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Introduction To Engineering Economics

Engineering economics involves applying economic principles to engineering problems and decisions. It helps engineers evaluate the costs and benefits of design alternatives to select the most economically optimal solution. Microeconomics focuses on individual decision-making of consumers and firms, while macroeconomics looks at an overall economy. Supply and demand theory explains how market prices are determined by consumer demand and business supply. Some key aspects of engineering economics include evaluating design alternatives, using consistent metrics like net present value, considering risk and uncertainty, and revisiting decisions over time.

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62 views13 pages

Introduction To Engineering Economics

Engineering economics involves applying economic principles to engineering problems and decisions. It helps engineers evaluate the costs and benefits of design alternatives to select the most economically optimal solution. Microeconomics focuses on individual decision-making of consumers and firms, while macroeconomics looks at an overall economy. Supply and demand theory explains how market prices are determined by consumer demand and business supply. Some key aspects of engineering economics include evaluating design alternatives, using consistent metrics like net present value, considering risk and uncertainty, and revisiting decisions over time.

Uploaded by

Aqib Ali
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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ENGINEERING

ECONOMICS
ENGINEERING

Engineering is the profession in which a knowledge of the mathematical and


natural sciences gained by study, experience, and practice is applied with
judgment to develop ways to utilize, economically, the materials and forces of
nature for the benefit of mankind.
ECONOMICS
• Economics is a social science concerned with the production, distribution, and
consumption of goods and services. It studies how individuals, businesses,
governments, and nations make choices about how to allocate scarce resources.
• Economics can be broadly categorized into types:
1. Microeconomics
2. Macroeconomics
MICROECONOMICS

• Focuses on how individual consumers and firms make decisions; these


individuals can be a single person, a household, a business/organization or a
government agency. 
• Microeconomics tries to explain how and why different goods are valued
differently, how individuals make financial decisions, and how individuals best
trade, coordinate and cooperate with one another.
• Microeconomics' topics range from the dynamics of supply and demand to the
efficiency and costs associated with producing goods and services.
MACROECONOMICS

• Macroeconomics studies an overall economy on both a national and international


level.
• Its focus can include a distinct geographical region, a country, a continent, or even
the whole world.
• Topics studied include foreign trade, government fiscal and monetary policy,
unemployment rates, the level of inflation and interest rates, the growth of total
production output as reflected by changes in the Gross Domestic Product (GDP),
and business cycles that result in expansions, booms, recessions, and depressions. 
SUPPLY & DEMAND THEORY

Demand Curve
SUPPLY & DEMAND THEORY

Supply Curve
SUPPLY & DEMAND EQUILIBRIUM
ENGINEERING ECONOMICS

• Systematic evaluation of the economic merits of proposed solutions to


engineering problems
Acceptable solutions must show:
• A positive balance of long-term benefits over long term costs
• Promote the well-being and survival of an organization
• Embody creative and innovative technology and ideas
EXAMPLES OF FINANCIAL DECISIONS

• Choosing the best design for a high-efficiency gas furnace


• Selecting the most suitable robot for a welding operation on an
automated assembly line
• Making a recommendation about whether jet airplanes for an
overnight delivery service should be purchased or leased
• Determine the optimal staffing plan for a computer help desk
GREEN ENGINEERING IN ACTION
• Energy conservation comprises an important element in environmentally-
conscious (green) engineering. In a Southeastern city, there are 310 traffic
intersections that have been converted from incandescent lights to light-
emitting diode (LED) lights. The study that led to this decision was conducted
by the sustainability manager of the city. The wattage used at the intersections
has been reduced from 150 watts to 15 watts at each traffic light. The resultant
lighting bill has been lowered from $440,000 annually to $44,000 annually.
When engineers went to check the traffic light meters for the first time, they
were shocked by the low wattage numbers and the associated cost. One of them
said, “We thought the meters were broken because the readings were so low.”
The annual savings of $396,000 per year from the traffic light conversion more
than paid for the $150,000 cost of installing the LED lights.
THE PRINCIPLES OF ENGINEERING
ECONOMICS
1. Develop the Alternatives
2. Focus of the Differences
3. Use a Consistent Viewpoint
4. Use a Common Unit of Measure
5. Consider All Relevant Criteria
6. Make Risk and Uncertainty Explicit
7. Revisit Your Decisions
ENGINEERING ECONOMY AND THE DESIGN PROCESS

Table 1. The general relationship between the engineering economic analysis procedure and the
engineering design process

Engineering Economic Analysis Procedure Engineering Design Process


Step Activity
1. Problem recognition, definition, and evaluation 1. Problem/need definition
2. Development of feasible alternatives 2. Problem /need formulation and evaluation
3. Synthesis of possible solutions (alternatives)
3. Development of outcomes and cash flows for each 4. Analysis, optimization, and evaluation
alternative
4. Selection of a criterion/criteria
5. Analysis and comparison of the alternatives
6. Selection of preferred alternative 5. Specification of preferred alternative
7. Performance monitoring and post-evaluation results 6. Communication

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