In the name of Allah the Most Gracious the Most Merciful 1

Engineering Economics

Course Essentials Assignments Weightage 10 % Abt 8 Quizzes Weightage 10 % Abt 8 Mid Term Weightage 30 % (must pass) (min 25/50 to qualify to take final exam alongwith 75% attendance) Final Weightage 50 % (must pass)

Course Outline (From HEC website) Introduction: Basic concept and principles of Economics, Microeconomic theory, the problems of scarcity, Concept of Engineering Economy Economic Environment: Consumer and producer goods, goods and services, demand & supply concept. Equilibrium, elasticity of demand, elasticity of supply, measures of Economic worth. Price-supply-demand relationship. Theory of production, factors of production, laws of returns, break-even charts and relationships. Perfect competition, monopoly, monopolistic competition and oligopoly, Fundamentals of Marketing.

Course Outline (Cont’d) Elementary Financial Analysis: Basic accounting equation. Development and interpretation of financial statement-Income statement, Balance sheet and cash flow. Working capital management. Break Even Analysis: Revenue/cost terminologies, behaviour of costs. Determination of costs/revenues. Numerical and graphical presentations. Practical applications. BEA as a management tool for achieving financial/operation efficiency.

Course Outline (Cont’d) Selection Between Alternatives: Time value of money and financial internal rate of return. Present value, future value and annuities. Cost-benefit analysis, selection amongst materials, techniques, design etc  Investment philosophy: Investment alternatives having identical lives. Alternatives having different lives. Make or buy decisions and replacement decisions.

Course Outline (Cont’d) Value Analysis/Value Engineering: Value analysis procedures. Value engineering procedures. Value analysis versus value engineering. Advantages and applications in different areas. Value analysis in designing and purchasing.  Linear Programming: Mathematical statement of linear programming problems, graphic solution simplex procedure. Duality problem.

Course Outline (Cont’d) Depreciation and Taxes: Depreciation concept, economic life, methods of depreciations, profit and returns on capital, productivity of capital gain (loss) on the disposal of an asset, depreciation as a tax shield.  Business Organizations: Type of ownership, single ownership, partnerships, corporation, type of stocks and joint stock companies banking and specialized credit institutions.

Course Outline (Cont’d) Capital Financing & Allocation: Capital budgeting, allocation of capital among independent projects, financing with debt capital, financing with equity capital trading on equity, financial leveraging.

Recommended Text Books Engineering Economy by A. Tarquin Engineering Economy by Degarmo Economics by Samaulson

Economics Limited Resources - Scarcity Unlimited Wants – Human Nature Economists generally define economics as the study of how individuals and societies use limited resources to satisfy unlimited wants Limited Resources - Scarcity Unlimited Wants – Human Nature

Economics Economists argue that the fundamental economic problem is scarcity. Since there are not enough resources available to satisfy everyone’s wants, therefore, individuals and societies have to choose amongst available alternatives. An alternative, and equivalent, definition of economics is that economics is the study of how such choices are made. Scarcity: The society has less to offer than people wish to have.

Microeconomics Vs Macroeconomics Microeconomics is the study of individual economic agents and individual markets Macroeconomics is the study of economic aggregates i-e averages and estimates

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

What are the economic Goals? A high level of employment Price stability Efficiency An equitable distribution of income Economic growth

Three Major Sectors of Economy Manufacturing Agriculture Services

Economic Cycle

Objectives of Economic Development To increase the availability and widen distribution of basic life sustaining goods To raise level of living To expand the range of economic and social choices

Common Characteristics of Developing Nations Low levels of living characterized by inequality, poor health and inadequate education Low levels of productivity High rates of population growth and dependency High and rising levels of unemployment and underemployment Cont’d

Common Characteristics of Developing Nations Cont’d Substantial dependence on agricultural production and primary products exports Prevalence of imperfect markets and limited information Dominance, dependence and vulnerability in international relations

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

Assignment 1 Find out GDP/ Capita of at least 10 countries of the world from various websites. It must include Pakistan, India, Bangladesh, Sri Lanka, Korea, USA, UK, Malaysia, China, Australia etc.. Assignment due on 12 Oct, 2010

Assignment 2 Find out share of three major sectors of economy in the overall economics of at least 10 countries of the world from various websites. It must include Pakistan, India, Bangladesh, Sri Lanka, Korea, USA, UK, Malaysia, China, Australia etc.. Assignment due on 19 Oct, 2010

That’s all for the day