Difference between Cost, Value, Price, Rent, Simple and Compound Interest, Profit, Cash flow Diagram, Annuities and its Types, Demand, Demand Schedule, Law of Demand, Demand Curve, Elasticity of Demand and Supply, Supply Schedule, Supply Curve, Elasticity of Supply Equilibrium, Equilibrium Price, Equilibrium Amount, Factors Affecting Price Determination Law of Diminishing Marginal Utility, Law of Substitution, Concept of Cost of Capital, Time Value of Money, Sources of Project Finance. SPPU PUNE CIVIL ENGINEERING SECOND YEAR CIVIL ENGINEERING 2019 PAT SYLLABUS SOLVED NUMERICALS

1. Imperial College of Engineering and
Research, Wagholi, Pune.
SUBJECT PROJECTMANAGEMENT
CODE
SEM SECOND
CLASS SECONDYEAR CIVIL
DIVISION ALL
A.YEAR 2020-21
UNIT V
TITLE OF UNIT PROJECT ECONOMICS
SUBJECT
TEACHER-
VINAYAK R. PAYGHAN

2.  Economics is the study of flow of finance from
production to consumption of goods & services
 Economics is also an art as well as science that studies
those activities of social, real & normal human beings
which are related to worth
 Construction activity touches every aspect of economics
 Construction industry gives employment to million
workers directly or indirectly
 Following fig. shows how construction influences to the
industries & overall economic development directly
indirectly

3. Economics is the study of flow of finance from production to consumption of
goods & services
Economics is also an art as well as science that studies those activities of
social,real & normal human beings which are related to worth
Constructionactivity touches every aspect of economics.
Construction industry gives employment to million workers directly or
indirectly.
It consist of benefit cost analysis budgeting, accounting and
different technique of appliedEconomics.
Following fig. shows how construction influences to the industries &
overall economic development directly indirectly

4. •Construction industry plays a vital role in the economy of any nation. It
employs largest number of labour, materials and financial resources. Hence the
necessity for the optimum use of these scarce resources.
•In addition, the construction activity precedes any social, business recreational
activities. These construction economics has developed into a separate field
distinct from design and construction.
•This has led to the genesis of modern concept of quantity surveying functions.
•The quantity surveyor is called upon to render advice to the employer on
various aspects of economy in construction from the stage of conception to
completion of the project and even during the life cycle period.
•The employer will look for the value for the money spent by him.
•The Engineer/Quantity surveyor therefore need to possess a thorough
knowledge of the project, market conditions, availability of vendors and
contractors to render his timely and independent advice to the employer.

6. By L. Robbins: economics is a science which studies human
behaviour as a relationship between ends and scarce means
which have alternative uses.
BY A. Marshall : its is the study of mankind in the ordinary
business of life it examines that part of individual and social
action which is most closely connected with the attainment and
with the use of material requisites of well begin
•In short economics can be defined as a social science concerned
with the proper uses and allocation of resources for the
achievement and maintenance of projects.

7. 1. Every project should completed within stipulated
time and resources.
2. The main objectives of project economics is
satisfaction of customer and contractor.
3. The resources which is most scare has to
monitored first.
4. Quality should be achieved with optimum
utilization of resources.

8. COST
•The amount or money that spent to make that particular
product.
•The cost of the product/service is the effort/amount you
spent to produce it.
•Cost may be fixed or variable.

9. PRICE
•Price is the financial reward for providing the product/service.
•Price is the amount of money that customer pays.
•Price is exchange value.
•Price is depends on the supply and demand.

10. VALUE
It is defined by the customers sight of view and represents
their appraisal of the worth of the product/service .

11. Rent-
It is that part of payment that is made for use of land only.
Rent is price paid for the use of land and other natural
resources.
It includes wages of labor, inertest and profit.

12. •Principal:
The money borrowed or lent out for a certain period is called the
principal or the sum.
Interest:
Extra money paid for using other's money is called interest.
Simple Interest (SI):
If the interest on a sum borrowed for certain period is reckoned
uniformly, then it is called simple interest.
Referance- http://placement.freshersworld.com/quantitative-aptitude-questions-
and-answers/simple-and-compound-interest-key-notes/331118609

13. Interest (I) = Pin =P n i
Amount (A) = P(1+ i n)
i = rate of interest
P = principal amount
A = Future sum of money paid
n = the time in years (no. of years)

14. Suppose x person deposit Rs 50000 in a savings account.
The interest rate is 4% per year. Find the interest earned in 9
years. Find the total of principal plus interests.
SOLUTION-
A= P(1+ i n )
P = 50000,
i = 0.04 = 4%,
n = 9 (in years), then
50000 x 0.04 = 2000 = interest on one year
50000 x 0.04 x 9 = 18000 interest
50000 + 18000 = Rs 68000
Rs 68000 is a amount in account after 9 years.

15. Compound Interest is when the bank pays interest on the Principal and
the Interest already earned.
The Balanceis the Principal PLUS theInterest.
The Balance becomes the Principal on which the bank figures the next
interest payment when doing Compound Interest.

16. Compoundinterest is calculated by multiplying the initial principal amount by one plus
the annual interest rate raised to the numberof compound periods minus one. Interest can
be compounded on any given frequency schedule, from continuous to daily to annually.
One can find a balance using compound interest in one step by using with the compound
interest formula.
An interest period is the length of time over which interest is calculated.
The Interest Period can be a year or less than a year.
A = P (1 + i) n
A =final amount
P=initial principal balance
i=interest rate
n =number of times interest applied per time period

17. YEAR PRINCIPAL
AMOUNT
INTREST TOTAL PRINCIPAL
AMOUNT AT THE
YEAR END
2019 10000 1000 11000
2020 11000 1100 12100
2021 12100 1210 13100
2022 SO ON

18. Profit is a financial gain, especially the difference between the
amount earned and the amount spent in buying, operating, or
producing something.
Profit is the revenue remaining after all costs are paid. These
costs include labour, materials, interest on debt, and taxes. Profit
is usually used when describing business activity. But everyone
with an income has profit. It's what's left over after paying the
bills.

19. Gross Profit
Gross profit subtracts variable costs to revenue for each product line. Variable
costs are only those needed to produce each product, like assembly workers,
materials, and fuel. It doesn't include fixed costs, like plants, equipment, and the
human resources department. Companies compare product lines to see which is most
profitable.
Operating Profit
Operating profit includes both variable and fixed costs. Since it doesn't include
certain financial costs, it's also commonly called EBITA. That stands for Earnings
Before Interest, Tax, Depreciation, and Amortization. It's the most commonly used,
especially for service companies that don't have products.
Net Profit
Net profit includes all costs. It's the most accurate representation of how much
money the business is making. On the other hand, it may be misleading. For
example, if the company generates a lot of cash, and it's invested in a rising stock
market, it may look like it's doing well. But it might just have a good finance
department and not be making money on its core products.

23. An annuity is simply a series of future cash payments that occur at a
regular interval. The payments can be different amounts, but must occur
regularly - usually monthly, quarterly, or annually.
Periods – year or month
Example- Higher purchase payments , installments buying , LIC Premium
payments are made by this method
Kind of annuities:
1.Present Worth Annuity
2.Capital Recovery Annuity
3. Sinking Fund Annuity

24. The present value of an annuity is the current value
of future payments from an annuity, given a
specified rate of return, or discount rate. The higher
the discount rate, the lower the present value of the
annuity.
PW =PMT X ( ( 1- (1/(1 + r) n/) / r
where:
P=Present value of an annuity stream
PMT= amount of each annuity payment
r=Interest rate (also known as discount rate)
n=Numberof periods in which payments will be made​

25. Capital Recovery Annuity is the earning back of the initial funds
put into an investment. When an investment is first made in an
asset or a company, the investor initially sees a negative return,
until the initial investment is recouped. The return of that initial
investment is known as capital recovery. Capital recovery must
occur before a company can earn a profit on its investment.
CRF= i (1 + i)n /( (1 +i) n – 1))
i = compound interest
n = periods of investment

26. A sinking fund is a fund containing money set aside or saved to pay off a
debt or bond. A company that issues debt will need to pay that debt off in
the future, and the sinking fund helps to soften the hardship of a large
outlay of revenue. A sinking fund is established so the company can
contribute to the fund in the years leading up to the bond's maturity.
This is applied to define sum required to be called at future date by
setting aside at equal interval of time amount so that these equal
period payment while earning compound interest total up the desired
amount at the desire future date
Formula for sinking fund factor
Sinking FundAnnuity formula -
A = P.A (n . i)
A = Saving amount
P = Periodic payment
n = Period of payment

27.  It is defined as, an economic principle that describes
a consumer's desire and willingness to pay a price for
a specific good or service. Holding all other factors
constant, the price of a good or service increases as
its demand increases and vice versa.

28.  Types of demand
 1.Price demand
 2. Income demand
 Price demand- if refers to the the various quantities of a
commodity or services that consumer would purchase at a
given time in market at various hypothetical price with other
things constant. Demand of an individual consumer is called
individual consumer demand. Total demand for the product of
an individual at various prices is known as individual seller
demand.
 Income demand - various quantities of goods and services
which would be purchased by the consumer at his various
levels of income is called income demand, with other things
such as rest price remaining constant. Income of an individual
increases purchase capacity also increases.

29.  Demand schedule- it is a table which shows the
various quantities of product which consumer are
willing to purchase at a specific price during a
specified of time.
 Demand curve- it is a graph which shows the
relationship between price and demand of quantity
as shown in below.

30.  Types of demand schedule
 1. Individual demand schedule
 2. Market demand schedule
 1. Individual demand schedule- this type of schedule
all list includes the items which required for the
personal use. It indicates the quantity of a particular
committee that individual is willing to buy at each
specific price at a given period of time.
 Following table indicates individual demand
schedule

31.  1. Individual demand schedule-
 Following table indicates individual demand
schedule

32.  Types of demand schedule
 1. Individual demand schedule-
 This schedule it is observed that, when the rate is 30
only 1 kg e and price goes down the quantity
demand is increase.

 Demand curve- let show the above information by
using a systematic graph which is known as demand
curve. The graph shows and indicates the
relationship between price of the product and
demand of the product.

33.  Types of demand schedule
 2. Market demand schedule
 Market demand schedule
 The market as a whole companies of large number of consumers. Market demand
means the demand of all consumers within the market for humidity at a particular
price. Market demand schedule is the summation of the individual demand
schedule of all consumers of that entity in the market.
 You understand take following example
 Let's see
 1. At 30/ e per kg 1 kg, A demand 1 kg of banana while B also demand 1kg banana
but total demand for respective item is 2 kg.
 2. For any case we can determine the demand of of the banana for an particular
timing, let see at a price 15 the A demand 3 kg and B is 4 kg so total demand is 7
kg.
 Demand curve- graph shows the nature of demand curve

34.  Types of demand schedule
 2. Market demand schedule

35.  Types of demand schedule
 2. Market demand CURVE

36.  Law of demand- the law of demand which is based on the law
of diminishing marginal utility, state the relationship between
increase in price and its effect on demand. Duty on services is
formed by the reduction in demand and a fall in price is
followed by increase in demand, if condition of demand
remains constant.
 Other can define as the greater the amount to be sold the
smaller must be the price at which it is offered in order that it
me. On the amount demanded demanded increases with fall
in price and diminishes with a rise in price.
 Law of demand states that "people will buy more at a lower
price and buy lease and higher price, other things remaining
constant."
 Law of demand depends upon the price and given by and
mathematical equation
 D= f (P)
 i.e. Demand is a function of price

38.  Demand curve
 To understand the concept of the demand curve in
the above graph. Is the demand curve for an
imaginary consumer or product. Figure shows that,
is the price decreases, the demand increases and vice
versa.
 The demand curve slope, download in accordance
with law of of diminishing marginal utility. When
the price Falls more supplier enter into the market
and old purchaser make purchase more.

39.  Graph price is shown on y axis and quantity on x
axis
 At a price P"(high price) , demand of quantity is L
(low price),
 For a price scenery for a price P' - low price and
quantity demand is N high price.

40.  We know that the as per the law of demand, as the
price of the product changes, the demand also
changes. The rate at which the demand for a product
changes when its price changes is known as the
elasticity of demand. Mathematically

41.  The method of finding Elasticity of demand of
demand is called as proportional method.
 Types of Elastic demand
 1. Perfectly elastic
 2. Perfectly inelastic
 3. Relative elastic
 4. Relative inelastic

42. supply is defined as
Supply is "the quantity of good, sailors wish to sell at
each conceivable price."
supply is related to
Time and price
Higher the price greater is the supply and lower the
price lower the supply

44. In above diagram quantity supply is shown on on x
axis whereas price is given on y axis.
Converselywith demand curve slopes from left to
right.
The Price bellow Which the Sailor refuge to sale is
called the Reserve price.
If price falls too much supply may be falls together.

45. Law of Supply
the law of supply demonstrates the quantities that
will be sold at a certain price. But unlike the law of
demand, the supply relationship shows an upward
slope. This means that the higher the price, the higher
the quantity supplied. Producers supply more at a
higher price because selling a higher quantity at a
higher price increases revenue.
The supply of goods "X" is a function of price x,
Sx= f (Px)

46. Law of supply states that the supply depend upon
the price of commodity.

47. Law of Supply
A, B and C are points on the supply curve. Each point on
the curve reflects a direct correlation between quantities
supplied (Q) and price (P). At point B, the quantity
supplied will be Q2 and the price will be P2, and so on.

48. SupplySchedule
List of quantityand the price of respective commodity.Let's
see the supply schedule for mango
It is observed in the above table when the price is at hundred
percent 6 units in use of the commodity are are offered to
sale.
Supplycurve
Supplycurve the y-axis represent the price and x axis is
quantityquantity of commodity.

49. Supply Schedule
List of quantity and the price of respective commodity. Let'ssee the supply schedule for
mango
It is observed in the above table when the price is at hundred percent 6 units in use of
the commodity are are offered to sale.
Supply curve
Supply curve the y-axis represent the price and x axis is quantity quantity of
commodity.

50. The supply curve, labeled S in
the figure, shows how the
quantity of a good offered for
sale changes as the price of
the good changes. The supply
curve is upward sloping: The
higher the price, the more firms
are able and willing to produce
and sell.
If production costs fall, firms
canproduce the same quantity
at a lower price or a larger
quantity at the same price. The
supply curve then shifts to the
right (from S to S’).

51. Change in price of a good or
Service leads to
Change in quantity supplied
Change in costs, input prices,
technology, or prices of related
goods and services leads to
Change in supply

52. If small rise or fall in the price leads to large decrease
or increase in supply respectively, the supply is called as
elastic supply.
On the other hand if large change in the price brings
only a small change in supply , it is called as inelastic
supply

53.  Types of elasticity supply
 1. Price inelastic supply- supply of commodity is not
affected by change in price then it is said to be perfectly
inelastic supply.
 2. Perfectly elastic supply- the supply is said to be
perfectly elastic if any negligible change in price bring
about infinite change in the quantity supplied.
 3. Relatively inelastic supply - the supply is said to be
relativity in elastic when a considerable change in price
bring about a small change in supply.
 4. Relative Lee elastic supply- when the negligible
change in price plus or minus bring about a
considerable change in supply date which supply term
as relatively elastic supply

56. To understandwhat is the equilibriumprice see above
figure.
Above figure shows x axis having quantity y axis as a price.
To determine or find equilibriumprice, plot demand curve
DD and supply curve SS as shown in figure.
He is the equilibriumprice point. At a point below distance
betweensupply curve and the demand curve at this shows
the the excess demand at this price.
For example and JCB at 20 lakh quantity suppliedis 40
numbers per year if the quantity demanded 120 number Year
the the distance AB represent the the excess demand of the
numbers per year.

57. Equilibrium amount-
All the equilibrium price is term as the
equilibrium amount.

59. Is stated by Marshall as "the additional benefit which person
derived from the given increase in his stock of things
diminishes with every with every increase in stock that he
already has."
Marginal utility is defined as" the change in total utility
resulting from a one unit change in conjunctions of a
commodity union time".
Assumptions
1. The commodity should have suitable Units.
2. The consumption of the commodity should be done at the
same time.
3 The test consumer remains the same.
4. Income of the consumer should be remain the same.
5. There is a no change in trends.

61. At time of purchasing of commodity; we are continuously weighing in our
mind little more or little less it.
It means balancing the marginal utility of commodity and money.
We are continuously in one commodity another with money as a bridge and
aiming at maximum satisfaction. This principle is called as law of
substitution.
Application
1. Is applicable to the consumption of limited resources. The expenditure can
be rearranged to get maximum satisfaction.
2. It is also applicable to the production in deciding the most economical
combination.
3. To exchange goods.
4. To equal distribution of goods.

62. Concept of cost capital
The the ratio Which is used to discount a company future cash
flow to the present is known as company required returns are
cost of capital.
It also represent a hurdle rate that a company must overcome
before it can generate value.
It also referred to the opportunity cost making a specific
investment.
It is the rate of return that could have to opportunity cost
making a specific investment.
It is the rate of return that could have been earned by putting
the same money in two different things made with equal risk.
It means the cost of capital is the rate of return required to
proceed the investor to make a given investment.

63. Definitionof capital :
Capitalis life line of any project. It can be in the form
such as money, land, property .
capital can be define as a wealth which created over a
periodof time
Cost of Capital:
The loan/ capital providers like bank, share holders etc.
want to suitably compensated for investing funds in the
project. This expectation is known as cost of capital
and
the expression in the terms of percentage . It is the
discount rate used for converting the expected cash flow
into its present value.

64. The change in amount of money over a period of time is
calledtime value of money.
Time value of money is relatedwith interest rate and their
effect.
TVM important concept of Financial Management.
It is based on concept that rupee that you have today is
worthmore than the expectations that you will receive a
rupee in future.
Example- if you have invested10000 RS at 9 percent of RI
for on 1 year=
The amount after 1 year equal to
=10000+(9/100)*10000= 10090

65. Sources of project Finance
Finance is necessary
1. Complete project
2. Expand project
3. Expenditure
4. Utilise the resources

66. Sources of project Finance-Concept of debt capital finance-
Debt- this type of capital involves borrowing money to be rapid
and interest.
Rising capital through debt financing does not include or
involves selling equity but works by borrowing against it.
This facility is available only for the owner, who have
something of value that the lender can instantly liquidate.

67. Concept of equity capital
Equity- involve the raising money by selling interest in the company.
Ass Owner business person or company you hold ownership to a subjective
value is called equity.
Equity of any type of property whether intellectual or physical is the value
someone is willing to pay for it - any liability attached to it.
Once owner and investor determine the valuation of equity the owner can then
sale part of equity in order to raise the capital.e

68. Capitalrequirefor following purposes:
To promotes a business
To conduct business operation smoothly
To expand the diversity
To meet contingencies (sudden fall in sales, natural
calamities)
To pay taxes
To pay interest to shareholders.
To replace the assets like plants and machinery To
support welfare programs
To wind up the business