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Economics of Engieering
Economics
Economy (oikia nomos)
Economics is the social science that studies
Aneconomyoreconomic
economic
activity to gain ansystemconsists
understanding of
of the
theproduction,distributionortrade,
processes
that govern the production, distribution
andconsumptionof
limitedgoodsandservicesby
and
consumption of goods
and services in an
differenteconomy
agents in a given geographical location.
exchange
The economic agents can be individuals, businesses,
or governments.
Inorganizations,
other words, economics
is the study of the
production and consumption of goods and the
transfer of wealth to produce and obtain those
goods. Economics explains how people interact
within markets to get what they want or accomplish
certain goals.
http://www.ted.com/talks/julian_treasure_5_ways
_to_listen_better
Asst. Prof. Dr. Bugra Cicek- Yldz Technical University -2014
Economic Terms
16,244,600 M$
Turkey
788,299 M$
Gross Domestic product (GDP): The total of goods and services produced by a nation over a given period,
usually 1 year. Gross Domestic Product measures the total output from all the resources located in a country, wherever the owners of
the resources live.
Asset:Anything of monetary value that is owned by a person.
Assetsinclude real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, etc)
Average total costis the sum of all the production costs divided by the number of units produced.
Balance of trade:The difference in value over a period of time between a country's imports and exports.
Barter system:System where there is an exchange of goods without involving money.
Bid price:The highest price an investor is willing to pay for a stock.
Break even:This is a term used to describe a point at which revenues equal costs (fixed and variable).
Budget:A summary of intended expenditures along with proposals for how to meet them.
A budgetcan provide guidelines for managing future investments and expenses.
Capital:Wealth in the form of money or property owned by a person or business and human resources of economic value.
Capitalis the contribution to productive activity made by investment is, physical capital (machinery, factories, tools and equipments)
and human capital (eg general education, health).
Capital is one of the three main factors of production other two are labour and natural resources.
Cartel:An organization of producers seeking to limit or eliminate competition among its members, most often by agreeing to restrict output
to keep prices higher than would occur under competitive conditions.Cartelsare inherently unstable because of the potential for producers
to defect from the agreement and capture larger markets by selling at lower prices.
Asst. Prof. Dr. Bugra Cicek- Yldz Technical University -2014
Russia
U.K
U.S.A
France
China
USA
Europe
Brazil
What is a Cartel?
Jewelleries in Grand Bazaar can be called Cartel?
or EU?
Census:Official gathering of information about the population in a particular area. Government departments use the data collected in
planning for the future in such areas as health, education, transport, and housing..
Central bank:Major financial institution responsible for issuing currency, managing foreign reserves, implementing monetary policy,
and providing banking services to the government and commercial banks.
Centrally planned economy:Aplanned economic systemin which the production, pricing, and distribution of goods and services are
determined by the government rather than market forces. Also referred to as a "non market economy." Former Soviet Union, China,
and most other communist nations are examples of centrally planed economyClassical economics:The economics of Adam Smith,
David Ricardo, Thomas Malthus, and later followers such as John Stuart Mill. The theory concentrated on the functioning of a market
economy, spelling out a rudimentary explanation of consumer and producer behaviour in particular markets and postulating that in the
long term the economy would tend to operate at full employment because increases in supply would create corresponding increases in
demand.
Closed economy:Aclosed economyis one in which there are no foreign trade transactions or any other form of economic contacts
with the rest of the world.
Copyright:A legal right (usually of the author or composer or publisher of a work) to exclusive publication production, sale,
distribution of some work. What is protected by the copyright is the "expression," not the idea. Notice that taking another's idea is
plagiarism, so copyrights are not the equivalent of legal prohibition of plagiarism.
http://www.ted.com/talks/rob_reid_the_8_billion_ipod#t-286767
Cost benefit analysis:A technique that assesses projects through a comparison between their costs and benefits, including social costs
and benefits for an entire region or country. Depending on the project objectives and its the expected outputs, three types of CBA are
generally recognised: financial; economic; and social. Generally cost-benefit analyses are comparative, i.e. they are used to compare
alternative proposals. Cost-benefit analysis compares the costs and benefits of the situation with and without the project; the costs
and benefits are considered over the life of the project.
Developing country, less developed country, underdeveloped country or third world country: a country characterized by low levels of
GDP and per capita income; typically dominated by agriculture and mineral products and majority of the population lives near
subsistence levels.
Dumping occurs when goods are exported at a price less than their normal value, generally meaning they are exported for less than
they are sold in the domestic market or third country markets, or at less than production cost.
Direct investment:Foreign capital inflow in the form of investment by foreign-based companies into domestic based companies.
Portfolio investment is foreign capital inflow by foreign investors into shares and financial securities. It is the ownership and
management of production and/or marketing facilities in a foreign country.
Economic growth: Quantitative measure of the change in size/volume of economic activity, usually calculated in terms of gross
national product (GNP) or gross domestic product(GDP).
Economicdevelopment:The process of improving the quality of human life through increasing per capita income, reducing poverty,
and enhancing individual economic opportunities. It is also sometimes defined to include better education, improved health and
nutrition, conservation of natural resources, a cleaner environment, and a richer cultural life.
Econometrics:The application of statistical and mathematical methods in the field of economics to test and quantify economic
theories and the solutions to economic problems.
Economic policy:A statement of objectives and the methods of achieving these objectives (policy instruments) by government,
political party, business concern, etc. Some examples of government economic objectives are maintaining full employment, achieving
a high rate of economic growth, reducing income inequalities and regional development inequalities, and maintaining price stability.
Policy instruments include fiscal policy, monetary and financial policy, and legislative controls (e.g., price and wage control, rent
control).
Free trade:Free tradein which goods can be imported and exported without any barriers in the forms of tariffs, quotas, or other
restrictions. Free trade has often been described as an engine of growth because it encourages countries to specialize in activities in
which they have comparative advantages, thereby increasing their respective production efficiencies and hence their total output of
goods and services.
Free-trade areaA form of economic integration in which there exists free internal trade among member countries but each member is
free to levy different external tariffs against non-member nations.
International Monetary Fund (IMF)An autonomous international financial institution that originated in the Bretton Woods Conference
of 1944. Its main purpose is to regulate the international monetary exchange system, which also stems from that conference but has
since been modified. In particular, one of the central tasks of the IMF is to control fluctuations in exchange rates of world currencies in
a bid to alleviate severe balance of payments problems.
Macroeconomics:The branch of economics that considers the relationships among broad economic aggregates such as national income,
total volumes of saving, investment, consumption expenditure, employment, and money supply. It is also concerned with determinants
of the magnitudes of these aggregates and their rates of change over time.
Market: The Stage
Microeconomics:The branch of economics concerned with individual decision units--firms and households--and the way in which their
decisions interact to determine relative prices of goods and factors of production and how much of these will be bought and sold. The
market is the central concept in microeconomics.
Monopoly:A market situation in which a product that does not have close substitutes is being produced and sold by a single seller.
National debt:Treasury bills, notes, bonds, and otherdebtobligations that constitute the debt owed by the federal government. It
represents the accumulation of each year's budget deficit
Public debt: Borrowing by the Government of India internally as well as externally. The total of the nation's debts: debts of local and
state and national governments is an indicator of how much public spending is financed by borrowing instead of taxation.
Asst. Prof. Dr. Bugra Cicek- Yldz Technical University -2014
Organization for Economic Cooperation and Development (OECD):An organization of 20 countries from the Western world including
all of those in Europe and North America. Its major objective is to assist the economic growth of its member nations by promoting
cooperation and technical analysis of national and international economic trends.
Quota:Aquotais a physical limitation on the quantity of any item that can be imported into a country, such as so many automobiles
per year. Also a method for allocating limited school places by noncompetitive means--for example, by income or ethnicity.
VAT:A form of indirect sales tax paid on products and services at each stage of production or distribution, based on the value added at
that stage and included in the cost to the ultimate customer. KDV
MICROECONOMICS MAKROECONOMICS
Microeconomics
Economy of individuals;
Induvidual units
Firms
Households
Individual prices
Wages/salary
Particular industries
Macroeconomics
From Greek word makros means larger
Macro economics is the field studying large part of the economy The whole The economic behaviour of the economy as whole.
Macroeconomics studies all individual systems but the aggregates of these
individuals, not with the induvidual incomes, but with national income, not with
individual prices but with prices level, not with indivusal output, but with national
output.
Total consumption
Total savings
Total investment
Total output
National Income
Inflation & Deflation
Economic Growth
Employment& unmemployment
Financial
Planning
Investment /
Loan
Manufacturing
Marketing
Profit!
Example ;
Analyse
Production Methods
Engineering Safety
Environmental impacts
Evaluate
Expected Profitability
Timing of Cah Flows
Degree of Financial Risk
Evaluate
Impact on Financial Statements
Firmss market value
Stock Price
Accounting
Past
Engineering Economics
Present
Future
Estimating the Process Design Based Investments for Material Sciences Engineering
4. Pipelines
a. Process pipelines
b. Pipeline construction
8. Deputy Facilities
a. Utilities- cooling, compressed air, nitrogen tanks, gas tanks, fine raw material silos
b. Environment Protecting Units Waste water treatment, wate organic control units, incinerator,
spray dryer locating and extermination units.
c. Off the Process Units Office equipment, infromation technologies and planning units, catering
services, maintenece services, safety and security units, medical unit equipments,
d. Distirubution and packaging Product depots, coding systems, loading stations, forklifts.
3. Construction expenses
a. Temporary facilities, roads offices, electrical construction etc.
b. Earth mover, crane etc. rental
c. Engineering, accounting of the (worksite) construction area
d. Permissions, feasibility tests, licenses
e. Tax, insurance etc.
4. Contructor Fees
5. Contingency (unexpected expenses)
Macroecomic reasons
Investment
Direct investment
Average %
20.0 40.0
21.5
7.3 26.0
2.5 7.0
3.5 15.0
8.2
2.8
6.1
2.5 9.0
6.0 - 20.0
1.5 5
8.1 35.0
1.0 -2.0
6.0 12.0
3.8
7.6
2.1
12.0
1.0
6.6
4.0 21.0
4.8 22.0
1.5 5.0
6.0 18.0
8.6
9.6
2.0
8.1
Indirect investment
Percentile Band %
100.00
1. Plant Expenses
a- Items and Materials
- Raw Materials
- Assist Materials (related materials , I.e.; foaming agents, solvents)
- Utilities
- Maintenance Materials
- Operating Materials (gas, nitrogen etc.)
b- Labour
- Direct Plant Labour
- Production Tracking
- Maintenance Labour
- Maintenance Tracking
- Other Labour costs i.e; overtime, travel aid.
c. Overheads
-
Administration costs
Indirect labour costs
Personnel and industrial relations
Health, security expenses
Communication expenses
Catering restaurant
Local abonments
d. Deprecitation
2. Distrubition Costs
a. Transport and Packaging
b. Stations and deposits (dealers are not counted!)
4. Administration Expenses
a. Salaries of the Management
b. Accounting, inspection etc..
c. Legal management
d. Public Relations
e. Taxes and insurance
Technological advancement
Extinction: no longer in fashion
Inappropriateness: with other options available, asset is no longer
attractive.
Expiry:right to use has expired over time
Exhaustion:for example mines and wells whereasset loses its value as a
result of extraction of minerals