Engineering Economics

Course Objective:
After completion of this course the students will be able to:

  1. Understand the basic terms, concepts and principles of economics required for management decisions.
  2. Prepare simple farm planning and budgeting to modify existing tools and equipment for better crop production or repair and maintenance work of them.
  3. Carryout the simple economic and financial analysis in the field of agricultural engineering.
  1. Basic Terms and Concepts in Economics [10 hours]
    1. Definition and Scope
    2. Basic Concepts of Goods, Utility, Value, Wealth, Equilibrium and Margin
    3. Consumption and Indifference Curve- Meaning, Types and Properties and Price Effects and Income Effects
    4. Law of Diminishing Marginal Utility- Meaning, Assumption, Limitations and Exceptions
    5. Law of Demand and Elasticity of Demand
    6. Law of Supply and Elasticity of Supply
    7. Concept of Cost Curve
    8. Types of Cost- Real, Opportunity, Implicit, Explicit, Social, Fixed, Variable and Marginal
    9. Short Run and Long Run Cost Analysis
    10. Market and Price Determination:
      1. Market Forms
      2. Characteristics of Perfect Competition Market
      3. Characteristics of Monopoly Market
      4. Characteristics of Monopolistic Market

  2. Production Economics Related to Management Decision [10 hours]
    1. Production Economics and its objectives
    2. Production Relationships:
      1. Factor- Product Relationships
      2. Factor-Factor Relationships
      3. Product-Product Relationships
    3. Principles Involved in Management Decisions
      1. Principle of Diminishing Return
      2. Cost Principle
      3. Principle of Substitution
      4. Principle of Combining Enterprises
      5. Principle of Equi-marginal Returns
      6. Principle of Comparative Advantage
      7. Principle of Time Comparison

  3. Tools of Farm Management [9 hours]
    1. Farm Planning
    2. Farm Budgeting:
      1. Partial Budgeting
      2. Complete Budgeting
    3. Farm Business Analysis:
      1. Farm Records and Accounts
      2. Farm Inventory
      3. Measuring Financial Condition
      4. Measuring Farm Profits
      5. Farm Prices and Production Efficiency
      6. Factors Affecting Farm Costs and Income

  4. Economic and Financial Analysis [8 hours]
    1. Definition of Cash Flow
    2. Interest and Time Value of Money:
      1. Simple Interest
      2. Compound Interest
      3. Interest Tables and Charts
    3. Compounding Factors
    4. Methods of Economic Analysis:
      1. Present Value Method
      2. Future Value Method
      3. Internal Rate of Return Method
      4. Benefit/Cost Ratio Method
      5. Breakeven Analysis
      6. Payback Period Method
    5. Financial Analysis
    6. Risk and Sensitivity Analysis

  5. Investment Decisions [8 hours]
    1. Comparison of Alternatives having same useful life
    2. Comparison of Alternatives having different useful life
    3. Comparison of Alternatives including and excluding the time value of money
    4. Comparison of Alternatives using Capitalized Worth Method
    5. Comparison of Mutually Exclusive Alternatives

Tutorial shall be used in problem solving on such farm management decisions as- profit maximization, optimal input decision, least cost combination and on farm inventory and farm budgeting. In addition case studies on economic analysis of such projects relating to the areas of Agricultural Engineering as- Agricultural Mechanization, Soil Conservation and Watershed Management, Irrigation and Water Management, shall be discussed as case studies. Students shall be given assignments based on these case studies.


  1. Small Business Management: An Entrepreneur's Guidebook by Megginson, I.C., Byrd M.J. and Meginson W.I. McGraw Hill Book Co.
  2. Walter J. Wills. An Introduction to Agricultural Business Management
  3. Economic Analysis for Engineering and Managerial Decision Making by N.N. Borish and S. Kaplan. McGraw Hill Book Co.

Evaluation scheme:
The questions will cover the entire chapter of the syllabus. The evaluation scheme will be as indicated in the table below:      



Marks Distribution*



















*Note: There may be minor deviation in marks distribution.

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