Economy for engineers

Course title: Economy for engineers

Code: FEIT09Z003

Number of credits (ECTS): 6

Weekly number of classes: 3+2+0+0

Prerequisite for enrollment of the subject: None

Course goals/Competences: Acquiring knowledge on basic economic principles and laws in regards to market economy and engineering practices, like as investing in energy facilities, evaluation of investments and return of investments, in accordance to the module curriculum. At the end of this module students will be enabled to acquire further profound knowledge on power system economics, and mainly on design and operation of power markets.

Total available number of classes: 180

Curriculum: Introduction. Basic concepts from market economics: Modeling the consumption: Individual demand, Surplus, Demand and inverse demand functions, Elasticity of demand; Modeling the producers: Opportunity cost, Supply and inverse supply functions, Marginal production, Marginal cost, Producers’ revenue, Elasticity of supply; Market equilibrium, Pareto efficiency, Global welfare and deadweight loss; Concepts from the theory of the firm: Economy of scope, Economy of scale, Inputs and outputs, Long run and short run, Costs, Short-run costs, Long-run costs; Types of markets: Spot market, Forward contracts and forward markets, Future contracts and futures markets; Options; Contracts for difference; Managing the price risks; Market liquidity, Market efficiency; Competition: Why competition?, Markets with imperfect competition and Market power; Models of imperfect competition: Cournot model, Bertrand model, Monopoly. Definition of network energy, with focus on electricity; What is the difference between a megawatt-hour and a barrel of Oil?; Specifics of electricity as a commodity; Price of electrical power and energy vs price of capacity; Locational pricing, Regulation and deregulation: The need for regulation, Natural monopolies, Benefits from deregulation; Network services: Regulatory approaches, Costs, Revenues, Return of capital investments and pricing of network services. Investing in energy infrastructure facilities: Structure of costs, Techno-economic analysis.

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