Professional Documents
Culture Documents
1.intro Engg Eco
1.intro Engg Eco
DEFINITIONS OF ECONOMICS
ECONOMICS: Economics is a social science . Its basic function is to study how people individual house holds, firms and nations maximizing their gains from their limited resources and opportunities.
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.
Economics is thus a social science, which studies human behaviour in relation to optimizing
ECONOMIC ACTIVITY:
Activities are classified into two Economic Activities & Non economic Activities. Activities which are carried out with the purpose of earning an income or making money, they are called economic activities. These activities involve money. We use this money to buy necessary goods & services that satisfy our needs
WANTS
EFFORTS
MONEY
SATISFATION
NON-ECONOMIC ACTIVITIES:
Activities that are performed out of love, affection or, perhaps, social concern, but not for money. For example, if a doctor gives free treatment to the patients of a village out of social concern, he is performing a non-economic activity.
Engineers has to necessarily possess knowledge of economic aspects of engineering so that he can design the products and services at an affordable price. Engineering is closely associated with economics for the reason that the engineering activities of analysis & design constitute means for satisfying human wants.
Why Economics
Engineering Economics deals with the concepts & techniques of analysis useful in evaluating the worth of systems, products & services in relation to the cost. The prerequisite of successful engineering application is economic feasibility. Engineering Economics focuses both on physical and economic efficiency.
Where to produce
NATURE OF ECONOMICS:
1. Assumptions-Based: there are two assumptions in economic analysis Ceteris paribus: we want to analyse the effect of the price of a commodity on its demand. Apart from price, there can be a host of other factors like income of the consumers, prices of related commodities, tastes,etc that may affect the demand for that commodity. Rationality: It implies that consumers and producers measure and compare the costs and benefits of a decision before
3. Positive & Normative: Positive Economics is concerned with the study of things as they are. It studies how the economic system works, & how prices rise. and Normative economics is concerned with value judgements about what ought to be. (What should have been the price) For example, 1. The distribution of income in india is unequal 2. The distribution of income in india should be equal.
The problem of scarcity & Choice: It focuses on the problem of scarcity & choice. Resources are scarce. Economics tells us how best to use the scarce resources to derive the greatest amount of satisfaction
Allocation of Resources: It explains how scarce resources can be allocated efficiently. Because resources are scarce, individuals, firms and nations have to make careful choices. Any misallocation will lead to inefficiency & consequently, losses.
Scope contd..,
A prerequisite for problem solving: An understanding of Economics is a prerequisite to solve economic problems such as unemployment, inflation and so on.
Scope contd..,
What to produce: It explains how price determines the kind of goods and services that are to be produced in an economy.
Scope contd..,
How to produce: Firms produce goods & services choosing efficient methods of production. There are two methods of production are available to firms- capital Intensive & Labour intensive If capital is available at a lower rate, firms adopt capital-intensive methods of production or if labour is cheap, firms can adopt labourintensive techniques.
Scope contd..,
For whom to produce: In a market economy, this is decided by the markets. Generally, members of the society who have a greater purchasing power can influence the kinds of goods that are produced.
BRANCHES OF ECONOMICS:
MICRO ECONOMICS: It offers a detailed measurement of individual decisions about particular commodities. It is concerned with, How the individual consumer determines the distribution of his total spending among the many products & services available to him What determines the prices of individual goods What determine the incomes of particular factors of production such as land, labour, capital & entrepreneurship. The study of different competitive situations such as perfect competition, monopoly & so on.
BRANCH OF ECONOMICS
MACRO ECONOMICS: Macro economics looks at the economy as a whole. It is concerned with the overall performance of the economic system rather than individual parts such as 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 of employment in the economy.
COVERAGE
PARAMETERS USED
DISTINCTION BETWEEN MICRO & MACRO ECONOMICS: ECONOMICS MACRO ECONOMICS POINTS OF MICRO
DIFFERENCE SCOPE OF THE STUDY Demand & Supply, production & cost analysis, market structure & competitive conditions,pricing policies & methods At the firm level NI, business cycles, inflation & unemployment, banking & credit,international trade etc., At the level of a nation or state
Alfred Marshall
In the process of managing organizations, the managers at different levels should take appropriate economic decisions which will help in Minimising investment, Operating and maintenance expenditures Savings & other related gains of the organisation.
Engineering Economics deals with the methods that enable one to take economic decisions towards minimizing costs and /or maximizing benefits to business organizations.
THANK YOU