ECONOMICS FOR ECONOMICS FOR ENGINEERSENGINEERS HU-501 HU-501

INTRODUCTIONINTRODUCTION1. 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.

COURSE FOCUS

ECONOMICS

FIN

AN

CIA

L

MA

NA

GEM

EN

T

COSTING

AC

CO

UN

TIN

G

ENGINEERING n ENGINEERING n ECNOMICSECNOMICS

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 MAJOR PRINCIPLES OF ENGINEERING ECONOMICS.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..........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 BASIC ECONOMIC PROBLEMSPROBLEMS

1. Allocation of Resources.

2. Methods of Goods Purchase.

3. Distribution of Goods.

4. Utilization of Resources.

SCOPE OF MANAGERIAL SCOPE OF MANAGERIAL ECONOMICSECONOMICS

1. Objective of a business firm.

2. Demand analysis and forecasting.

3. Cost Analysis.

4. Production Management.

CONTINUED.....CONTINUED.....

5. Supply Analysis.

6. Pricing Decisions, Policies & Practices.

7. Profit Management.

8. Capital Budgeting & Investment Decision.

9. Competition.

FUNCTIONS OF FUNCTIONS OF ECONOMICSECONOMICS1. CONSUMPTIONS

2. PRODUCTION

3. EXCHANGE & DISTRIBUTION

4. MONEY & BANKING

5. INTERNATIONAL TRADE.

INTERDEPENDENCE BETWEEN INTERDEPENDENCE BETWEEN FIRM & HOUSEHOLDFIRM & HOUSEHOLD

FA

CTO

R,

S

ER

VIC

ES

PA

YM

EN

T fo

r G

OO

DS

&

SER

VIC

ES

REN

T,

WA

GE,

INTER

ES

T &

P

RO

FIT

GO

OD

S &

SER

VIC

ES

TYPES OF ECONOMICSTYPES OF ECONOMICSMICRO 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 ProcessDecision 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......CONTINUED......

5. Analysis and comparison of the alternatives.

6. Selection of the preferred alternatives.

7. Performance monitoring and post-evaluation of the result.