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Engineering Economics & Optimization: Lecture#1

Engineering economics deals with methods to minimize costs and maximize benefits for organizations. It involves systematically evaluating the economic merits of proposed solutions to engineering problems. Some key concepts covered include: - Economics is the study of production, consumption, and distribution of goods and services for human welfare. It deals with how societies manage scarce resources. - Engineering economics applies economic principles to engineering decision making. - Efficiency ratios measure output to input, including technical efficiency based on a physical system and economic efficiency based on a business system. - Optimization aims to improve productivity by increasing output with the same or less input.

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Sahab Hafeez
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125 views18 pages

Engineering Economics & Optimization: Lecture#1

Engineering economics deals with methods to minimize costs and maximize benefits for organizations. It involves systematically evaluating the economic merits of proposed solutions to engineering problems. Some key concepts covered include: - Economics is the study of production, consumption, and distribution of goods and services for human welfare. It deals with how societies manage scarce resources. - Engineering economics applies economic principles to engineering decision making. - Efficiency ratios measure output to input, including technical efficiency based on a physical system and economic efficiency based on a business system. - Optimization aims to improve productivity by increasing output with the same or less input.

Uploaded by

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

Optimization
Lecture#1
What is Engineering?????
What is Economics?????
What is Optimization?????
Economics
Economics is the science that deals with the production and consumption of
goods and services and the distribution and rendering of these for human
welfare.

It is the study how society manages scarce resources

Economics is also defined as the science that deals with the allocation or use of
scarce resources for the purpose of fulfilling the society’s needs and wants.
Engineering Economics

Engineering economics deals with methods that


enable one to take economic decisions towards
minimizing cost and maximizing benefits to
business organizations.

It involves systematic evaluation of economic


merits of proposed solution to engineering
problems.
1–6
Scope of Engineering Economics
• Efficiency
• Ratio of output to input
Types of Efficiency
• Technical Efficiency
• Economic Efficiency
Engineering Optimization everyday case study
Observation/ Personal Experience

Daily
Technical Efficiency
It is the ratio of output to input of physical system.
Physical system may be a diesel engine , a
machine working in a shop floor, computer system

Technical Efficiency(%)= Output/input


Technical Efficiency(%)=Heat eq. of mechanical
energy produced/Heat eq. of fuel used
Economic Efficiency
• It is the ratio of output to input of a business
system.
Economic Efficiency(%)= Output/Input
= Worth/Cost
Productivity
Economic Efficiency is also called productivity.

• Productivity Improvement Techniques


Increased output for the same input
Decreased input for the same output.
Proportionate increase in output which is more than proportionate
increase in input.
Proportionate decrease in input which is more than proportionate
decrease in output.
Through simultaneous increase in output with decrease in the input.
Macro and Microeconomics
Microeconomics is the study of economics at an individual, group or
company level. This could mean studying the supply and demand for a
specific product, the production that an individual or business is capable
of, or the effects of regulations on a business.

Macroeconomics is the study of a national economy as a whole. Some


of the most common focuses of macroeconomics include unemployment
rates, the gross domestic product of an economy, and the effects of
exports and imports.
Flow in Economy
Law of Supply and Demand
Demand and supply of a product are interdependent and they are
sensitive with respect to the price of that product.

When there is a decrease in the price of a product, the demand for the
product increases and its supply decreases.
Factors Influencing Demand

•Income of the people


•Prices of related goods
•Tastes of consumers

1–15
Factors Influencing Supply

•Cost of the inputs


•Technology
•Weather
•Prices of related goods

1–16
Law of Supply
and Demand
• Lowering of the price of the
product makes the producers
restrain from releasing more
quantities of the product in the
market. Hence, the supply of the
product is decreased.

• The point of intersection of the


supply curve and the demand
curve is known as the equilibrium
point.

• At the price corresponding to this


point, the quantity of supply is
equal to the quantity of demand.
Hence, this point is called the
equilibrium point
Revision

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