Engineering Economics PDF

Engineering Economics: Introduction Do its benefits exceed its costs?  What is Economics  ECONOMICS is a social science that studies the production, distribution, and consumption of goods and services. What is Engineering ENGINEERING is the profession in which a...

Engineering Economics: Introduction Do its benefits exceed its costs?  What is Economics  ECONOMICS is a social science that studies the production, distribution, and consumption of goods and services. What is Engineering ENGINEERING is the profession in which a knowledge of the mathematical and natural sciences gained by study, experience, and practice is applied with judgment to develop ways to utilize, ECONOMICALLY, the materials and forces of nature for the benefit of mankind.  In recent decades, TRANSPORTATION In recent decades, MEDICINE In recent decades, TECHNOLOGY don’t occur without a price Do its benefits exceed its costs?  Engineering involvesEconomy the systematic evaluation of the economic merits of proposed solutions to engineering problems. Criterias to be economically acceptable  #1 demonstrate a positive balance of long term benefits over long term costs  #2 promote the well-being and survival of an organization  #3 embody creative and innovative technology and ideas  #4 permit identification and scrutiny of their estimated outcomes  #5 translate profitability to the “bottom line” through a valid and acceptable measure of merit The mission of engineering economics is to balance trade- offs in the most economical manner TRADE-OFF Engineering economy involves technical analysis, with emphasis on the economic aspects, and has the objective of assisting decisions. NEED TO STUDY ECONOMICS Economics studies economic activities Economics is the study of wants, efforts, wealth, and satisfaction Economics is the study of human behavior with relation to ends and scarce means Economics studies problem of choice CIRCULAR FLOW OF ECONOMIC ACTIVITIES Circular Flow of economic activities is a flow which has neither a BEGINNING nor an END. An ECONOMIC ACTIVITY is a systematic endeavor to SATISFY a material need.  VITAL ECONOMIC ACTIVITIES Production Distribution Consumptio n Investment  VITAL ECONOMIC ACTIVITIES necessary for the working or survival of an economy  PRODUCTION process of creation of utility or value in goods or services (or both) Factors of 1. Land 2. Labor Productio 3. Capital 4. Entrepreneurship DISTRIBUTION the way total output, income, or wealth is distributed among individuals or among the factors of production CONSUMPTION use of goods and services for the direct satisfaction of individual and collective wants  1. Individual Types of Consumption Consumptio 2. Collective Consumtpion n INVESTMENT excess of production over consumption in an accounting year  Production Investment Distribution Consumptio n SECTORS OF THE ECONOMY  HOUSEHOLD SECTOR includes households, who consumes goods and services, and provides factor services  BUSINESS SECTOR produces goods and services by using factor services  GOVERNMENT SECTOR undertakes both consumption as well as production FLOW OF INCOME Real flow of income It involves the flow of factor services from the household sector to the producing sector and the corresponding flow of goods and services from the producing sector to household sector. Monetary flow of income It refers to the flow of factor income e.g.: rent, interest, profit, wages, and so on from the producing sector to the household sector as rewards for their factor services.  CIRCULAR FLOW OF INCOME IN DIFFERENT SECTORS TWO SECTOR MODEL  THREE SECTOR MODEL  FOUR SECTOR MODEL