person’s unlimited needs and wants. It also set out such

factors determining from the production, to distribution and the consumption of final products

which are either goods or services. A branch of this study which is engineering economy, deals

with application of economic principles towards engineering projects or business ventures. It is

essential with decision making of an engineer to be able to present comparisons of ventures and

alternatives to accomplish whatever purpose the project is for. The main costs that is being studied

in economics especially when producing goods and services are variable costs and fixed costs.

Variable costs are proportional with how much a company is producing. If the company is

producing much, the variable costs increases and decreases if production is low. Variable costs

can be labor costs, commissions and the cost of raw materials used to produce certain goods or

services. In the other hand, fixed costs remain the same no matter how productive the company is.

Examples of these include lease or rent payments, salaries, insurance and utilities.

Aside from the costs, economics also studies the forces within the free market which are

called supply and demand. Supply basically means how much a certain product will be available

or how much suppliers are willing to make it available. Whereas demand means to how much a

product, commodity or item the consumers are willing to avail or purchase. When supply and

demand are equal, this scenario is called equilibrium. These are significant in determining the price

in the market with the better understanding the market economic theories. Also, there are times
when demand or supply goes out of control or way beyond equilibrium. These scenarios are called

shortage and supply. Shortage is described as “excess demand”. This happens when a certain

commodity’s supplies are way below that it cannot meet the high demands of the consumers. This

is opposite with surplus. Surplus can be described as the excess supply when the suppliers

produced way too much than the consumption of the consumers or their demands. In the

equilibrium price, surplus happens above it and shortage appears below the equilibrium price.

Within the economy, there are fluctuations of the growth of money or say, a capital. One

way to make a certain amount of money grow over time is through interest. Interest is the cost of

borrowing money from someone else depending on how long it is borrowed. It is basically money

that grows whereas discount is opposite as it means a certain money is being reduced at some rate.

There are two methods in calculating how much interest is to be added to the borrowed capital

after a certain period of time. One method is through simple interest. The interest is calculated

depending on the principal or capital solely different from the second method which is through

compound interest. It is calculated based on the principal plus the interest it accumulated every

period. It is also called “an interest on top of interest”. These two methods used an interest rate to

determine how much a lent or borrowed principal will grow.

In economics, it is also considered that the free market scenario is not absolutely true to all

as there are market structures that exist when there is an imperfect competition in the market. A

competition is not existing for a monopoly market structure as it contains a single firm producing

either goods or services and there would be no other commodity that can replace or substitute it.

If there would be even a small number of large firms that produce a similar commodity with slight

difference with each other, this market structure is called oligopoly.

 In generating sales of a company or firm, revenue and income will determine how much a

certain firm’s financial strength. The revenue of the company is the total generated sales before

the operation costs. Income is the profit, meaning the revenue deducted by the operation and

manufacture costs. In order for companies to generate income or revenue, determining cost and

price must be taken in careful consideration. Cost is the expense spent by the company for a

commodity to make or manufacture before selling it while price is the amount set by the company

in selling a certain commodity for a profit. Although it is the price set by the company, it should

still depend on how much a consumer is willing to pay for the specific product through a regulation

set by the government. This ensures that there is still balance with the profit of the company and

price burdened upon consumers.

There are particular groups that describe as parts of the economy. An organization is a

group of people with a particular purpose. This can be applied to a business or government

department. And a corporation is authorized to act as a single entity by a large company or group

of companies and recognized as such in law.

Economics places a great impact to how the society or even the world works today. It is

affecting to all often in ways that feel beyond our control. And it is very significant to learn how

these things work or grasp the importance as these same principles are still present in the coming

future and beyond it, in order to make better choices that is beneficial.