In the name of Allah the Most Gracious

In the name of Allah the Most Gracious the Most Merciful

Engineering Economics

QUIZ # 2 ØList common characteristics of developing nations. ØList three objectives of economic development.

MACROECONOMIC POLICIES ØGrowth policy ØInvestment Policy ØHuman Resource Development ØTrade Policy ØExchange Rate Policy ØFiscal Policy Ø Taxation Policy Ø Public Expenditure Policy ØMonetary Policy ØEmployment and Poverty Trends & Policy

Three Major Sectors of Economy Manufacturing Agriculture Services

Traditional Measures of Economic Development ØGrowth and Levels of Per Capita Income ØDeclining share of Agriculture and rising share of Manufacturing sector ØImprovement in Social Indicators such as Literacy, Schooling, Health Conditions, Services and Provision of Housing ØTrickle Down of Growth

History of Engineering Economics Ø 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 Ø J C. L. Fish and O. B. Goldman both evaluated engineering structures from the perspective of actuarial mathematics. Ø Fish formulated an investment model related to the bond market Ø Goldman in his book “Financial Engineering” proposed a compound interest procedure for determining comparative values over a period of time Cont’d

Engineering Economics

History of Engineering Economics Cont’d Ø 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 Ø Eugene L. Grant could be called as the father of engineering economics.

Engineering Economics Ø Engineering economics is the application of economic techniques for the evaluation of design and engineering alternatives. The role of engineering economics is to: Ø assess the appropriateness of a given project Ø estimate its value Ø justify it from an engineering point of view Ø 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 Ø 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: Ø Promote the wellbeing and survival of an organization Ø Embed use of creative and innovative technology and ideas Ø Permit identification and scrutiny of their estimated out comes Ø Translate profitability to the lowest tier through a valid and acceptable measure of merit

Engineering Economics ØThe 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 : ØOptimal cost-effectiveness ØAlternative possibilities

Engineering Economics ØWhat we must know? Ø Time value of money Ø Estimation of cash flows Ø Quantitative Ø Systematic measurements of profitability comparison of alternatives

Assignment 2 Ø 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. ØAssignment due on 26 Oct, 2010

That’s all for the day