Course Handout (2019-20 ODD SEMESTER)

Subject Name/Code : ENGINEERING ECONOMICS(18HS1T02) Branch/Sem/Batch :

Name of Faculty : Mahendra Prasad Agasty , JANMEJAY SENAPATI
Scope & Objective -:

The objective of this course is to familiarize the students with elementary principles of economics, provide the tools needed for
analyzing time value of money in engineering decision making, profit/revenue data, and make economic analysis for projects and
alternatives.
Pre-Requisite -:

Detailed Syllabus:
Module# CO Topics Hours
Engineering Economics-its meaning and importance, Basic problems
of an economy. The concept of time value of money; Concept of
MODULE-1 1 Interest. Time value of equivalence, Compound interest factors; Cash 9
flow diagrams, Calculation of time value of equivalence, Present worth
comparison, Future worth comparison, Pay-back period comparison.
Equivalent annual worth comparison method, Situations for equivalent
annual worth comparison, Rate of return, Internal rate of return,
Incremental IRR analysis, Depreciation analysis, Methods of
MODULE-2 2 9
depreciation, Straight line method, Declining balance method, SOYD
Method and MACRS method of depreciation; After tax comparison,
Analysis of public Project, Cost-benefit analysis.
Introduction to Micro Economics and Macro Economics, Theory of
demand, Elasticity of demand, Price elasticity of demand,
MODULE-3 3 Measurement of elasticity of demand; Income elasticity and cross 8
elasticity of demand, Demand forecasting; Law of supply, Elasticity of
supply.
Theory of production, Law of variable proportion, Laws of returns to
scale, Cost Concepts, Total Costs, Fixed cost, Variable cost, Revenue
MODULE-4 4 concepts, Total revenue, Average revenue and marginal revenue, 8
Market (Forms of market), Perfect Competition, Determination of price
under perfect competition, Linear Break-even Analysis.
Inflation, Meaning of inflation, Types, Causes, Measures to control
inflation, Commercial Banks, Functions of Commercial Bank, Central
MODULE-5 5 8
bank, Functions of central Bank; National income, Definitions,
Concepts of national Income, Methods of measuring National Income.
Total 42 Hours

# Topic Module Chapter Course Coverage No of Classes

Introduction to Economics, Definition of

Economics, the basic problems of an
1 economy, Concept of Engineering MODULE-1 1 TRUE 1
Economics and its application.(Chapter-1,
Riggs, Chapter-1, Ahuja)
Time Value of Money, Why money has time
2 value? Concept of Interest, Simple interest MODULE-1 2 TRUE 1
and Compound Interest.(Chapter-2,Riggs)
Nominal Interest Rate, Effective Interest
rate, Discrete compounding and continuous
3 MODULE-1 2 TRUE 1
compounding, the concept of the time value
of equivalence.(Chapter-2,Riggs)
Compound interest Factors, Compound-
Amount Factor, Present worth Factor,
4 MODULE-1 2 TRUE 1
Sinking-fund factor, (Annuity, Annuity Due)
.(Chapter-2,Riggs)
Series compound amount factor, Capital
Recovery factor, Series present worth
5 factor, Arithmetic gradient factor, MODULE-1 2 TRUE 1
Geometric Gradient
Factor.(Chapter-2,Riggs)
 Cash-Flow Diagram, Calculation of time
value of equivalence (Unknown interest
rate, the present worth of annuity due,
6 MODULE-1 2 TRUE 1
Present worth of Deferred Annuity,
Multiple-Payment Cash Flows, Selected
Problems.(Chapter-2,Riggs)
Present-worth Comparison, Conditions of
present worth Comparison, Net Preset
7 worth and present worth of equivalence, MODULE-1 3 TRUE 1
Selection criteria, Comparison of Assets
having equal lives.(Chapter-3,Riggs
Comparison of assets having un-equal lives
8 MODULE-1 3 TRUE 1
and infinite lives.(Chapter-3,Riggs)
Future-worth Comparison, Pay-back period
9 Comparison, Selected MODULE-1 3 TRUE 1
Problems.(Chapter-3,Riggs)
Equivalent Annual worth Comparison,
Utilisation of equivalent Annual worth
10 MODULE-2 4 TRUE 1
Comparison, Structure of a capital recovery
Annuity, .(Chapter-4,Riggs)
Situations for equivalent Annual worth
Comparison, Consolidation of cash-flows,
Recovery of Invested Capital, Comparison
11 MODULE-2 4 TRUE 1
OF Net Annual Costs, Asset Life,
Comparison of Assets having unequal
lives.(Chapter-4,Riggs)
Problems, Rate of Return, Minimum
attainable Rate of Return (MARR), Internal
Rate of Return (IRR), Definition of IRR,
12 MODULE-2 5 TRUE 1
Types of Investment (Simple, Non-Simple
)Calculation of IRR (Trial and Error
Method). .(Chapter-5,Riggs)
Comparison of IRR method with other
13 methods (Mutual Exclusive Cases), MODULE-2 5 TRUE 1
Incremental IRR.(Chapter-5,Riggs)
Problems, Depreciation, Meaning, Why
14 Depreciation? Causes of MODULE-2 9 TRUE 1
Depreciation.(Chapter-9,Riggs)
Depreciable property, Methods, Straight
Line method (SL), Declining Balance
15 Methods(DB), Double Declining Balance MODULE-2 9 TRUE 1
(DDB), Double Declining Balance switching
to the straight line. .(Chapter-9,Riggs)
Sum of Year Digit Method (SOYD), Modified
16 Acceleratory Recovery System (MACRS), MODULE-2 9 TRUE 1
After-Tax Comparison .(Chapter-9,Riggs)
Selected Problems on Depreciation,
Analysis of Public project, Cost-Benefit
17 MODULE-2 8 TRUE 1
Analysis, Selection
criteria.(Chapter-8,Riggs)
Selection among mutual exclusive
18 projects(Problem), MODULE-2 8 TRUE 1
Limitations.(Chapter-8,Riggs)
19. Difference between Micro and Macro
Economics, Meaning of Demand, Law of
demand, Why does demand curve slopes
19 downward? (Income effect, substitution MODULE-3 2, 5 TRUE 1
effect and law of diminishing marginal
utility and equi-marginal
utility).(Chpter-2,Ahuja,Chapter 5, Ahuja)
20. Limitations to the law of demand,
Change in demand and change in quantity
20 MODULE-3 5 TRUE 1
demanded, Determinants of demand.
Problems (Chapter 5, Ahuja)
The elasticity of Demand, Meaning, Types,
Price elasticity, Income elasticity and cross
21 MODULE-3 7 TRUE 1
elasticity, determinants of elasticity of
demand (Chapter 7, Ahuja)
Measurement of elasticity of demand, Point
22 Method, Expenditure Method, Arc MODULE-3 7 TRUE 1
Elasticity(Chapter 7, Ahuja
Income elasticity, Cross elasticity,
23 MODULE-3 7 TRUE 1
Problems(Chapter 7, Ahuja)
Law of Supply, Determinants of
24 MODULE-3 5 TRUE 1
Supply(Chapter 5, Ahuja)
Limitation of supply, Elasticity of
25 MODULE-3 5,7 TRUE 1
supply(Chapter 5,7, Ahuja)
 Theory of Production, Meaning, Short-run
and long-run production function, Concept
26 MODULE-4 16 TRUE 1
of production, Law of Variable
proportions.(Chapter-16,Ahuja)
Long-run production function, Law of
27 Return to scale, Economies and MODULE-4 17 TRUE 1
Diseconomies of scale. .(Chapter-17,Ahuja
Cost concepts, Meaning, Short-run cost,
Fixed Cost, Variable cost, Total Cost,
28 Average Fixed Cost (AFC), Average Variable MODULE-4 19 TRUE 1
Cost (AVC), Average Cost (AC), Marginal
Cost (MC).(Chapter 19-Ahuja
The cost function, Derivation of Marginal
29 cost from total cost function. Concept of MODULE-4 19 TRUE 1
Revenue
Introduction to Market form, Perfect
competition(Features), Monopoly,
30 MODULE-4 21 TRUE 1
Monopolistic, Oligopoly (Brief
view),(Chapter 21-Ahuja)
31. Price determination under perfect
competition, Equilibrium of firm and
31 MODULE-4 21 TRUE 1
Industry, Simple problems on Perfect
competition. (Chapter-21 Ahuja
Break-even Analysis (Linear).Meaning,
32 Break-even Chart, Basic Formula MODULE-4 12 TRUE 1
(Chapter-12,Riggs, Class Notes)
P/V ratio, Formula, Uses, Problem on P/V
33 MODULE-4 12 TRUE 1
ratio (Class Notes)
The margin of Safety, Formula,
34 MODULE-4 12 TRUE 1
Problems(Class Notes)
Inflation, Meaning, Types of Inflation,
35 Demand-pull and Cost-Push Inflation(Part A- MODULE-5 12 TRUE 1
Chapter 12, Paul)
Causes of Inflation, Increase in Demand
36 MODULE-5 12 TRUE 1
(Part A- Chapter 12, Paul)
Effects of inflation on Production and
distribution, Controls of inflation, Fiscal
37 MODULE-5 12 TRUE 1
Measures and monetary measures. (Part A-
Chapter 12, Paul)
Commercial Banks, Functions of
commercial Banks(Acceptance of Deposits,
38 Advancing Loans, Agency functions and MODULE-5 1 TRUE 1
General utility function(Part B- Chapter 1,
Paul )
Central Bank, Functions of Central Bank.
39 MODULE-5 2 TRUE 1
(Part B- Chapter 2, Paul )
National Income, Definition, Concept of
40 MODULE-5 1 TRUE 1
National Income(Part-Chapter-1, Paul)
Methods of Measuring national Income,
41 Difficulties in measurement of national 1 FALSE 1
Income.(Part-C,Chapter-1,Paul)

Total no. of classes : 41

Text Book
J. L. Riggs, D. D. Bedworth, and S. U. Randhawa, Engineering Economics, 4th Edition, Tata McGraw-Hill, 2004., ., .
H. L. Ahuja, Principles of Micro Economics, 16th Edition, S. Chand & Co, 2008., ., .

Reference Book
R. R. Paul, Monetary Economics, 11th Edition, Kalyani Publishers, 2015., ., .
C. S. Park, Contemporary Engineering Economics, 6th Edition, Pearson Education, 2015., ., .
D. G. Newnan, T. G. Eschenbach, J. P. Lavelle, and N. A. Lewis, Engineering Economic Analysis, 13th Edition, Oxford University
Press, 2017., ., .
A. Koutsoyiannis, Modern Micro Economics, 2nd Edition, Palgrave Macmillan UK, 2003., ., .
H. C. Petersen, W. C. Lewis, and S. K. Jain, Managerial Economics, 4th Edition, Pearson, 2005., ., .
N. G. Mankiw, Macroeconomics, 7th Edition, Worth Publishers, 2010., ., .
M. P. Agasty, Engineering Economics and Costing, 2nd Edition, Scitech Publication, 2009., ., .
Online Reference Material(s):
https://nptel.ac.in/courses/112107209/: Engineering Economic Analysis
https://www.icai.org/post.html?post
id=10058: Study Materials by ICAI
http://www.icaiknowledgegateway.org/littledms/folder1/chapter-5-part-2.pdf: National Income Accounting
http://www.m5zn.com/newuploads/2013/05/28/pdf/ed6f3d1f87b9cd2.pdf: eBook
Course Outcome:
1 Understand the concepts of economics, engineering economics and its application in engineering.
2 Solve problems related to engineering economics and analyze decision alternatives in engineering projects.
3 Evaluate how changes in demand and supply affect market and production.
4 Assess the effects of changes in costs, selling price and units sold on the break-even point and target profit.
5 Analyze the macroeconomic environment of the business and its impact on society and enterprise.

Program Outcomes Relevent to the Course:

Engineering knowledge: Apply the knowledge of mathematics, science, engineering fundamentals, and an
PO1
engineering specialization to the solution of complex engineering problems
Problem analysis: Identify, formulate, review research literature, and analyze complex engineering problems
PO2 reaching substantiated conclusions using first principles of mathematics, natural sciences, and engineering
sciences.
Design/development of solutions: Design solutions for complex engineering problems and design system
PO3 components or processes that meet the specified needs with appropriate consideration for the public health
and safety, and the cultural, societal, and environmental considerations.
Conduct investigations of complex problems: Use research-based knowledge and research methods including
PO4 design of experiments, analysis and interpretation of data, and synthesis of the information to provide valid
conclusions.
Modern tool usage: Create, select, and apply appropriate techniques, resources, and modern engineering and
PO5 IT tools including prediction and modeling to complex engineering activities with an understanding of the
limitations.
The engineer and society: Apply reasoning informed by the contextual knowledge to assess societal, health,
PO6 safety, legal and cultural issues and the consequent responsibilities relevant to the professional engineering
practice.
Environment and sustainability: Understand the impact of the professional engineering solutions in societal
PO7
and environmental contexts, and demonstrate the knowledge of, and need for sustainable development.
Environment and sustainability: Understand the impact of the professional engineering solutions in societal
PO8
and environmental contexts, and demonstrate the knowledge of, and need for sustainable development.
Individual and team work: Function effectively as an individual, and as a member or leader in diverse teams,
PO9
and in multidisciplinary settings.
Communication: Communicate effectively on complex engineering activities with the engineering community
PO10 and with society at large, such as, being able to comprehend and write effective reports and design
documentation, make effective presentations, and give and receive clear instructions.
Project management and finance: Demonstrate knowledge and understanding of the engineering and
PO11 management principles and apply these to one’s own work, as a member and leader in a team, to manage
projects and in multidisciplinary environments.
Life-long learning: Recognize the need for, and have the preparation and ability to engage in independent and
PO12
life-long learning in the broadest context of technological change.

Mapping of CO's to PO's: (1: Low, 2: Medium, 3: High)

PO6 PO7 PO9 PO11 PO12
1 1 1 3 1
2 1 1 3 1
3 2 2 3 1
4 2 2 1 3 1
5 2 2 1 3