R.HARIHARAN AP/EEE

 Engineering is the conscious application of science to the problem of economic production.  Economics is the science of making decision in the presence of scarced resources.  Accounting is the art of recording, classifying and summarizing in a significant manner and in monetory terms the transactions and events which are financial in nature.  Financial accounting involves preparation of trial balance, profit and loss account and balance sheet. This helps in calculating the profit earned or losses incurred during a particular period.

 Managerial economics in the form of engineering economics is a valuable tool to analyze business situations a firm may be in.  It is the study of directing resources in a way that it most efficiently achieves the managerial goals.  It is also the application of the tools of economic analysis in decision making in actual business situations.

 Macro Economic Condition: ◦ This is the economic environment in which the firm operates. ◦ The nature of the environment is broad and almost always decisions of the firm are made within this broad frame work.  Economy in which firm operates is predominantly a free enterprise economy  Present day economy – rapid technological and economic changes  Government intervening in the economic affairs has increased in recent times and is likely to go up further.

 Micro Economic Condition: ◦ It deals with the problems of an individual firm, industry or consumer. ◦ It helps in dealing the issues like allocating resources, to use it efficiently. ◦ Some tools are : elasticity of demand, marginal cost, economics of scale, opportunity cost, market structure.

 Objectives of a business firm  Demand analysis and forecasting  Cost analysis  Production management  Supply analysis  Pricing decisions, policies and practices  Profit management  Capital budgeting and investment decisions  Decision theory under uncertainty  competition

 Managerial economics and operation research  Managerial economics and statistics  Managerial economics and mathematics  Managerial economics and economics  Managerial economics and accounting.

Evaluation and Feedback Diagnosis and Analysis of Causes Recognition of Decision Requirement Development of Alternatives Selection of Desired Alternative Implementation of Chosen Alternative Decision- Making Process      

 Problem Formulation  Decision Making without Probabilities  Decision Making with Probabilities  Risk Analysis and Sensitivity Analysis  Decision Analysis with Sample Information  Computing Branch Probabilities

The economy can be divided into two sectors:  The Private Sector  The Public Sector

 Private individuals and firms that are owned by private individuals  Firms in the private sector include: ◦ Sole Traders ◦ Private Limited Companies (Ltd) ◦ Partnerships ◦ Public Limited Companies (PLC)

 Made up of central government, local government, and businesses that are owned by government  In the last twenty years the number of government-owned firms in the UK has shrunk massively  Now, very few examples remain: for instance, the Royal Mail

One of the key differences is between:  Sole traders and partnerships whose liability is unlimited And  Private Limited and Public Limited Companies, who have ‘limited liability’

 Co-operatives are owned by their staff, who are ‘members’ of the firm  Profits are shared amongst the members  Losses too must be shared

 Many businesses today are franchises  A business idea is licensed to a franchisee  The owners of the brand receive a license fee  The franchisee gains the right to use the business brand

 Many charity-based business organisations are run as ‘not for profit’ operations  They typically receive donations or funds from groups or government  Any financial surplus is ploughed back into the business  The organisation does not aim to generate profits