Transcript Engineering Economics

In the name of Allah the Most Gracious the Most Merciful
QUIZ # 2
List common characteristics of developing
nations.
List three objectives of economic
development.
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
Three Major Sectors of Economy
Manufacturing
Agriculture
Services
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
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
Cont’d
History of Engineering Economics
Cont’d
 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.
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
Cont’d
Engineering Economics
Cont’d
 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
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
Engineering Economics
What we must know?
 Time value of
money
 Estimation of
cash flows
 Quantitative
measurements of profitability
 Systematic comparison of
alternatives
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