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.

FINANCIAL
MANAGEMENT

COURSE
FOCUS

ECONOMICS

ACCOUNTING

COSTING

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.

GOODS & SERVICES

RENT, WAGE,
INTEREST &
PROFIT

PAYMENT for
GOODS &
SERVICES

FACTOR,
SERVICES

INTERDEPENDENCE BETWEEN
FIRM & HOUSEHOLD

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 postevaluation of the result.