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Note for Engineering Economics - EE By Joseph Noel

  • Engineering Economics - EE
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ENGINEERING ECONOMICS UNIT 2: Syllabus: Production, agents of production, laws of returns. Forms of business organization. Single trader, partnership and public limited company. Two Marks: 1.  What do you mean by SINGLE TRADER? It is the oldest and the simplest form of business organization in which single entrepreneur after furnishing himself with his own or hired land, labour and capital according to his requirements works the raw materials and governs the general policy of the business, the entire responsibility of the business falls on his shoulders. Advantages: 1. Low cost of Production 2. Promptness in decision 3. Personal Contact 4. East to start and to wind up 5. Incentive for hard work 6. Business Secrecy 7. Flexibility in business 8. Independence Disadvantages: 1. 2. 3. 4. 5. 6. 7. 8. Unlimited Liability Limited means of production Limited skills No economies of large scale production No division of labour Small income Instability Keeps a country economically backward 2. Define BUSINESS. A business also known as an enterprise, agency or a firm is an entity involved in commercial, industrial or professional activities for provision of goods and/or services to consumers. Different forms of Business are 1. Sole proprietorship 2. Partnership 3. Joint stock companies a. Private Limited Company b. Public Limited Company c. Government Companies 4. Co operatives 3. Agents of Production. All productive operations are the result of the co– operation of several agents of production. The factors of production are four in number i.e., 1. Land 2. Labour 3. Capital 4. Organization Out of these Land and Labour are indispensable factors of production 4. Types of PARTNERSHIP. A partnership is a business owned by two or more people. In most forms of partnerships, each partner has unlimited liability for the debts incurred by the business i. General Partnership ii. Limited Partnership iii. Limited Liability Partnership

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14 Marks: 1. Distinguish between PUBLIC LIMITED and PRIVATE LIMITED types of companies. ENGINEERING ECONOMICS UNIT 3: (THIS CHAPTER IS VERY IMPORTANT) (Tara Chand PgNo: 99 ) 2. What is BUSINESS? Explain the salient features of PUBLIC LIMITED COMPANY. (Tara Chand PgNo: 98 ) Syllabus: Price determination in perfect competition, monopoly and imperfect competition. Rent, interest, money, cheques, bills of exchange. Two Marks: 3. What is BUSINESS? Explain the salient features of PARTNERSHIP. (Tara Chand PgNo: 89 ) 4. Explain the LAWS OF RETURN.(7marks) (Tara Chand PgNo: 36 ) (Refer modern Economic Therory text book also for this question) 5. Explain the law of Diminishing RETURN. (Tara Chand PgNo: 37 ) (Refer modern Economic Therory text book also for this question) -------------------------------------------------- What is meant by Perfect Competition There is said to be perfect competition when every purchaser and seller is so small relative to the entire market that he cannot influence the market price by increasing or decreasing his purchases or his output The conditions for perfect competition are i. Large number of buyers and sellers ii. Homogeneous product iii. Free entry or exit iv. Perfect knowledge v. Absence of Transport cost vi. Perfect mobility of the factors of production. Imperfect Competition Imperfect competition has three main forms a) Monopolistic competition b) Oligopoly c) Monopoly Under monopolistic completion the numbers of dealers are large and the product is not homogeneous I In oligopoly the numbers of dealers are not large. When in monopoly a single producer or seller controls the entire market. Monopoly Monopoly is a market form in which a single producer controls the whole supply of a single commodity which has no close substitutes

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Types of markets: Type of market Perfect perfect or pure competition competition monopolistic competition Imperfect perfect oligopoly competition imperfect oligopoly Monopoly monopoly no. of firms nature of commodity infinite homogeneous many differentiated a few homogeneous a few differentiated one homogeneous How is price determined under monopoly? A firm under monopoly faces a downward sloping demand curve or average revenue (AR) curve. If a monopolist lowers the price of his product the demand increases and if he raises the price, the demand decreases. So a monopolist is not free to establish his price, which means he depends not only on the demand conditions but also on the cost situation faced by the monopolist. Total profits = profits per unit x total output sold Total profits earned by a monopolist in the equilibrium position are equal to the rectangle ABCE Bill of exchange A bill of exchange is legally defined as an instrument in writing, containing an unconditional order signed by the maker directing a certain person to pay a certain sum of money only to or the order of a certain person or to the bearer of the instrument. Parties to a bill of exchange: 1. The maker of bill of exchange is called the drawer. 2. The person who is directed to pay is called the drawee. 3. The person who will receive the money is called the payee. Types of Cheques: A cheque is a written order on a specified bank made by the depositor to pay an amount of money specified therein to order of a person named or the bearer of the cheque. Cheques of three varieties are in vogue  Bearer Cheques  Order Cheques  Crossed Cheques Economic Rent: It refers to that part of the payment by a tenant which is made only for the use of land, ie., free fift of nature. Ricardian Theory of Rent: David Ricardo defined rent as follows “Rent is that portion of the produce of the earth which is paid to the landlord for the use of the original and indestructible powers of the soil.” Economic rent according to Ricardo is the true surplus left after the expenses of cultivation are represented by payments to labour, capital and enterprise have been met.

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Money: “Anything which has general acceptability and passes freely from hand to hand as a medium of exchange and is generally received in final discharge of debts” 14 Marks: MET by KK DEWETT – Modern Economic Theory (MET) Text book by KK Dewett and MH Navalur 1. Explain the principle involved in PRICING policy. 2. What is monopolistic COMPETITION? Explain the important features. (MET Page No: 238) 3. Explain various theories of INTEREST and how rate of interest is determined under these theories. (MET Page No: 390 to 402, study the Imp points only) 4. Distinguish between Perfect And Imperfect Markets (7marks). 5. Why is the PRICE policy of a company crucial to its success? Illustrate your answer with an example. 6. Why does an actual Rate of Interest differ from person to person, place to place and industry to industry (7marks) (MET Page No: 388 and 389) 7. Discuss the neo classical theory of INTEREST (7marks). (MET Page No:395 ) (This theory is also called as Lonable funds theory of interest) 8. Describe conditions of Perfect competition and how the price will be determined in short run. (MET Page No: 237 and 281) 9. Describe the conditions of monopoly and how the price will be determined. (MET Page No: 290 and 292) 10. Describe the importance of MONEY and explain its functions. (Tara Chand Pg No: 136) --------------------------------------------------

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