principle of economics

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ADAMA SCIENCE AND TECHNOLOGY UNIVERSITY
SCHOOL OF CIVIL ENGINEERING AND ARCHITECTURE
DEPARTMENT OF CIVIL ENGINEERING

Course Title: ENGINEERING ECONOMICS
Course Code: CEng 5301
Lecturer: Natnael Fantu (M.Sc.)
Credit Hrs. 3
E-Mail:
Program: 5th year Civil Eng.
A/Y & Sem.: 2020/21, Second Sem.

,ASTU Engineering Economics Compiled By: Nati




CHAPTER TWO

PRINCIPLES OF ENGINEERING
ECONOMICS
(BASIC CONCEPTS)
Instructor: Natnael Fantu (M.Sc.)


July,2021

, ASTU Engineering Economics Compiled By: Nati

 2.1 PRINCIPLES OF Eng. Economics
 Four Principles of Engineering Economics:
1. A nearby money is worth more than a distance money.
 Fundamental concept in E.E. is that Money has a time
value. /Interest Concept./
2. All that counts is the difference among Alternatives.
 An economic decision should be based on the differences
among alternatives. /Decision Making among alternatives
concept/
 An economic decision should be based on the objective of
making the best use of limited resources.
 Whenever a choice is made, something is given up, the
opportunity cost.

, ASTU Engineering Economics Compiled By: Nati

3. Marginal Revenue must exceed Marginal Cost.
/Cash Flow Concept/

4. Additional risk is not taken without the expected
additional return. /MRR and Payback Concept/
 Investors demand a minimum return that must be
greater than the anticipated rate of inflation or potential
risk.