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Engineering Economics & Management

This course covers engineering economics and project management. Students will learn about economic concepts like supply and demand, costs, revenues, break-even analysis, and how to apply economic analysis to materials selection and process planning. Key topics include marginal costing, the law of demand, calculating the break-even point, differentiating technical and economic efficiency, defining opportunity costs and sunk costs, profit-volume ratios, and elasticity of demand. The goal is for students to increase their understanding of economics and how to evaluate engineering alternatives using economic criteria.

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Dawar Khan Yousafzai
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61 views12 pages

Engineering Economics & Management

This course covers engineering economics and project management. Students will learn about economic concepts like supply and demand, costs, revenues, break-even analysis, and how to apply economic analysis to materials selection and process planning. Key topics include marginal costing, the law of demand, calculating the break-even point, differentiating technical and economic efficiency, defining opportunity costs and sunk costs, profit-volume ratios, and elasticity of demand. The goal is for students to increase their understanding of economics and how to evaluate engineering alternatives using economic criteria.

Uploaded by

Dawar Khan Yousafzai
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Engineering Economics &

Management (Theory)
HSS-411

This course is designed to increase the understanding of the students about


economics, the economic effects of decisions and methods for comparing
engineering alternatives using economic criteria. You will learn various managerial
skills and how the knowledge of project management can be applied to manage
projects professionally.
Introduction to Economics
• Flow in an economy,
• Law of supply and demand,
• Concept of Engineering Economics –
• Engineering efficiency,
• Economic efficiency,
• Scope of engineering Economics –
• Element of costs,
• Marginal cost,
• Marginal Revenue,
• Sunk cost,
• Opportunity cost,
• Break-even analysis,
• Elementary Economic Analysis –
• – Material selection for product Design selection for a product, Process planning.
Define Engineering Economics.
• Engineering economics defined as how limited resources used to
satisfy unlimited human wants
• In other words, it can be defined as a set of principles, concepts,
techniques and methods by which alternatives with in a project can
be compared and evaluated for the best monetary return.
• Engineering economics deals with the methods that enable one to
take economic decisions towards minimizing costs and/or maximizing
benefits to business organizations.
Marginal costing
• Marginal costing is defined by the ICWA as, “the ascertainment by
differentiating between fixed costs, of marginal costs and of the effect
on profit of changes in volume or type of output
Law of the Demand
• It states that other things being equal demand when price falls and
contracts when price rises.
What is BEP
• The Break-even point is, therefore, the volume of output at which
neither a profits made nor a loss is incurred. It is a point where the
total sales are equal to total cost
Differentiate ‘technical efficiency’ and
‘economical efficiency’
1. Technical efficiency:
It is the ratio of the output to input of a physical system. The physical system may be a diesel engine, a
machine working in a shop floor, a furnace, etc.

Technical efficiency (%) = Output × 100


Input

The technical efficiency of a diesel engine is as follows:

Heat equivalent of mechanical


Technical efficiency (%) = energy produced × 100
Heat equivalent of fuel used
2. Economic efficiency:
It is the ratio of output to input of a business system.

Economic efficiency (%) = Output × 100 = Worth × 100


Input Cost
Define opportunity cost.
• Opportunity cost defined as the potential benefit that is given up as
you seek an alternative course of action.
• In other words, the expected return or benefit forgone in
rejecting one course of action for another
What is sunk cost?
• A cost which was incurred or sunk in the past and is not relevant to
the particular decision making is a sunk cost or sunk loss.
• It may be variable or fixed or both.
Define P/V ratio.
• Profit-Volume ratio expressed as a percentage indicates the relative
profitability of different products.
What are the elements of cost?
• The elements of cost are:
Materials cost
Labor cost
Expenses
What is elasticity of demand?
• Elasticity of demand may be defined as the degree of responsiveness
of quantity demanded to a Change in price.

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