Note for Engineering Economics - EE By Jitendra Pal

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Subject: Engineering Economics & Costing Subject Code: HSSM3204 Branch: B. Tech. all branches Semester: (3rd / 4th SEM) Lecture notes prepared by: i) Dr. Geetanjali Pradhan(Coordinator) Asst. Prof. Mathematics, Dept. of Mathematics and Humanities College Of Engineering and Technology, BBSR ,BPUT ii) Dr. S. Mishra Lecturer in Economics College Of Engineering and Technology, BBSR, BPUT Disclaimer: The lecture notes have been prepared by referring to many books and notes prepared by the teachers. This document does not claim any originality and cannot be used as a substitute for prescribed textbooks. The information presented here is merely a collection of materials by the committee members of the subject. This is just an additional tool for the teaching-learning process. The teachers, who teach in the class room, generally prepare lecture notes to give direction to the class. These notes are just a digital format of the same. These notes do not claim to be original and cannot be taken as a text book. These notes have been prepared to help the students of BPUT in their preparation for the examination. This is going to give them a broad idea about the curriculum. The ownership of the information lies with the respective authors or institutions. Further, this document is not intended to be used for commercial purpose and the committee faculty members are not accountable for any issues, legal or otherwise, arising out of use of this document. The committee faculty members make no representations or warranties with respect to the accuracy or completeness of the contents of this document and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. HSSM3204 Engineering Economics & Costing Module-I: (12 hours) Engineering Economics – Nature and scope, General concepts on micro & macro economics. The Theory of demand, Demand function, Law of demand and its exceptions, Elasticity of demand, Law of supply and elasticity of supply. Determination of equilibrium price under perfect competition (Simple numerical problems to be solved). Theory of production, Law of variable proportion, Law of returns to scale. Module-II: (12 hours) Time value of money – Simple and compound interest, Cash flow diagram, Principle of economic equivalence. Evaluation of engineering projects – Present worth method, Future worth method, Annual worth method, internal rate of return

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method, Cost-benefit analysis in public projects. Depreciation policy, Depreciation of capital assets, Causes of depreciation, Straight line method and declining balance method. Module-III: (12 hours) Cost concepts, Elements of costs, Preparation of cost sheet, Segregation of costs into fixed and variable costs. Break-even analysis-Linear approach. (Simple numerical problems to be solved) Banking: Meaning and functions of commercial banks; functions of Reserve Bank of India. Overview of Indian Financial system. Text Books: 1. Riggs, Bedworth and Randhwa, “Engineering Economics”, McGraw Hill Education India. 2. D.M. Mithani, Principles of Economics. Himalaya Publishing House Reference Books : 1. Sasmita Mishra, “Engineering Economics & Costing “, PHI 2. Sullivan and Wicks, “ Engineering Economy”, Pearson 3. R.Paneer Seelvan, “ Engineering Economics”, PHI 4. Gupta, “ Managerial Economics”, TMH 5. Lal and Srivastav, “ Cost Accounting”, TMH HSSM3204 Engineering Economics & Costing Module-I: (12 hours) Engineering Economics – Nature and scope, General concepts on micro & macro economics. The Theory of demand, Demand function, Law of demand and its exceptions, Elasticity of demand, Law of supply and elasticity of supply. Determination of equilibrium price under perfect competition (Simple numerical problems to be solved). Theory of production, Law of variable proportion, Law of returns to scale. Module-II: (12 hours) Time value of money – Simple and compound interest, Cash flow diagram, Principle of economic equivalence. Evaluation of engineering projects – Present worth method, Future worth method, Annual worth method, internal rate of return method, Cost-benefit analysis in public projects. Depreciation policy, Depreciation of capital assets, Causes of depreciation, Straight line method and declining balance method. Module-III: (12 hours) Cost concepts, Elements of costs, Preparation of cost sheet, Segregation of costs into fixed and variable costs. Break-even analysis-Linear approach. (Simple numerical problems to be solved) Banking: Meaning and functions of commercial banks; functions of Reserve Bank of India. Overview of Indian Financial system.

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Text Books: 1. Riggs, Bedworth and Randhwa, “Engineering Economics”, McGraw Hill Education India. 2. M.D. Mithani, Principles of Economics. Reference Books : 1. Sasmita Mishra, “Engineering Economics & Costing “, PHI 2. Sullivan and Wicks, “ Engineering Economy”, Pearson 3. R.Paneer Seelvan, “ Engineering Economics”, PHI 4. Gupta, “ Managerial Economics”, TMH 5. Lal and Srivastav, “ Cost Accounting”, TMH MODULE – 1 DEMAND AND LAW OF DEMAND Meaning of Demand The demand for any commodity, at a given price, is the quantity of it which will be bought per unit, of time at the price. From this definition of demand two things are quite clear: Firstly, demand always refers to demand at a price. If demand is not related to price, it conveys no sense. To say that the demand for mangoes is 100 kgs. fails to convey any sense. It should be always related to price. Again in the words of Shearman, “To speak of the demand of a commodity in the sense of the mere amount that will be purchased without reference to any price will be meaningless.” Secondly, demand always means demand per unit of time. The time may be a day, a week or a month, etc.

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Therefore, “the demand for any commodity or service is the amount that will be bought at any given price per unit of time.” —G. L. Thirkettle. There is a difference between ‘desire’ ‘need’ and ‘demand’. A desire “will become demand only if a consumer has the means to buy a thing and also he is prepared to spend the money.. Suppose Ram has the desire of haying a fan. But this desire will become demand only if he has 350 rupees and he is prepared to spend this money. Thus by demand -we mean the various quantities of a given commodity or service which -consumers would buy in the market in a given period of time at various prices. According to Pension, “Demand implies, three things (a) desire to possess a thing, (b) mean of purchasing it and (c) willingness to use those means for purchasing it.” Meaning of Demand Schedule Demand schedule depicts the “various quantities of a commodity which will be demanded at different prices. Quantity demanded will be different at different prices because with an increase in price, demand falls and with a fall in prices demand extends. Demand schedule can be of the following two types :— (i) Individual Demand Schedule. (ii) Market Demand Schedule. Individual Demand Schedule : Individual Demand Schedule shows the various quantities demanded by one person at different prices, individual Demand Schedule can be shown as follows : Price Demand of Mangoes (In Rupees) in Kgs Rs.5 1 Kg.