Production engineering is a combination of manufacturing technology, engineering sciences with management science. ... The goal is to accomplish the production process in the smoothest, most-judicious and most-economic way.

1. Economics in
Production Engineering
GED-2101
Fundamental of
Economics

2. prepared by-
Imran Sadiq Shaikat
Saimum Huq
Md. Jannatul Islam Jisan

3. What is Economics?
Study of how people and society choose to
employ scarce resources that could have
alternative uses in order to produce various
commodities and to distribute them for
consumption.
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4. Economics and Engineering
The engineering profession is a repository of
knowledge,technology and experience of key
economic development.Engineering is linked with
economics when we make decision regarding the
allocation of limited resources.
Microeconomics,the branch of engineering
economics relate the two section.
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5. Engineering Economics
Is a subset of economics concerned with the use
and application of economic principles in the
analysis of engineering decision.
Why we need to know?
 Optimal cost-effectiveness
 Alternative possibilities
3

6. Production Engineering
Known as manufacturing engineering,is the
design,development,implementation,operation,maintenance
and control of all processes in the manufacture of product.
Economics in production
Economic well-being is created in a production process,meaning
all economic activities that aim directly or indirectly to satisfy
human wants and needs.
 Market production
 Public production
 Household production
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7. Economic Importance of
Engineering
 Contribute to knowledge economy
 Contribute to economic output
 Engineers’ contribution to sustainability
 Provide side effect of product
 Framework of cost
 Utility of particular product
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8. Factors of Production
The factors of production are resources that are the
building blocks of the economy; they are what
people use to produce goods and services.
Economists divide the factors of production into
four categories: land, labor, capital, and
entrepreneurship.

9. 1)Land
The first factor of production is land, but this includes any
natural resource used to produce goods and services. This
includes not just land, but anything that comes from the
land. Some common land or natural resources are water,
oil, copper, natural gas, coal, and forests. Land resources
are the raw materials in the production process. These
resources can be renewable, such as forests, or
nonrenewable such as oil or natural gas. The income that
resource owners earn in return for land resources is called
rent.

10. 2)Labour
The second factor of production is labor. Labor is the effort that
people contribute to the production of goods and services.
Labor resources include the work done by the waiter who brings
your food at a local restaurant as well as the engineer who
designed the bus that transports you to school. It includes an
artist's creation of a painting as well as the work of the pilot
flying the airplane overhead. If you have ever been paid for a
job, you have contributed labor resources to the production of
goods or services. The income earned by labor resources is
called wages and is the largest source of income for most
people.

11. 3)Production Capital
The third factor of production is capital. Think of capital
as the machinery, tools and buildings humans use to
produce goods and services. Some common examples of
capital include hammers, forklifts, conveyer belts,
computers, and delivery vans. Capital differs based on
the worker and the type of work being done. For
example, a doctor may use a stethoscope and an
examination room to provide medical services. Your
teacher may use textbooks, desks, and a whiteboard to
produce education services. The income earned by
owners of capital resources is interest.

12. 4)Entrepreneurship
The fourth factor of production is entrepreneurship. An
entrepreneur is a person who combines the other factors of
production - land, labor, and capital - to earn a profit. The most
successful entrepreneurs are innovators who find new ways of
producing goods and services or who develop new goods and
services to bring to market. Without the entrepreneur
combining land, labor, and capital in new ways, many of the
innovations we see around us would not exist. Think of the
entrepreneurship of Henry Ford or Bill Gates. Entrepreneurs are
a vital engine of economic growth helping to build some of the
largest firms in the world as well as some of the small businesses
in your neighborhood. Entrepreneurs thrive in economies where
they have the freedom to start businesses and buy resources
freely. The payment to entrepreneurship is profit.

13. How they works?

30. TIME VALUE OF MONEY
 Considering the time value of money is central to
most engineering economic analyses. Cash flows are
discounted using an interest rate, except in the most
basic economic studies.
 For each problem, there are usually many possible
alternatives. One option that must be considered in
each analysis, and is often the choice, is the do
nothing alternative. The opportunity cost of making
one choice over another must also be considered.
There are also non-economic factors to be
considered, like color, style, public image, etc.; such
factors are termed attributes.

31.  Costs as well as revenues are considered, for each
alternative, for an analysis period that is either a fixed
number of years or the estimated life of the project. The
salvage value is often forgotten, but is important, and is
either the net cost or revenue for decommissioning the
project.
 Some other topics that may be addressed in engineering
economics are inflation, uncertainty, replacements,
depreciation, resource depletion, taxes, tax credits,
accounting, cost estimations, or capital financing. All
these topics are primary skills and knowledge areas in
the field of cost engineering.

32. ENGINEERING INDUSTRIAL
ECONOMY
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. Major topics in
engineering industrial economics 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;
 The development, marketing, and financing of new engineering
technologies and products;
 Benefit–cost ratio.

33. FACING CHALLENGES IN
MANUFACTURING
The national economy faces major challenges to rebuild
and retain the nation’s manufacturing capacity, jobs, and
innovative edge in a global, virtual market economy.
Several central questions arose during the course of
workshop discussions on these challenges:
 How can we ensure that the discussion of manufacturing
issues takes place using accurate and useful metrics in the
correct context?
 How do we effectively exploit manufacturing globalization
for the mutual benefit of employees, companies,
consumers, and society, both here and abroad?

34.  How can the manufacturing enterprise effectively
exploit the opportunities presented by new
technologies, especially information technology?
 How can we maintain the pace of innovation, to create
new jobs for those displaced by changes in the
manufacturing enterprise?
 How can we ensure that small and medium-sized
manufacturers remain strong and competitive?
 How can we maintain a sufficient talent pool and
adequately skilled manufacturing workers?
 How can manufacturing enterprises tackle the rising
costs of health care, regulation, and litigation?

35. RESEARCH AND DEVELOPMENT
 To thrive in competitive markets, manufacturers
must innovate, and innovation often relies on
research and new technologies. The increases in
productivity over the past 50 years have been the
result of heavy investment in research and
development by the manufacturing sector. Between
1983 and 1997, the ratio of industry-funded
research and development to sales for all
manufacturing increased from 2.6 to 3.3 percent.
Reduced profits, however, often because of the
recession, have led most companies to decrease
their investments in research and development.
.

36. IMPLEMENTING STANDARDS
 Standards are part of the technical infrastructure that
underpins all aspects of manufacturing, including
innovation. Effective standards for research, production,
and product development can enable a vigorous and
sustainable future for manufacturing. In specifying
characteristics or performance levels, standards promote
efficiency in domestic and international markets.
Although the implementation of new standards always
incurs cost, by adhering to agreed-upon standards,
businesses can negotiate according to widely accepted
criteria for products or services.

39. References:
1.Gollop, F.M. (1979). "Accounting for Intermediate Input:
The Link Between Sectoral and Aggregate Measures of
Productivity Growth". Measurement and Interpretation
of Productivity. National Academy of Sciences.
2.Hulten, C.R. (January 2000). "TOTAL FACTOR
PRODUCTIVITY: A SHORT BIOGRAPHY" (PDF).
NATIONAL BUREAU OF ECONOMIC RESEARCH.
3.Hulten, C.R. (September 2009). "GROWTH
ACCOUNTING" (PDF). NATIONAL BUREAU OF
ECONOMIC RESEARCH.