PRESENT ECONOMY
Engineering Economy is a vital aspect of decision-making for engineers and managers. It involves
evaluating the costs and benefits of various alternatives to make informed choices. In today's rapidly
changing economic landscape, understanding and applying engineering economy principles are more
critical than ever.
Engineering Economy study of economic theories and their applications to engineering problems
with the concept of obtaining maximum benefit at the least cost.
“Economics is the study of scarcity. Resources are limited, and every society wants to figure out how
to allocate its resources for maximum benefit. “_Jodie Beggs, PhD (Harvard U)
SELECTION AND EQUIVALENCE IN PRESENT ECONOMY
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Present economy involves the analysis of problems for manufacturing a product or rendering a
service upon the basis of present or immediate costs. It is highlighted when the effects of time
such as interest and depreciation are negligible. Present economy is employed when the
alternatives to be compared will provide the same result and the period involved in the study
is relatively short.

When alternatives for accomplishing a specific task are being compared over one year or leastand influence of time on money can be ignored, engineering economic analyses are referred to
as present economy studies.
SELECTION AND EQUIVALENCE IN PRESENT ECONOMY
Present economy studies occur in the following situations:
a. Selection of material
In many cases, economic selection among materials cannot be based solely on the costs of materials.
Frequently, a change in materials will affect the design and processing costs, and shipping costs may
also be altered.
b. Selection of method to be used
In mechanical or chemical operations a product may be made by two or more methods giving
equivalent results. Some goods may be delivered by various methods such as using different capacity
trucks, and the results would still be the same regardless of the truck used. These are but a few of the
examples that may be cited to show that certain operations are capable of being done by two or more
methods.
c. Selection of design
In the design of a machine to produce a certain product, the engineer responsible for the work will
usually make as many designs as possible and from which, by a process of elimination, he will select
the design best fitted for the work to be done with particular care being given to the one which will do
the work with most economy.
d. Selection location or site for a project
In the choice of a factory site many factors are often considered such as the cost of the land, the cost
of construction in the different sites, and the difference in transportation cost, and many other factors.
e. Comparison of proficiency among workers
In industrial operations where the efficiency of the workers is a factor affecting costs, it is usually
observed that workers have varying efficiencies. In some occupations only those with better average
proficiencies are acceptable. In teaching for example, other factors being equal, preference should be
given to those teachers who did better than average in their studies.
f. Economy of tool and equipment maintenance
In many activities, tools have to be sharpened from time to time, and equipment have to be kept in
good operating condition all the time. In certain cases, experience will show the best time to perform
certain operations to maintain equipment at the optimum operating efficiency.
g. Economy of number of laborers
In certain industrial operations it is observed that a certain number of workers cooperating on a certain
phase of work will lead to the highest efficiency. An increase beyond this number will usually cause
the taking into effect of the law of diminishing returns. In certain cases, the excess of laborers will
result in some laborers not working at certain times while waiting for the work of other laborers to be
finished.
Time Value of Money (TVM):
In the present economy, the concept of time value of money is paramount. Money today is more
valuable than the same amount in the future due to factors like inflation and opportunity cost.
Cost-Benefit Analysis:
Evaluating the costs and benefits of a project or decision is fundamental. Engineers need to consider
both quantitative and qualitative factors, including environmental and social impacts.
Risk and Uncertainty:
The present economy is marked by uncertainties. Engineers must incorporate risk analysis in their
evaluations, considering the probability of different outcomes and their potential impact.
Sustainability and Ethics:
With a growing emphasis on sustainability, engineers must factor in the long-term environmental and
social impacts of their decisions. Ethical considerations are integral to engineering economy in the
present context.
Application in Projects
1. Infrastructure Development
Assessing the economic feasibility of infrastructure projects is crucial. Engineers must consider
life cycle costs, including maintenance and environmental impacts.
2. Technological Investments
In a rapidly evolving technological landscape, engineers need to evaluate the economic
viability of new technologies, considering both initial costs and potential future benefits.
3. Energy Efficiency and Renewable Resources
Given the current focus on sustainability, engineers play a key role in evaluating the economic
feasibility of energy-efficient systems and renewable energy sources.