Business Economics - Learn to Evaluate Your Startup Business

Engineering economics, previously known as engineering economy, is a subset of economics concerned with the use and "application of economic principles" in the analysis of engineering decisions. As a discipline, it is focused on the branch of economics known as microeconomics in that it studies the behavior of individuals and firms in making decisions regarding the allocation of limited resources. Thus, it focuses on the decision-making process, its context and the environmentAs a discipline though, it is closely related to others such as statistics, mathematics, and cost accounting.

It draws upon the logical framework of economics but adds to that the analytical power of mathematics and statisticsEngineers seek solutions to problems, and along with the technical aspects, the economic viability of each potential solution is normally considered from a specific viewpoint that reflects its economic utility to a constituency. Fundamentally, engineering economics involves formulating, estimating, and evaluating the economic outcomes when alternatives to accomplish a defined purpose are available. Since engineering is an important part of the manufacturing sector of the economy, engineering industrial economics is an important part of industrial or business economics.

For this reason, the major courses that are covered in this course are:The economics of the management, operation, and growth and profitability of engineering firms;Macro-level engineering economic trends and issues;Engineering product markets and demand influences; andThe development, marketing, and financing of new engineering technologies and products. This Course Includes the following topics. Introduction: Engineering economy defined, measures of financial effectiveness, non-monetary factors and multiple objectives.

Principles of engineering economy. The Economic Environment: Consumer and producer goods, measures of economic worth. price, supply, & demand relationship.

production. factors of production laws of return. Cost Concepts & Analysis: Sunk & opportunity costs.

fixed, variable, and incremental costs, recurring & nonrecurring costs. direct, indirect. and overhead costs, standard costs.

Break-even analysis, unit cost of production, cost-benefit analysis, feasibility studies, value analysis in designing & purchasing. Time Value of Money: Simple interest, compound interest, cash flow diagrams, interest formulas, nominal versus effective interest rate, continuous compounding. Depreciation and Depletion: Purpose of depreciation, types of depreciation, economic life and what can be depreciated?

Comparing Alternatives: Present economy, selection among machines, materials, processes, and designs, payback period method, present worth method, uniform annual cost method, rate of return method, alternatives having identical lives, alternatives having different lives. Linear Programming: Mathematical statement of linear programming problems graphic solution. Simplex method and duality problems.

RECOMMENDED BOOKS(01) Engineering Economics by William G. Sullivan & James A. Bontadelli(02) Operational Research: An Introduction by Hamdy A TahaCOURSE OUTLINE OF THIS COURSE IN DETAILIntroduction of EconomicsIntroduction to Economics and Difference between Wants and DesiresIntroduction to EconomicsDifference between Want and DesiresDo resources fulfill wants or desires?

Macro and Micro Economics, Engineering Economics and Economic BehaviorTwo Dimensions of Economics Macro Economics Micro EconomicsEngineering EconomicsEconomic Environment/BehaviourClassification of Consumer and Producer GoodsTheory and Laws of Demand and SupplyTheory of Demand and SupplyLaw of SupplyDetermination of SupplyShifts in SupplyLaw of DemandDemand Schedule or Demand CurveDetermination of DemandShifts in DemandSupply Function/EquationDemand Function/EquationUnderstanding the Market Equilibrium and Elasticity concepts in EconomicsMarket EquilibriumEquilibrium’s Mathematical RepresentationPrice Elasticity of DemandElasticity and RevenueSpecial Cases of ElasticityMarket Structure and Types of BusinessesMarket StructureTypes of BusinessesUnderstanding the Time Value of MoneyUnderstand Simple and Compound Interest with Problems and Cash Flow DiagrammingSimple InterestCompound InterestSimple vs. Compound InterestNotation and Cash Flows DiagramCash Flow DiagramingPresent and Future Values of Single Cash FlowDiscrete Cash Flow Examples Illustrating EquivalencePresent Equivalent of Future Amount of MoneySolving Problem related to Time Value of MoneyAnnuity and Deferred Annuity and Solving Example Problems related to themAnnuityRelating a Uniform Series (Annuity) to its Present and Future EquivalencePresent Equivalent of AnnuitySolving Problems Related to the AnnuityDeferred Annuities (Uniform Series)Present Equivalent of Deferred AnnuitySolving Problems related to Present Equivalent of Deferred AnnuityUniform Arithmetic Gradient of Cash FlowGradient Problem and using Gradient Conversion for Solving ProblemsGradient ProblemUsing Gradient Conversion Factor for solving ProblemsNominal and Effective Interest Rate and Concepts of APR and APYNominal and Effective Interest RatesConcept of APR (Annual Percentage Rate) and APY (Annual Percentage Yield)Time-based Units (Interest Rate Statement)Solving Problems related to Nominal and Effective Interest RatesSolving Problems related to Nominal and Effective Interest RatesDerivation of Effective Annual Interest RateEquivalence Relation: Payment Period and Compounding PeriodEffective Interest rate of any time and Financial Effectiveness and EfficiencyEffective Interest rate for any time periodEquivalence Relation (PP<CP)Financial Effectiveness and EfficiencyEvaluating an Engineering Project (Comparison and Selection of Alternatives)Taking Decision on the Basis of Present and the Future Worth MethodThe Present worth MethodThe decision of PW MethodRelation between i & PWFind that the Project is Economically Justified? The Future worth MethodTaking Decision on the Basis of Annual Worth MethodThe Annual worth MethodComparing the Business Alternatives for taking the DecisionComparing Alternative BusinessesSolving Problems related to Present worth analysisSolving Problems related to Future worth analysisLinear ProgrammingObjective Functions, Constrains and Main Elements of Linear ProgrammingOperations ResearchObjective Functions and Constraints of Linear ProgrammingMain Elements of Linear ProgrammingThe Reddy Mikks Company ModelPayback Period of any InvestmentUnderstand Payback and Discounted Payback Period of any BusinessCase 1 : For Even Cash FlowCase 2: For Uneven Cash FlowSolving Problems related to the Payback Period (Even and Uneven Cash Flows)Discounted Payback PeriodInternal Rate of Return and Solving Problems related to itInternal Rate of ReturnSolving Problems Related to Internal rate of ReturnUnderstand about Incremental Cash Flow and Mutually Exclusive Project AnalysisIncremental Cash FlowMutually Exclusive Project AnalysisReplacement Decision Analysis and Lives of AssetReplacement Decision AnalysisType of Lives of Asset1.

Economic Life2. Ownership Life3. Physical Life4.

Useful LifeReplacement Analysis Using PW (Present worth Analysis)Replacement Analysis using Estimated Uniform Annual Cost (EUAC)Solving Problems related to EUAC for Replacement AnalysisUnderstand about the Economic Life of New AssetDepreciationDeprecation of Tangible and Intangible Property and Methods of DeprecationDeprecation of Tangible and Intangible PropertyTypes of Depreciation (Normal and Monetary)Methods of Deprecation1. Straight Line (SL) Method2. Sum of the Year Digit Method3.

Declining Balance Method4. Double Declining BalanceModified Accelerated Cost Recovery (MACRS)Declining Balance with switch over Straight Line MethodModified Accelerated Cost Recovery (MACRS)Solving Problems related to Depreciation and MACRSCost Concept in EconomicsConcepts of Cost, Volume and Break-Even Point for any Start-up BusinessWhat is meant by Cost?