Assignment: 1. Explain the concepts of economics and describe the role of engine
ID: 384220 • Letter: A
Question
Assignment: 1. Explain the concepts of economics and describe the role of engineering economics in your organization. State the process of decision making process, identify and describe the nature and types of any three engineering economic decisions in your organization with full details. 6 marks 2 Why cost components in engineering economic studies play an important role evaluating the projects? Describe your answer with good examples. How would you classify the costs of products/ services in your organization to forecast cost behavior? Show your calculations with proper justification for at least three products/services of your choice. 7 marks What is time value of money? Describe the concepts of time value of money in at least two engincering projects. What do you understand by cash flow and how is it used in your organization? Describe different approaches of cash flow used in engineering organizations/ projects 3. 7 marks If you have doubts/questions discuss with your professor.Explanation / Answer
1. The concepts of Economics are value, price, wealth, stocks and flows, and optimisation. These 5 concepts can be explained as follows:
Value: the value is described as the utility of the commodity of satisfying the demand for it. The value of a commodity or service depends on how it is ultilised to satisfy the demand of the commodity. To ascertain the value of the commodity certain charactertics of it should be taken into consideration. Firstly the commodity should posses utility power which means that if it is damaged or in a state that it cannot be used in any manner then it will have no value. Secondly, it should be scarcely avalaible to have a value. For eg, water has no value till it is easily avalaible to human but if there is shortage of water in a particular location due to weather conditions, the value of water increases. Thirdly, the commodity should possess the characteristic of transferability. This means that it should be easily avalaible or able to be moved at the place of its requirement.
Price: The next important concept of economics is price. The value of a commodity states its demand in non monetary terms wheras, the price shows the monetary value of the commodity, The price oftens falls with the fall in demand and rises with the rise in demand.
Wealth: The economic meaning to wealth is anything that has value and posses the characteristics of the same will fall in the category of wealth. Which means that if a commodity is posses the features of utility, scarcity and transferability then it will have some value and will be called wealth.
Stock and flow: Stock variable is termed in measure of time whereas flow does not have any time dimension. both these are important concepts of economics.
Optimisation: It is the maximum or minimun ultilisation of a resource. It is used by the producer and consumer as a method for decision making in categorising a commodity.
The engineering economic decision means the decision of investment which are related to engineering projects. It evaluates how beneficial it will be to make capital investments and evaluating the costs henceforth.
Decision making is a process in which the organisation takes a decision taking into consideration the information gathered from all possible resources and comparing them all to bring optimum profits from the same. If such step wise processes are followed for decision making, it finishes the chances of faults and brings up the best results by the evaluated decisions made.
The three types of engineering economic decisions are:
- Service or quality improvement: this means that through engineering economics decisions are taken for improving the quality of goods or services and the cost for the same is evaluated.
-Product innovation or expansion: a certain product needs to be expanded in its dimension or new products need to be introduced, this decision can be made through engineering economics.
- Selection of equipment and process: In the process of production mentioned above certain equipments and processes have to be followed. Economic decisions help selection the most efficient equipment or the best process for the production of the same.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.