Engineering Economics

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In the name of Allah the Most Gracious the Most
Merciful
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Engineering Economics
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QUIZ 2

• List common characteristics of developing
  nations.
• List three objectives of economic development.

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MACROECONOMIC POLICIES

• Growth policy
• Investment Policy
• Human Resource Development
• Trade Policy
• Exchange Rate Policy
• Fiscal Policy
• Taxation Policy
• Public Expenditure Policy
• Monetary Policy
• Employment and Poverty Trends Policy

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Three Major Sectors of Economy
Manufacturing
Agriculture
Services
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Traditional Measures of Economic Development

• Growth and Levels of Per Capita Income
• Declining share of Agriculture and rising share
  of Manufacturing sector
• Improvement in Social Indicators such as
  Literacy, Schooling, Health Conditions, Services
  and Provision of Housing
• Trickle Down of Growth

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History of Engineering Economics

• Arthur M. Wellington founder of engineering
  economics, by profession a civil engineer, wrote
  a book the economic theory of location of
  railways in 1887. His area of interest was role
  of railways building in USA
• J C.L.Fish and O.B.Goldman both evaluated
  engineering structures from the perspective of
  actuarial mathematics.
• Fish formulated an investment model related to
  the bond market
• Goldman in his book Financial Engineering
  proposed a compound interest procedure for
  determining comparative values over a period of
  time

Contd
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Engineering Economics
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History of Engineering Economics
Contd

• Eugene L.grant in 1930 in his book principles of
  engineering economics discussed the importance
  of Judgment factors and short term investment
  evaluation as well as conventional comparisons of
  long term investments in capital goods based on
  compound interest calculations
• Eugene L.Grant could be called as the father of
  engineering economics.

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Engineering Economics

• Engineering economics is the application of
  economic techniques for the evaluation of design
  and engineering alternatives. The role of
  engineering economics is to-
• assess the appropriateness of a given project
• estimate its value
• justify it from an engineering point of view
• Engineering economy involves technical analysis,
  with emphasis on the economic aspects and has the
  objective of assisting in decision making

Contd
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Engineering Economics
Contd

• Engineering economy involves the systematic
  evaluation of the economic merits of proposed
  solutions to engineering problems. To be
  economically acceptable, solutions to engineering
  problems must demonstrate a positive balance of
  long term benefits over long term cost and they
  must also
• Promote the wellbeing and survival of an
  organization
• Embed use of creative and innovative technology
  and ideas
• Permit identification and scrutiny of their
  estimated out comes
• Translate profitability to the lowest tier
  through a valid and acceptable measure of merit

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Engineering Economics

• The application of economic principles to
  engineering problems, for example in comparing
  the comparative costs of two alternative capital
  projects or in determining the optimum
  engineering course from the cost aspect. It means
  that we need to know about -
• Optimal cost-effectiveness
• Alternative possibilities

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Engineering Economics

• What we must know?
• Time value of money
• Estimation of cash flows
• Quantitative measurements of profitability
• Systematic comparison of alternatives

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Assignment 2

• Find out share of three major sectors of economy
  in the overall economics of at least 15 countries
  of the world from various websites. It must
  include Pakistan, India, Bangladesh, Sri Lanka,
  Korea, USA, UK, Malaysia, China, Australia etc..
  Provide page reference of website as applicable.
• Assignment due on 26 Oct, 2010

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Thats all for the day