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    Engineering Economics

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    Akshay
    Engineering economy involves evaluating the costs and benefits of engineering projects to determine the most economically viable design or solution. It is important because engineers must consider both technical and economic factors in their decision making. Engineering economy uses analytical tools and concepts like present/future worth, payback period, rate of return, and benefit-cost ratio to evaluate alternatives and select the best option. While economic factors are important, decisions may also consider social, environmental, legal, political, and personal impacts. The goal is to understand the problem, define alternatives, evaluate each using time value of money concepts, and select the optimal alternative to implement.

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    Engineering Economics

    Uploaded by

    Akshay
    206 views32 pages
    Engineering economy involves evaluating the costs and benefits of engineering projects to determine the most economically viable design or solution. It is important because engineers must consider both technical and economic factors in their decision making. Engineering economy uses analytical tools and concepts like present/future worth, payback period, rate of return, and benefit-cost ratio to evaluate alternatives and select the best option. While economic factors are important, decisions may also consider social, environmental, legal, political, and personal impacts. The goal is to understand the problem, define alternatives, evaluate each using time value of money concepts, and select the optimal alternative to implement.

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    Engineering economics

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    Engineering economics

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    Engineering economy involves evaluating the costs and benefits of engineering projects to determine the most economically viable design or solution. It is important because engineers must consider both technical and economic factors in their decision making. Engineering economy uses analytical tools and concepts like present/future worth, payback period, rate of return, and benefit-cost ratio to evaluate alternatives and select the best option. While economic factors are important, decisions may also consider social, environmental, legal, political, and personal impacts. The goal is to understand the problem, define alternatives, evaluate each using time value of money concepts, and select the optimal alternative to implement.

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    © All Rights Reserved
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    Download as pdf or txt
    206 views32 pages

    Engineering Economics

    Uploaded by

    Akshay
    Engineering economy involves evaluating the costs and benefits of engineering projects to determine the most economically viable design or solution. It is important because engineers must consider both technical and economic factors in their decision making. Engineering economy uses analytical tools and concepts like present/future worth, payback period, rate of return, and benefit-cost ratio to evaluate alternatives and select the best option. While economic factors are important, decisions may also consider social, environmental, legal, political, and personal impacts. The goal is to understand the problem, define alternatives, evaluate each using time value of money concepts, and select the optimal alternative to implement.

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    of 32

    Importance of Engineering Economics

    Lecture 1
    Shahid Iqbal
    What is Engineering Economy ???

    Engineering economy is a subset of economy for


    application to engineering projects
    Engineers seek solutions to problems, and the economic
    viability of each potential alternative or design is normally
    considered along with the technical aspects
    Engineering economy involves the evaluation of the costs
    and benefits of proposed projects
    Why Engineering Economy is Important?
    ƒ There are lots of factors that are considered in making Decisions,
    these factors are combinations of economic and non economic
    ones.
    • Engineers play a major role in investment by making decisions
    based on economic analysis and design considerations
    Thus, decisions often reflect the engineer’s choice of how to best
    invest funds by choosing the proper alternative out of a set of
    alternatives
    Role of Engineering Economy in Decision
    Making

    • Engineers make decisions but tools and computers do not.


    • Tools assist engineers in making decisions.
    • Decisions affect what will happen in the future and thus the
    time frame of engineering economy is the future.
    • So, engineering economy analysis presents the best estimates
    of what is expected to occur.
    •
    Role of Engineering Economy in Decision
    Making
    ƒ Understand the Problem
    ƒ Collect all relevant data/information
    ƒ Define the feasible alternatives
    ƒ Evaluate each alternative
    ƒ Select the “best” alternative
    ƒ Implement and monitor
    Role of Engineering Economy in Decision
    Making
    • The economic evaluation of alternatives is based on the so
    called “Measure of Worth” such as:
    • Present worth: amount of money at the current time
    • Future worth: amount of money at some future time
    • Payback period: Number of years to recover the initial
    investment and a stated rate of return.
    • Rate of return: Compound interest rate on unpaid or
    unrecovered balances.
    • Benefit/cost ratio
    There are other factors that affect the decision
    making such as:
    ƒ Social
    Environmental
    Legal
    Political
    Personal
    This may place less reliance on the economic-based factors yet
    this also shows the importance of knowing all the involved
    factors including the economic ones
    Time Value of Money
    ƒ Time Value of Money (TVM) is an important concept
    • TVM is based on the concept that money that you hold today is
    worth more because you can invest it and earn interest
    • For instance, you can invest your dollar for one year at a 6%
    annual interest rate and accumulate $1.06 at the end of the
    year.
    • You can say that the future value of the dollar is $1.06 given a
    6% interest rate and a one-year period
    THINKING LIKE AN ECONOMIST
    Every field of study has its own language and its own way of
    thinking:
    ƒ
    ƒ Mathematicians talk about integrals, and vector
    spaces.
    ƒ Psychologists talk about ego, and cognitive
    dissonance
    ƒ Lawyers talk about the legal terms.
    ƒ Economics is no different. Supply, demand, elasticity,
    comparative advantage, consumer surplus, deadweight loss—
    these terms are part of the economist’s language.
    Economic Order of Islam
    ISLAM is not an ascetic religion and does not aim at depriving
    Muslims of the 'good things that God has provided' (al-Qur'an, 7: 32).
    Virtue therefore lies not in shunning the bounties of God, but in
    enjoying them within the framework of the values for 'righteous
    living' through which Islam seeks to promote human welfare.

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