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The word ‘Economics’ is derived from the ancient Greek word Oikonomia which means
household management. It implies that economics is that domain of knowledge which is
concerned with the management of wants by households. However, as a result of the writings
of many economists, the focus has now shifted from the management of wants to the
management of resources.
Indian economy has undergone a phenomenon change particularly after the launching
of the New Industrial Policy, 1991. It is in the process of transformation of licensed regime
to liberalisation and closed economy to globalisation. Industrial licensing has been abolished
for all industries except for a short list of 6 industries related to security and social concerns,
social reasons, and overriding environmental reasons. Most of the industries reserved for the
public sector have been opened for the private sector to bring competition in the Indian
Industrial Economics is intended to provide basic knowledge of the framework of the
general and industrial economics to the extent useful for the students of engineering and
Industrial Economics (IEc), Incorporated is a consulting firm with more than two decades
of experience providing a range of professional services to government agencies, non-
governmental organisations, and private firms.
We take provide in and emphasize the quality of our work and the quality of our client
relationships. In all of our engagements we deliver exceptional value without compromising
creativity or intellectual rigor.
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1.1.1 Area of Expertise

1. Applied economic analysis,
2. Evaluation and innovation,
3. Damage assessment,
4. Strategic finance and accounting, and
5. Risk and uncertainty.
1. Applied economic analysis: IEc is nationally recognised for innovative high
economic analyses. For more than 20 years we have assisted federal agencies, states, non-
government organisations and private sector clients with research, analysis, and expert opinion
across topics that range from environmental protection to utility rate design to homeland

Singh, Manoj Kumar. Industrial Economics and Principles of Management, New Age International, 2008. ProQuest Ebook Central,
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2. Evaluation and innovation: Organisations in both the public and private sectors
commonly face a need, if not a mandate, to evaluate their performance and to develop new
plans and programmes to ensure future success. Our clients frequently call upon us not only
to identify opportunities for improvement in their organisations but also to design, test,
implement, and manage innovative solutions to recognised needs and challenges.
3. Damage assessment: IEc offers the economic, financial, legal, and scientific expertise
necessary to determine the appropriate scale of monetary or other damages resulting from
actions that cause a public or private entity to suffer a material loss. In addition to our
general expertise in measuring economic damages, we offer specialized expertise in the
assessment of damages recoverable by the public for human to natural resources caused by
oil spills and hazardous waste sites.
4. Strategic finance and accounting: With a firm grounding in modern financial
theory and techniques, IEc serves clients by interpreting financial statements, evaluating
financial performance and establishing values for businesses, often in the context of
environmental non-compliance litigation. IEc staff are also qualified to testify on issues
relating to financial analysis, including the economic benefit of non-compliance with
environmental requirements and the ability of defendants to pay assessed civil or criminal
5. Risk and uncertainty: Embedded in the development and evaluation of
environmental policies is a need to assess their effects on ecosystems and human health. IEc
believes that the best basis for good policy decisions is strong scientific evidence, developed
using objective technical analysis with transparent assumptions and methods and explicit
analysis of uncertainties. Drawing on recognized principles of human health and ecological
risk assessment, IEc develops clear analytic frameworks and creates models and data sets to
assess the potential effects of policy decisions.

1.1.2 Definition of Economics

1. Alfred Marshall (1842–1924) famous Economists at the Cambridge University who
defined Economics as “Political Economy or Economics is a study of mankind in the ordinary
business of life; it examines that part of individual and social which is most closely connected
with the attainment and with the use of the material requisites of well-being.”
2. Lionel Robbins (1898–1984) was a famous English Economists of the 1920s and
occupied the chair of London School of Economics in 1929 who defined “Economics is a study
of the allocation of scarce means capable of alternative uses, among competing ends for the
attainment of a maximum result in the achievement of these ends.”
Copyright © 2008. New Age International. All rights reserved.

1.1.3 Modern Definition of Economics

During the last 40 years or so, economic thinking has moved much further from Robbins
view. According to Robbins, Economics is concerned with the best possible use of the limited
resources. But it is now considered that economics is much more than merely a theory of
value or of resource allocation. The credit for bringing about a revolution in economic thinking
goes to late lord J.M. Keynes. According to him, Economics studies how the levels of income
and employment in a economity are determined. Thus, in Keynesian terms Economics is
defined as the study of the administration of scarce resources and of the determinants of
income and employment.

Singh, Manoj Kumar. Industrial Economics and Principles of Management, New Age International, 2008. ProQuest Ebook Central,
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Nature and significance of Economics is a subject of logical structure as it is build on

from stage to stage.
1. Economics analysis is an aid to understand business practice in a given environment
and thereby to make business decisions which are primarily economic in nature.
2. Economics provides a set of concepts and precepts. These concepts and precepts
furnish as the tools and techniques of analysis.
3. Economics contributes a great deal towards the performance of managerial duties
and responsibilities. Like biology contributes to medical profession and physics to engineering,
economics contributes to managerial professions.
4. Economics are interested in the choices you make, and inquire into why, for instance,
you might choose to spend your money on a new DVD player instead of replacing your old
5. Economics may appear to be the study of complicated table and charts statistics and
numbers but more specifically, it is the study of what constitutes rational human behaviour
in the endeavor to fulfill needs and wants.
6. Alfred Marshall author of “The Principles of Economics” (1890) reflects the complexity
underlying economics. “Thus, it is on one side the study of wealth, and on the other, and more
important side, a part of the study of man.”
7. Adam Smith (1723–1790) the “Father of Modern Economics” and author of the famous
book “An Inquiry into the Nature and Causes of the Wealth of Nations”, explain the discipline
of economics by trying to understand why some nations prospected while others lagged
behind in poverty.
8. Economics is, therefore, a valuable guide to management. The extent of guidance
would depend very much on the extent of integration between abstract economic theories and
real world business practices.
9. The basic function of the managers of a business firm is to achieve the objectives of
the firm to the maximum possible extent with the limited resources placed at their disposal.
10. Economics, through variously defined is essentially the study of logic, tools and
techniques of making optimum use of the available resources to achieve the given ends. Thus,
provides analytical tools and techniques that managers need to achieve the goals of the
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According to Robbins: Science of scarcity or science of choice. He offered a definition

which the tought, was free from the defects he had pointed out in Marshall’s definition. He
defined Economics thus:
Economics studies human behaviour as a relationship between ends and scarce means
which have alternatives uses. “A science is built upon facts as a house is built of stones”.
Applying this, we find that economics is built, upon facts, which are examined and systematised
by economists. The economic phenomena are measured by the economists measuring rod of
money. In addition to it, a science is expected to have its own methodological apparatus i.e.,
methods of investigation.

Singh, Manoj Kumar. Industrial Economics and Principles of Management, New Age International, 2008. ProQuest Ebook Central,
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Economics as a science: Economics is a science in the same way as other sciences,

physics, chemistry etc. just as these sciences study uniformities providing in the particular
branches of nature, so does economics study the uniformities regarding human behaviour. On
the basis of this study of uniformities in the human behaviour, laws have been formulated
which are based on the relationship of economic studies of phenomenon, one of which is the
cause and the other effect of it. Economics as a science has also got the scientific methods
of deduction for its study. Economics like other sciences deduces conclusions of generalisations
after observing, collecting and examining facts. Thus, it involves.
(i) Observation of facts,
(ii) Measurement,
(iii) Explanation, and
(iv) Verification.
In short, it formulates, economic laws about human behaviour thus in simple words, a
science is a systematised body of knowledge about a particular branch of the universe and
which contains concepts, theories and principles which are based on cause and effect
relationship and are universal in nature.
Economics as an art: According to J.M. Keynes, an art is a system of rules for the
attainment of a given end. The object of an art is the formulation of rules for the attainment
of a given end.
“According to Adam Smith, political economy process to enrich both sovereign and
Many English economists consider that economics is also an art. An art lays down
precepts or formulate to guide people who want to achieve a certain aim. The aim might be
the removal of poverty from a country, or the production of more wheat from an acre of land.
It has been taken as controversial whether economics is an art or science. Through an
art is a systematised knowledge yet it has not established the relationship between cause
and effect. Thus an art apply value of knowledge.



The word Engineering has come from the word “Engine” and may be defined as the
Application of Scientific Knowledge is called engineering. Engineering is the profession in
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which knowledge of the mathematical and natural sciences gained by study, experience, and
practice is applied with judgement to develop ways to utilize economically, the materials and
forces of nature for the benefit.
According to E.M. Irwicks, “An Engineer who is unprepared to excel at engineering
economy analysis is not properly equipped for his or her job.” Economics helps the Engineers:
(i) In the provision of basic tools,
(ii) In decision-making,
(iii) In factor substitution,
(iv) In choice making,
(v) In understanding the problem of agriculture,
(vi) In understanding the problem of labour and personnel management

Singh, Manoj Kumar. Industrial Economics and Principles of Management, New Age International, 2008. ProQuest Ebook Central,
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(vii) In understanding the market condition, accounting of costing, auditing and

depreciation etc.,
(viii) In understanding rural development problems,
(ix) Relationship between engineering design process and economic analysis, and
(x) In understanding problem formulation.
The first step of engineering economic analysis is that the problem must be well
understood and stated in an explicit from before the engineer proceeds will the rest of
The second step is to select a small group of feasible alternatives for detailed analysis
and comparison. The term feasible means that each alternative selected should satisfy
specifications for the situations.
The third step is to select Economics plays an important role in developing investment
alternatives for engineers. Therefore, the knowledge of economics is of utility for engineers.
Through economics they can also understand the complete economic problem like backwardness
of agriculture, poverty, unemployment, pressure of population, unsatisfactory progress of
industrial sector etc. This is the role of Engineering in Economic Development.



The word technology is derived from a Greek word technologia, techne “craft” and logia
“saying.” It is a broad term dealing with use and knowledge of humanity’s tools and crafts.
According to Bernard Gendron, technology is defined as “any systematised practical
knowledge based on experimentation and/or scientific theory which enhances the capacity of
a society to produce goods and services.”
Technological self-reliance also implies capability in our institutions to support
technological development through their infrastructure and skilled man power. Self-reliance
means, we should be able to for see and forecast our needs so that development work can be
undertaken at suitable centres. It means we should not be helpless watchers of new technology
emerging from other countries. Self-reliance implies capacity of industry to produce the goods
we need.
The use and development of technology must relate to the people’s aspirations. Our own
immediate needs in India are the attainment of technological self-reliance, a swift and tangible
Copyright © 2008. New Age International. All rights reserved.

improvement in the conditions of the weakest sections of the population and the speedy
development of backward regions.
The basic objectives of the technology policy are the development of indigenous technology
and efficient absorption and adaptation of imported technology appropriate to national priorities
and resources. Thus, the technology policy stresses attainment of self-reliance in technological
development and utilisation of national resources through indigenous technology in order to
speed up the process of economic development.
Technology consists of a series of techniques. The development of techniques is essentially
a historical process in which one technique with one set of characteristics replace other in
the light of the historical and economic development. Technology is a major source of

Singh, Manoj Kumar. Industrial Economics and Principles of Management, New Age International, 2008. ProQuest Ebook Central,
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productivity improvement. Though human element is primarily responsible for handing

technology. Their efficiency is determined by the nature/type of technology adopted.
Technology being used determines the various jobs being performed by individuals in
an organisation. With change in technology the jobs are changed because it is the technology
that determines the level of skill needed.


1. Define economics. Discuss its importance in present day environment.

2. Explain the role of science, engineering and technology in making the economic development
of the country.
3. Distinguish between:
(a) Macro and Micro Economics (b) Static and Dynamic Economics.
4. Underline the role of technology in the economic development of a country.
Copyright © 2008. New Age International. All rights reserved.

Singh, Manoj Kumar. Industrial Economics and Principles of Management, New Age International, 2008. ProQuest Ebook Central,
Created from hec-ebooks on 2018-08-29 22:31:16.