Engineering

Economics
Assignment No. 01

M. Shahzad Tabassum
2012-BT-CIVIL-26
Submitted to: Engr. Fatima Mehvish

Department of Civil Engineering Technology

MNS University of Engineering & Technology Multan

Economics:
 Importance of Economics in Civil Engineering

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.

The following are the economic goals.

A high level of employment

Price stability
Efficiency
An equitable distribution of income
Growth

Engineering economics:

Engineering economics, previously known as engineering economy, is a subset

of economics for application to engineering projects. Engineers seek solutions to problems, and the
economic viability of each potential solution is normally considered along with the technical aspects.
Fundamentally, engineering economics involves formulating, estimating, and evaluating the economic
outcomes when alternatives to accomplish a defined purpose are available.

Importance of Engineering Economics in Civil Engineering:

Civil engineering focuses on providing basic amenities to the public. Without considering
economics, there are very few limits on the scale of what could be undertaken (a 10-bedroom mansion
vs. a 1-bedroom cottage). Taking economic restrictions into account, it is the duty of Civil Engineers
to balance the opposing forces of cost and product. Beyond this, as in any industry, if your competetor
can provide more for less, assuming comparable quality, they will get the work.

Engineering Economics is important to the engineers. The main objective is to make the Civil
Engineer know about the basic law of economics, how to organise a business, the financial aspects
related to business, different methods of appraisal of projects and pricing techniques. A civil Engineer
learns about following points

How to start a construction business

How to get finances
How to account
How to price and bid
How to assess the health of a project

Some given terms also kept in mind by Civil Engineer while designing the Construction project.

Planning
Designing
Cost-benefit of the product
Time value of money

All engineering activities have toward the cost and justification of any work or project. This
means the engineer needs to be aware of what costs are important and how to determine the optimum
way of doing things from an economic standpoint.

1. Time value of money:

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M. Shahzad Tabassum 2012-BT-CIVIL-26 MNS UET MULTAN
 Importance of Economics in Civil Engineering

Time value of money is the idea that money has a different value now than it will in the future.
This is due to a number of dynamic variables, such as inflation and interest rates. These values are
standardized through present and future value calculations, thereby equalizing the time dependent
variables. This is very important for engineers because these calculations provide an intuition as to
how money should be spent and saved, how cash flow should be negotiated in contracts, and how
interest rates can affect the present and future values

2. Cost analysis:

Cost analysis is a key tenant for balancing a businesss budget, as well as for calculating the
viability of a project. Engineers can compare the costs and benefits of a project, and determine
whether the benefits outweigh the costs enough to entertain the project.

3. Interest:

Interest is another concept that is important to economical engineers. Many times, engineering
firms take out significant loans to finance construction of major projects. Having a clear
understanding of the cost of borrowing money is crucial to making appropriate business decisions.

4. Depreciation:

Depreciation is the loss of value in an asset over time. Depreciation plays a major influence on
engineering firms; it is important for engineers to calculate the wear and tear that activities have on
their expensive equipment. This allows them to calculate how much it costs their firm to operate a
piece of equipment for a period of time, and how much they should recoup annually to compensate
for these costs.

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M. Shahzad Tabassum 2012-BT-CIVIL-26 MNS UET MULTAN