Tribology is a study on friction, wear, adhesion and scratch resistance of moving interferences in contact. In other words, it is a study on movement of surface in contact with one another and the surroundings. The study also involve dissipation of energy (friction induces heat energy and etc.). Wear, being one of the sub-content of tribology is a study of useful life of a material or a part component of a machine. It is given by the equation:
Usp = Vloss / (FxD)
Usp = wear rate
Vloss = volumetric loss
F = force applied
D = total sliding distance
There are 4 types of wear, namely:
a)Abrasive wear
-Due to presence of hard/sharp particles between contacting surface (moving)
b)Adhesive wear
-Due to unsuitable lubrication or lubricant ran dry between moving surfaces in contact
c)Surface fatigue
-Due to repeated mechanical stress
d)Tribo-oxidation
-Tribological sliding causes chemical reaction, increase of temperature of contacting surfaces and oxidation
From the 4 types of wear mentioned above, wear is a study of useful life of components. The useful life of components here are components of a machine that experiences friction during operation. Friction causes loss of solid material on the contacting surface and this will reduces the integrity of the material. Thus, this is why friction and wear are mentioned concurrently since all 4 types of wear are caused by frictional problems.
Showing posts with label Assignment. Show all posts
Showing posts with label Assignment. Show all posts
Thursday, June 28, 2012
Sunday, December 18, 2011
CAD/CAM for Modern Injection Moulding
The prominent machinery used to produce wheel cover is Injection Moulding Machine. Modern Injection Moulding machine basically comes with integrated system of CAD/CAM. Therefore, CAD/CAM system is crucial to be implemented in this production.
By applying CAD into production, it helps to increase the productivity by reducing time consumed by designer to do synthesis, analysis and documentation of the design. Synthesis can be referred as geometric modelling in CAD function. Geometric model permits the user of the CAD to perform certain operation on the model which includes making new geometric model or modification on existing model takes less time compared to the manual drafting.
CAD is also useful in order to improve the quality of the design where this software permit the designer to do more complex engineering analysis and to consider a large number of options and varieties of design alternatives. Analysis that can be made by applying CAD in design process includes mass properties analysis, interference checking, tolerance analysis, finite element analysis, kinematic and dynamics analysis and discrete – event simulation.
Besides that, design evaluation and review procedures also can be augmented by CAD. The features includes in-evaluating and reviewing a proposed design consist of automatic dimensioning analysis, error checking, animation of discrete – event simulation solutions and plan layout design scores to design the facilities. CAD also helps to improve the design documentations. The graphical output of CAD system results in better documentation of the design than manual drafting where the drawings is superior and has less drafting error and greater legibility.
Finally, CAD eases to create manufacturing database. The documentation includes the product design (geometric specification of product, dimension of the product, material specification, bill of material etc).
By applying CAD into production, it helps to increase the productivity by reducing time consumed by designer to do synthesis, analysis and documentation of the design. Synthesis can be referred as geometric modelling in CAD function. Geometric model permits the user of the CAD to perform certain operation on the model which includes making new geometric model or modification on existing model takes less time compared to the manual drafting.
CAD is also useful in order to improve the quality of the design where this software permit the designer to do more complex engineering analysis and to consider a large number of options and varieties of design alternatives. Analysis that can be made by applying CAD in design process includes mass properties analysis, interference checking, tolerance analysis, finite element analysis, kinematic and dynamics analysis and discrete – event simulation.
Besides that, design evaluation and review procedures also can be augmented by CAD. The features includes in-evaluating and reviewing a proposed design consist of automatic dimensioning analysis, error checking, animation of discrete – event simulation solutions and plan layout design scores to design the facilities. CAD also helps to improve the design documentations. The graphical output of CAD system results in better documentation of the design than manual drafting where the drawings is superior and has less drafting error and greater legibility.
Finally, CAD eases to create manufacturing database. The documentation includes the product design (geometric specification of product, dimension of the product, material specification, bill of material etc).
Thursday, September 29, 2011
Dr. Deming: 14 Points
Deming’s 14 Points is a framework to improve quality and production. It is basically cure to 5 Deadly Diseases mentioned above. The 14 points are:
1. Constancy of purpose
The management must have continuous plans to compete in the ever-changing industry by always looking for ways to improve products and services. This will eliminate short term goals and always be prepared for new changes. A good example will be AirAsia, where the management team jumped leaps and bounds from what they have started as a budget airline company. Now they are majority shareholder of MAS, Team Lotus F1 and Queens Park Rangers FC, and they’ve spread their wings in other businesses like Tune Hotels, Tune Talk and Tune Insurance.
2. Adopt to the new philosophy
Industries and economics are dynamic, failure to move in parallel leads to obsoleteness. Competitions become stiffer as each business or industry is stuffed with similar producers. The management and workers as well must accept and understand new philosophy wholly. Changes occurs all the time and each level must acknowledge it and incorporate it fully to generate passion to the new philosophy.
3. Cease dependence on mass inspection
For years quality inspection has been about detecting defects rather than preventing them. Defect rate can be reduced by using quality materials, machines and workers. To ensure high quality offshore modules fabrication, Brooke Dockyard ensures that steel plates have milling certificates, quality machineries, hire skilled workers and to top it off, employ highly qualified QAQC staffs to monitor fabrication process.
4. End lowest tender contracts
If expensive does not ensure quality, cheap will be a long shot. To get higher profit margin, some management award tenders to companies with the lowest cost. Contracts should always be given based on proven records from previous projects or those with evidence of quality like up-to-date machineries and qualified workers.
5. Find problems to make improvements
No system is flawless and it is one of many roles of the management to find problems with the system. Problems do not mean defects or deficiency, but can be considered as points which could be improved. For example, cutting defects are solved by replacing cutting tool(s) and an inspector with RT Level 2 can detect more defects than a RT Level 1 inspector. (RT = Radiographic Testing).
6. Institute modern methods of training on the job
Most of the time, workers are trained by showing them how to do things. Thus workers do not really understand the process but just work for the sake of working. With on job training in the other hand, workers are able to understand the work process and such training should be standardize so that all workers have produces same quality standard.
7. Institute leadership
It is common that most ‘leaders’ in management system are instructors rather than leaders. Usually they tell ‘do this’, ‘do that’, ‘stop’ and etc. Leadership is more than that; they help others to improve by giving coaching and encouragements.
8. Drive out fear
This point is related to Point 7. When leadership is instituted, leaders gain respect and workers will feel close to them. If leaders are instruction givers, boundary will occur between workers and management and this will strike fear among workers. With this, workers will refrain from giving out new ideas to improve the system.
9. Eliminate barriers between departments
Different processes/roles in a system create barriers between different departments. Thus a department will not fully understand the process of another department and this situation will creates a lot of problems between departments. If the barriers can be removed, understandings between departments can be achieved and this will improve the process flow, thus improve quality.
10. Eliminate exhortations
Dr. Deming has highlighted that problems are due to those in management, not workers. Exhortations such as meaningless motto and slogans will only frustrate workers that understand errors are done by the system and not workers. This will cause dissatisfaction and workers will not have the passion to produce quality products and services.
11. Eliminate arbitrary numerical targets
Usually management will use average production quality standard as benchmark and most of the time; most workers will fall below the benchmark. This will cause workers to unite to lower average standard and the better workers will not be able to perform according to real ability. This will lower quality standard of end product.
12. Permit pride of workmanship
Workers are those involved more in production of products or services. By instilling passion with the work they do, workers will have the sense of pride of their work. This will encourage them wanting to produce high work quality all the time without offering many rewards like bonuses and off days. Rewards are temporary, pride is forever.
13. Encourage education
Economics and businesses change all the time, prompting change in technologies and philosophies. This also means workers must also change to move along with the flow. This can be done by continuous process to improve themselves through trainings, education and seminars. Experience helps but knowledge of new technologies and systems will generate even more value to quality production.
14. Commitment to accomplish transformation
The last point demands commitment from every level of the system, from management to workers, to put into action Point 1 to Point 13. This can also be viewed as enforcement of the first 13 points to achieve quality management.
1. Constancy of purpose
The management must have continuous plans to compete in the ever-changing industry by always looking for ways to improve products and services. This will eliminate short term goals and always be prepared for new changes. A good example will be AirAsia, where the management team jumped leaps and bounds from what they have started as a budget airline company. Now they are majority shareholder of MAS, Team Lotus F1 and Queens Park Rangers FC, and they’ve spread their wings in other businesses like Tune Hotels, Tune Talk and Tune Insurance.
2. Adopt to the new philosophy
Industries and economics are dynamic, failure to move in parallel leads to obsoleteness. Competitions become stiffer as each business or industry is stuffed with similar producers. The management and workers as well must accept and understand new philosophy wholly. Changes occurs all the time and each level must acknowledge it and incorporate it fully to generate passion to the new philosophy.
3. Cease dependence on mass inspection
For years quality inspection has been about detecting defects rather than preventing them. Defect rate can be reduced by using quality materials, machines and workers. To ensure high quality offshore modules fabrication, Brooke Dockyard ensures that steel plates have milling certificates, quality machineries, hire skilled workers and to top it off, employ highly qualified QAQC staffs to monitor fabrication process.
4. End lowest tender contracts
If expensive does not ensure quality, cheap will be a long shot. To get higher profit margin, some management award tenders to companies with the lowest cost. Contracts should always be given based on proven records from previous projects or those with evidence of quality like up-to-date machineries and qualified workers.
5. Find problems to make improvements
No system is flawless and it is one of many roles of the management to find problems with the system. Problems do not mean defects or deficiency, but can be considered as points which could be improved. For example, cutting defects are solved by replacing cutting tool(s) and an inspector with RT Level 2 can detect more defects than a RT Level 1 inspector. (RT = Radiographic Testing).
6. Institute modern methods of training on the job
Most of the time, workers are trained by showing them how to do things. Thus workers do not really understand the process but just work for the sake of working. With on job training in the other hand, workers are able to understand the work process and such training should be standardize so that all workers have produces same quality standard.
7. Institute leadership
It is common that most ‘leaders’ in management system are instructors rather than leaders. Usually they tell ‘do this’, ‘do that’, ‘stop’ and etc. Leadership is more than that; they help others to improve by giving coaching and encouragements.
8. Drive out fear
This point is related to Point 7. When leadership is instituted, leaders gain respect and workers will feel close to them. If leaders are instruction givers, boundary will occur between workers and management and this will strike fear among workers. With this, workers will refrain from giving out new ideas to improve the system.
9. Eliminate barriers between departments
Different processes/roles in a system create barriers between different departments. Thus a department will not fully understand the process of another department and this situation will creates a lot of problems between departments. If the barriers can be removed, understandings between departments can be achieved and this will improve the process flow, thus improve quality.
10. Eliminate exhortations
Dr. Deming has highlighted that problems are due to those in management, not workers. Exhortations such as meaningless motto and slogans will only frustrate workers that understand errors are done by the system and not workers. This will cause dissatisfaction and workers will not have the passion to produce quality products and services.
11. Eliminate arbitrary numerical targets
Usually management will use average production quality standard as benchmark and most of the time; most workers will fall below the benchmark. This will cause workers to unite to lower average standard and the better workers will not be able to perform according to real ability. This will lower quality standard of end product.
12. Permit pride of workmanship
Workers are those involved more in production of products or services. By instilling passion with the work they do, workers will have the sense of pride of their work. This will encourage them wanting to produce high work quality all the time without offering many rewards like bonuses and off days. Rewards are temporary, pride is forever.
13. Encourage education
Economics and businesses change all the time, prompting change in technologies and philosophies. This also means workers must also change to move along with the flow. This can be done by continuous process to improve themselves through trainings, education and seminars. Experience helps but knowledge of new technologies and systems will generate even more value to quality production.
14. Commitment to accomplish transformation
The last point demands commitment from every level of the system, from management to workers, to put into action Point 1 to Point 13. This can also be viewed as enforcement of the first 13 points to achieve quality management.
Dr. Deming: 5 Deadly Disease
The 5 Deadly Diseases highlights critical management mistakes that lead to low quality production. The 5 critical mistakes are:
1. Lack of constancy of purpose
This occurs when the management does not have proper planning to maintain competitiveness in the industry. Such system only concerns with current production and changes the system when the current system no longer works. Thus when changes occurred, the management will have to make hasty changes to accommodate the flow and in the end fail to achieve similar quality standards of the previous production plan. For example, Sarawak Transportation Company (STC) dominated land transportation since its establishment, regardless of the quality they provide, and when purchasing of vehicles were made easy in the turn of millennium, STC was not ready. Once a significant land transport provider, now STC is just a significant part of local history.
2. Emphasis on short term profits
With lack of future planning, it also means the management are more focussed on what they obtain at current time and not the future. This is usually done by new companies in which the management compromise on the quality of materials, workmanship and overall, the end product. Companies from China, Taiwan and Indonesia to name a few are the usual suspects to produce sub-standard products.
3. Evaluation by performance, merit rating or annual review of performance
The third mistake emphasise on evaluation of individual contributions, which will lead to lack of teamwork and harmony. Workers will only concern on their own performance and not the overall achievements of the department or company. Individualistic performance can be seen clearly in modern soccer where players are more concern on goal scoring bonuses rather than the team’s match performance.
4. Mobility of Management
This disease occurs when the management changes too frequently. Changes in management occur when the system fails to deliver stability in profit and quality. New changes bring in new management philosophy and this breaks continuous efforts to improve a system. Thus, long term plans could not be planned and the system will just play around with new short term plans.
5. Running a company on visible figures alone
The fifth disease is co-related to the first four diseases. This occurs when the management is obsessed with number of sales and the profit margin instead of customer satisfaction and product quality. In addition to that, such management plan tends to organize sales or offer lower selling price in order to achieve high sales and significant short term income. In the long run, such method will give lower profit margin (profit/duration) and in the end fail to sustain future business. A budget airline company in Indonesia extends the word ‘budget’ by compromising pilot trainings. The decision resulted in an airline tragedy and the company filed for bankruptcy due to multiple legal actions.
1. Lack of constancy of purpose
This occurs when the management does not have proper planning to maintain competitiveness in the industry. Such system only concerns with current production and changes the system when the current system no longer works. Thus when changes occurred, the management will have to make hasty changes to accommodate the flow and in the end fail to achieve similar quality standards of the previous production plan. For example, Sarawak Transportation Company (STC) dominated land transportation since its establishment, regardless of the quality they provide, and when purchasing of vehicles were made easy in the turn of millennium, STC was not ready. Once a significant land transport provider, now STC is just a significant part of local history.
2. Emphasis on short term profits
With lack of future planning, it also means the management are more focussed on what they obtain at current time and not the future. This is usually done by new companies in which the management compromise on the quality of materials, workmanship and overall, the end product. Companies from China, Taiwan and Indonesia to name a few are the usual suspects to produce sub-standard products.
3. Evaluation by performance, merit rating or annual review of performance
The third mistake emphasise on evaluation of individual contributions, which will lead to lack of teamwork and harmony. Workers will only concern on their own performance and not the overall achievements of the department or company. Individualistic performance can be seen clearly in modern soccer where players are more concern on goal scoring bonuses rather than the team’s match performance.
4. Mobility of Management
This disease occurs when the management changes too frequently. Changes in management occur when the system fails to deliver stability in profit and quality. New changes bring in new management philosophy and this breaks continuous efforts to improve a system. Thus, long term plans could not be planned and the system will just play around with new short term plans.
5. Running a company on visible figures alone
The fifth disease is co-related to the first four diseases. This occurs when the management is obsessed with number of sales and the profit margin instead of customer satisfaction and product quality. In addition to that, such management plan tends to organize sales or offer lower selling price in order to achieve high sales and significant short term income. In the long run, such method will give lower profit margin (profit/duration) and in the end fail to sustain future business. A budget airline company in Indonesia extends the word ‘budget’ by compromising pilot trainings. The decision resulted in an airline tragedy and the company filed for bankruptcy due to multiple legal actions.
Friday, April 1, 2011
Relationship between Economics and Process Control
In the past, economics has little meaning to engineers since engineers create and build without thinking much about the cost and materials. However, time has change and we no longer have raw materials in abundance. With limited sources and costly materials, engineers have no choice but to consider the economics side of engineering.
One field where engineers have to monitor cost and profit is process control in the industry. In any industry, a process or multi-processes will always involve raw materials and supportive elements like labour hour, machine hour, and salary in order to produce a product. Raw materials and supportive elements are what we view as variables in process and these variables determine if the process is profiting, sustainable or not sustainable. To deduce values of the variables and to relate between input and output of a process, we use Cobb-Douglas Production Function.
Obtaining values of α, β and γ will enable us to do the next step, α+β+γ. This step will give us the following conditions:
• α+β+γ < 1, the return scale is decreasing
• α+β+γ > 1, the return scale is increasing
• α+β+γ = 1, the return scale is constant
To solve Cobb-Douglas Production Function, we can either use Microsoft Excel or SPSS software.
One field where engineers have to monitor cost and profit is process control in the industry. In any industry, a process or multi-processes will always involve raw materials and supportive elements like labour hour, machine hour, and salary in order to produce a product. Raw materials and supportive elements are what we view as variables in process and these variables determine if the process is profiting, sustainable or not sustainable. To deduce values of the variables and to relate between input and output of a process, we use Cobb-Douglas Production Function.
Obtaining values of α, β and γ will enable us to do the next step, α+β+γ. This step will give us the following conditions:
• α+β+γ < 1, the return scale is decreasing
• α+β+γ > 1, the return scale is increasing
• α+β+γ = 1, the return scale is constant
To solve Cobb-Douglas Production Function, we can either use Microsoft Excel or SPSS software.
Machine Vision System
Machine vision system is a system that is capable to acquire one or more images by using an optical, non-contact sensing device. Decisions are made after the processing, analyzing and measuring various characteristics by the sensing device.
In the context of manufacturing, machine vision is a branch of engineering that uses computer vision. Machine vision analyse images to extract data for controlling a process or activity. Machine visions are applied for the quality assurance, sorting, material handling, robot guidance and calibration.
For any vision system, 2 important specifications are sensitivity and resolution. Sensitivity here refers to the ability to detect or differentiate small changes like brightness. As for resolution, it’s the ability to differentiate objects. Usually, sensitivity and resolution are interdependent. This means if sensitivity is high, resolution will be lower and vice-versa.
One of the areas where machine vision system is used is the 3D Model Construction. This is extensively used in entertainment (animation and effects) industry to create digital 3D models. Using scanned 3D models is a lot easier and time saving compared to creating 3D models from scratch.
3D scanner works by scanning and analyzing a real object and reconstruct it as a 3D model in digital mode. Scanning and analyzing is done when the scanner projects wave to the object(s) and collects the reflection of the wave. This wave can be light, ultrasound, laser or x-ray.
An example of a 3D scanner is the time-of-flight laser scanner, a non-contact active scanner type. The main part of this scanner is the laser rangefinder. Just like the name itself, rangefinder, it finds the range between the scanner and object by deducing time for the laser to reflect from the object to the scanner. The precision to measure time is very important for this device because it signifies accuracy.
A laser rangefinder detects an object one point at a time, which means to detect an object; direction view of the scanner must change to scan different point. To change direction view, we either rotate the rangefinder or use a rotating mirror system. Rotating mirror system is the better choice because they’re lighter, making them faster to rotate at a better accuracy.
Another example where machine vision system is used, is for quality assurance. It is the systematic monitoring and evaluation of the various aspects of a project, service or facility to maximize the probability that minimum standards of quality are being attained by the production process. Quality assurance cannot absolutely guarantee the production of quality products but it can reduce the probability of damage. Quality assurance will make sure that the quality of the product produced at least at the minimum requirement for the production.
The system involve camera for motion capture and process the image captured into digital form of image. The system works by capturing the image of the output product and compare the image with the set point image. If the image captured did not satisfy the requirement, the system will trigger the product as faulty and thus the product will be sent back.
For example, label inspection on wine bottles. If the figure/label on the bottle is not the same in database, then the bottle will be sidelined as reject.
There are other applications of machine vision system like in the security (e.g retina recognition, thumb print recognition), medical (bacteria detection) and safety (currency detector)sector.
In the context of manufacturing, machine vision is a branch of engineering that uses computer vision. Machine vision analyse images to extract data for controlling a process or activity. Machine visions are applied for the quality assurance, sorting, material handling, robot guidance and calibration.
For any vision system, 2 important specifications are sensitivity and resolution. Sensitivity here refers to the ability to detect or differentiate small changes like brightness. As for resolution, it’s the ability to differentiate objects. Usually, sensitivity and resolution are interdependent. This means if sensitivity is high, resolution will be lower and vice-versa.
One of the areas where machine vision system is used is the 3D Model Construction. This is extensively used in entertainment (animation and effects) industry to create digital 3D models. Using scanned 3D models is a lot easier and time saving compared to creating 3D models from scratch.
3D scanner works by scanning and analyzing a real object and reconstruct it as a 3D model in digital mode. Scanning and analyzing is done when the scanner projects wave to the object(s) and collects the reflection of the wave. This wave can be light, ultrasound, laser or x-ray.
An example of a 3D scanner is the time-of-flight laser scanner, a non-contact active scanner type. The main part of this scanner is the laser rangefinder. Just like the name itself, rangefinder, it finds the range between the scanner and object by deducing time for the laser to reflect from the object to the scanner. The precision to measure time is very important for this device because it signifies accuracy.
A laser rangefinder detects an object one point at a time, which means to detect an object; direction view of the scanner must change to scan different point. To change direction view, we either rotate the rangefinder or use a rotating mirror system. Rotating mirror system is the better choice because they’re lighter, making them faster to rotate at a better accuracy.
Another example where machine vision system is used, is for quality assurance. It is the systematic monitoring and evaluation of the various aspects of a project, service or facility to maximize the probability that minimum standards of quality are being attained by the production process. Quality assurance cannot absolutely guarantee the production of quality products but it can reduce the probability of damage. Quality assurance will make sure that the quality of the product produced at least at the minimum requirement for the production.
The system involve camera for motion capture and process the image captured into digital form of image. The system works by capturing the image of the output product and compare the image with the set point image. If the image captured did not satisfy the requirement, the system will trigger the product as faulty and thus the product will be sent back.
For example, label inspection on wine bottles. If the figure/label on the bottle is not the same in database, then the bottle will be sidelined as reject.
There are other applications of machine vision system like in the security (e.g retina recognition, thumb print recognition), medical (bacteria detection) and safety (currency detector)sector.
Friday, March 25, 2011
Process Control Monitoring, Controlling and Management
With the vast pace of change over the years, process control has been an important part of any industry. With scarce sources around, the industry demands a more efficient process control in order to produce quality products with minimum cost. That is why we see evolution of better and better process control system from open loop back in the old days to cascade control, a now commonly used system control option.
In the real world, industries do not just have one process control, but plant wide control level. With so many process control system, it is important for us to have process monitoring and control. The main point is to monitor processes in a plant as well as control them, thus ensuring quality production efficiently. Basically there are 2 process monitoring and control method; traditional method and Statistical Process Control.
Other than controlling the process system by implementing monitoring and controlling, it is equally important to manage monitoring and controlling. This is done by planning, organizing, leading and controlling the management itself. In short, we have to manage the organization properly from top management to floor staffs to ensure proper. This will ensure proper flow of order from executive level to technical staffs and this contribute indirectly to quality production of product based on Cobb-Douglas Equation Function.
In the real world, industries do not just have one process control, but plant wide control level. With so many process control system, it is important for us to have process monitoring and control. The main point is to monitor processes in a plant as well as control them, thus ensuring quality production efficiently. Basically there are 2 process monitoring and control method; traditional method and Statistical Process Control.
Other than controlling the process system by implementing monitoring and controlling, it is equally important to manage monitoring and controlling. This is done by planning, organizing, leading and controlling the management itself. In short, we have to manage the organization properly from top management to floor staffs to ensure proper. This will ensure proper flow of order from executive level to technical staffs and this contribute indirectly to quality production of product based on Cobb-Douglas Equation Function.
Wednesday, September 8, 2010
True or not?
Is it true that if interest is compounded quarterly, the interest period is four months?
Well, it's not true. When we say the interest is compounded quarterly, it means each interest period is 3 months. There you go...BYah!!!!!!!
Well, it's not true. When we say the interest is compounded quarterly, it means each interest period is 3 months. There you go...BYah!!!!!!!
Tuesday, September 7, 2010
Why does money have time value?
In order to understand why money has a time value, we must first understand and able to relate the relationship between money-->earning power-->purchasing power-->time. Apart from that, we must also understand interest rate and inflation rate.
In simple terms, money is a commodity we earn to exchange with another commodity. As mentioned, money is a commodity (money to make more money) and the same goes to houses, cars, food, and so on (things that we buy).
The idea of making money from money is to invest money in order to generate more money. We invest/save our money (initial amount) and interest will be added to the initial amount after a period of time. Interest here is defined as the cost of having money available for use. The cost of money being invested/ saved here is measured by interest rate (percentage addition over a period of time). Now, the whole idea mentioned is what we call earning power. To make it simpler, money gives us power to earn more. As for purchasing power, it is simply defined as having the ability to purchase or acquire something with an amount of money.
When we relate earning power and purchasing power, we will see that both react differently over a period of time. When we invest in a longer period of time, we will earn more money. However, over a longer period of time, our purchasing power decreases (as comparison with real world inflationary economy). For example, RM100 that we invest in a bank will become RM200 after 10 years. However, RM100 today can buy you 10kg of meat but the same RM100 can only buy 6kg of meat in 10 years to come.
Thus, we can see that to the concept of time, money has both purchasing and earning power. You’ll either make more or lose more money over a period of time, which is why we say money has a time value.
In simple terms, money is a commodity we earn to exchange with another commodity. As mentioned, money is a commodity (money to make more money) and the same goes to houses, cars, food, and so on (things that we buy).
The idea of making money from money is to invest money in order to generate more money. We invest/save our money (initial amount) and interest will be added to the initial amount after a period of time. Interest here is defined as the cost of having money available for use. The cost of money being invested/ saved here is measured by interest rate (percentage addition over a period of time). Now, the whole idea mentioned is what we call earning power. To make it simpler, money gives us power to earn more. As for purchasing power, it is simply defined as having the ability to purchase or acquire something with an amount of money.
When we relate earning power and purchasing power, we will see that both react differently over a period of time. When we invest in a longer period of time, we will earn more money. However, over a longer period of time, our purchasing power decreases (as comparison with real world inflationary economy). For example, RM100 that we invest in a bank will become RM200 after 10 years. However, RM100 today can buy you 10kg of meat but the same RM100 can only buy 6kg of meat in 10 years to come.
Thus, we can see that to the concept of time, money has both purchasing and earning power. You’ll either make more or lose more money over a period of time, which is why we say money has a time value.
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