R2008Department : Mechanical Engineering
Semester : 8
Subject Code : MG2451
Subject Name : Engineering economics and cost analysis
UNIT - INTRODUCTION TO ECONOMICS
Economics is the science that deals with the production and consumption of goods and services and the distribution and rendering of these for human welfare.
Flow in an Economy
Households and businesses are the two major entities in a simple economy. Business organizations use various economic resources like land, lab our and capital which are provided by households to produce consumer goods and services which will be used by them Business organization makes payment of money to the households for receiving various resources. The households in turn make payment of money to business organization for receiving consumer goods and services. This cycle shows the interdependence between the two major entities in asimple economy.
Circular Flow of Money in an Economy Money
Production and People V
Goods and services
Law of Supply and Demand
An interesting aspect of the economy is that the demand and supply of a product are interdependent and they are sensitive with respect to the price of that product. When there is a decrease in the price of a product, the demand for the product increases and its supply decreases. The point of intersection of the supply curve and the demand curve is known as the equilibrium point. At the price corresponding to this point, the quantity of supply is equal to the quantity of demand.
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