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Engineering Economics

Engineering economics is the application of economic principles to engineering project decisions and designs. It allows engineers to evaluate design and project alternatives based on their costs and benefits. Engineering economics provides techniques to simplify comparisons of alternatives and identify the most economical solution - one that makes efficient use of resources. Some examples of where engineering economics can help with decision making include determining whether to lease or purchase a vehicle, selecting between potential engineering designs or projects, and choosing equipment for a manufacturing company based on cost minimization.

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76 views7 pages

Engineering Economics

Engineering economics is the application of economic principles to engineering project decisions and designs. It allows engineers to evaluate design and project alternatives based on their costs and benefits. Engineering economics provides techniques to simplify comparisons of alternatives and identify the most economical solution - one that makes efficient use of resources. Some examples of where engineering economics can help with decision making include determining whether to lease or purchase a vehicle, selecting between potential engineering designs or projects, and choosing equipment for a manufacturing company based on cost minimization.

Uploaded by

amanahmedsiddiquee3
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We take content rights seriously. If you suspect this is your content, claim it here.
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ENGINEERING ECONOMICS

Economics is the science of choice.

We Live in a resource-constrained world. Available resources are insufficient


to satisfy all wants and needs.

Economics is the study of how countries (macroeconomics) and individuals


(microeconomics) make decisions to allocate limited resources.

Engineers apply science and technology to develop cost effective solutions to


practical problems. Cost effective means economic.

Economics is the study of how individuals and groups make decisions about
the allocation of limited resources. Example : Using principles of economics,
a person might decide it is better to lease rather than purchase an automobile.

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Engineering economics is the application of economic techniques to
engineering decisions.

Engineers often have to decide among alternatives. Which of several


designs to use? Which of several projects to pursue?

Engineering economics gives engineers the tools they need to take decisions
that maximize the use of resources.

A successfully engineered solution is one that not only works from a


technical perspective, but also from an economic one.

An economical solution is one that makes efficient use of resources.

Engineering economy is a collection of techniques that simplify


comparisons of alternatives on an economic basis.

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Engineering economy is not a method or process for determining what the
alternatives are.

Engineering economics begins only after the alternatives have been


identified.

If the best alternative solution is actually one, then all the engineering
economic analysis tools will not result in its selection.

In today's competitive world of business it has become essential that


engineers should practice financial project analysis for engineering projects
and make rational decisions.

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SOME EXAMPLES
Let us present few examples in different environments where engineering
economy can facilitate the decision making process.

Business environment:

A small manufacturing company needs to buy a forklift truck for material


Handling. Two different brands, say A and B, are being considered. Which
truck should be bought? The decision will probably be based on
minimisation of cost.

Methods from engineering economy can be used for determining the best
choice.

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