1.intro engg eco

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INTRODUCTION TO ENGINEERING

ECONOMICS


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DEFINITIONS OF ECONOMICS

ECONOMICS: Economics is a social science . Its basicfunction is to study how people individual house holds,firms and nations maximizing their gains from theirlimited resources and opportunities.

In economic terminology it is called as maximizingbehaviour or more approximately optimizingbehaviour .

Optimization means selecting best out of availableresources with the objective of maximizing gains from

given resources.


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The term economics is derived from two Greek

words OIKOS(a house) and NEMEIN(to

manage).

Prof. Samuleson remarks economics as the oldest

of arts and newest of science, indeed the queen of the

social science.


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Economics is thus a social science, which studies

human behaviour in relation to optimizingallocation of available resources to achieve the

given goals.

Eg : individual household behaviour, firm, industry

and nation

Economics is also a study of choice-making behaviour

of the people.


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ECONOMIC ACTIVITY:

Activities are classified into two

Economic Activities & Non economicActivities.

Activities which are carried out with thepurpose of earning an income or makingmoney, they are called economic

activities.These activities involve money.

We use this money to buy necessary

goods & services that satisfy our needs


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SUBJECT MATTER OF

ECONOMICS

WANTS EFFORTS

MONEY SATISFATION


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NON-ECONOMIC ACTIVITIES:

Activities that are performed out of love,affection or, perhaps, social concern, butnot for money.

For example, if a doctor gives freetreatment to the patients of a village outof social concern, he is performing anon-economic activity.


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Why Economics forEngineers

Engineers has to necessarily possessknowledge of economic aspects ofengineering so that he can design the

products and services at an affordableprice.

Engineering is closely associated witheconomics for the reason that theengineering activities of analysis &design constitute means for satisfyinghuman wants.


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Why Economics

Engineering Economics deals with theconcepts & techniques of analysis usefulin evaluating the worth of systems,

products & services in relation to thecost.

The prerequisite of successfulengineering application is economicfeasibility.

Engineering Economics focuses both onphysical and economic efficiency.


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NATURE OF ECONOMICS:1. Assumptions-Based: there are twoassumptions in economic analysis

Ceteris paribus: we want to analysethe effect of the price of a

commodity on its demand. Apartfrom price, there can be a host ofother factors like income of theconsumers, prices of relatedcommodities, tastes,etc that mayaffect the demand for thatcommodity.

Rationality: It implies that consumers


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Nature of Economicscontd..,

2.Two branches of study: Economicsconsists of two branches: Micro economics& Macro Economics

Micro Economics looks at the smallerpicture of the economy and is the study ofthe behaviour of the small units.

Macro Economics is that branch ofeconomic analysis that deals with thestudy of aggregates.


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3. Positive & Normative: PositiveEconomics is concerned with the study ofthings as they are. It studies how the

economic system works, & how prices rise.and Normative economics is concerned

with value judgements about what oughtto be. (What should have been the price)

For example,

1. The distribution of income in india is

unequal


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SCOPE & SIGNIFICANCE OFECONOMICS:

The problem of scarcity & Choice:

It focuses on the problem of scarcity &choice. Resources are scarce. Economics

tells us how best to use the scarceresources to derive the greatest amountof satisfaction


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SCOPE & SIGNIFICANCE OFECONOMICS:

Allocation of Resources:

It explains how scarce resources can beallocated efficiently. Because resources

are scarce, individuals, firms and nationshave to make careful choices.

Any misallocation will lead to inefficiency

& consequently, losses.


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Scope contd..,

A prerequisite for problem solving:

An understanding of Economics is aprerequisite to solve economic problems

such as unemployment, inflation and soon.


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Scope contd..,

What to produce:

It explains how price determines the kindof goods and services that are to be

produced in an economy.


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Scope contd..,

How to produce:

Firms produce goods & services choosingefficient methods of production.

There are two methods of production areavailable to firms- capital Intensive &Labour intensive

If capital is available at a lower rate,firms adopt capital-intensive methods ofproduction or if labour is cheap, firms

can adopt labour-intensive techniques.


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Scope contd..,

For whom to produce:

In a market economy, this is decided bythe markets.

Generally, members of the society whohave a greater purchasing power caninfluence the kinds of goods that are

produced.


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BRANCHES OF ECONOMICS: MICRO ECONOMICS:

It offers a detailed measurement ofindividual decisions about particularcommodities.

It is concerned with,

How the individual consumerdetermines the distribution of histotal spending among the manyproducts & services available to him

What determines the prices of


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BRANCH OF ECONOMICS

MACRO ECONOMICS:

Macro economics looks at the economyas a whole. It is concerned with the

overall performance of the economicsystem rather than individual parts suchas individuals, firms and industries.

It deals with total aggregates, for eg.,total NI, total employment, total output& total Invt.,

It is concerned with the level ofem lo ment in the econom .


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MICRO & MACRO

ECONOMICS:POINTS OFDIFFERENCE

MICROECONOMICS

MACROECONOMICS

NATURE Micro meanssmall. It studiesthe behaviour ofindividualconsumers, firms

Macro meanslarge.it studiesthe economy asa whole

COVERAGE It coversindividual unitssuch asindividuals &

firms

It coversaggregates ofindividuals, firmsin the economy

as a whole


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DISTINCTION BETWEEN

MICRO & MACROECONOMICS:POINTS OFDIFFERENCE

MICROECONOMICS

MACROECONOMICS

SCOPE OF THESTUDY

Demand &Supply,

production & costanalysis, marketstructure &competitiveconditions,pricingpolicies &methods

NI, businesscycles, inflation

&unemployment,banking &credit,international trade etc.,

UTILITY OF THE

STUDY

At the firm level At the level of a

nation or state

S f E i i


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Scope of EngineeringEconomics

In the process of managingorganizations, the managers at differentlevels should take appropriate economic

decisions which will help in Minimising investment,

Operating and maintenance

expenditures Savings & other related gains of the

organisation.

D fi i i f E i i


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Definition of EngineeringEconomics:

Engineering Economics deals with themethods that enable one to takeeconomic decisions towards minimizing

costs and /or maximizing benefits tobusiness organizations.


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THANK YOU

1.intro engg eco

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