ECONOMICS FOR ENGINEERS

HU-501
 INTRODUCTION
 1. WHAT IS ECONOMICS?
 2. HOW IT IS RELATED TO ENGINEERING?

 ECONOMICS= Oikus (Household) and

Nemein (Management)
 Today engineers are not only Designers or
Builders, they are also Problem Solver,
Managers and Decision Makers. This change in
scenario integrate Engineering with
Economics.
 COSTING

ACCOUNTING
MANAGEMENT
FINANCIAL

COURSE
FOCUS

ECONOMICS
 ENGINEERING n ECNOMICS
 WHAT IS THE RELATION BETWEEN
ENGINEERING & ECONOMICS?

 Previously engineering job was only about

design, construction and operation of m/c,
structure and process.

 Today it is integrated with Economics in

terms of Cost, Demand and Resource
allocation and utilization.
MAJOR PRINCIPLES OF ENGINEERING
ECONOMICS.

 1. Money has a Time Value

 2. Make investment that are economically justified.

 3. Choose the mutually exclusive investment

alternative that maximize economic worth.

 4. Two investment alternatives are equivalent if

they have same economic worth.
CONTINUED..........

 5. Marginal revenue must exceed marginal cost.

 6. Compare investment alternatives over a

common period of time.

 7. Risk and Returns tend to be positively

correlated.

 8. Past costs are irrelevant in engineering

economic analysis until they impact future cost.
BASIC ECONOMIC PROBLEMS
 1. Allocation of Resources.

 2. Methods of Goods Purchase.

 3. Distribution of Goods.

 4. Utilization of Resources.
SCOPE OF MANAGERIAL
ECONOMICS

 1. Objective of a business firm.

 2. Demand analysis and forecasting.

 3. Cost Analysis.

 4. Production Management.
CONTINUED.....
 5. Supply Analysis.

 6. Pricing Decisions, Policies & Practices.

 7. Profit Management.

 8. Capital Budgeting & Investment Decision.

 9. Competition.
FUNCTIONS OF ECONOMICS
 1. CONSUMPTIONS

 2. PRODUCTION

 3. EXCHANGE & DISTRIBUTION

 4. MONEY & BANKING

 5. INTERNATIONAL TRADE.
FACTOR, SERVICES

RENT, WAGE,
INTEREST &
PROFIT
FIRM & HOUSEHOLD

SERVICES
GOODS &
PAYMENT for
INTERDEPENDENCE BETWEEN

GOODS & SERVICES

 TYPES OF ECONOMICS
 MICRO ECONOMICS vs MACRO ECONOMICS

 1. Microeconomics: is the study of economic behaviour of

individual such as individual consumers or producers, particular
firms, particular markets, individual industries, particular prices
etc. It is the study of specific segment of the total economy.

 2.Macroeconomics is the study of the aggregate of these

quantities, not with individual income but with the national
income, not with particular prices but with general price levels,
not with individual output but with national income.
 Decision Making Process

 1. Problem recognition, definition and evaluation.

 2. Development of the feasible alternatives.

 3. Development of the outcomes and cash flow of

the each alternatives.

 4. Selection of the criteria.

 CONTINUED......

 5. Analysis and comparison of the alternatives.

 6. Selection of the preferred alternatives.

 7. Performance monitoring and post-evaluation

of the result.