The application of knowledge in mathematical and natural sciences, gained through study, experience, and practice, to develop economic solutions for the benefit of mankind.
Definition of Economics
A science dealing with the production, consumption, and distribution of goods and services to promote human welfare.
Engineering Economics
The field that merges engineering and economic principles to analyze the economic merits of engineering solutions, ensuring a balance of long-term benefits over costs.
Systematic Evaluation
Engineers perform quantitative analysis to compare alternatives and select the most economical option.
Economic Viability
Engineering solutions must not only solve technical problems but also be economically sustainable, balancing long-term benefits with costs.
Promotes Organizational Survival
Ensures solutions promote organizational survival and well-being.
Encourages Innovation
Encourages the use of creative and innovative technology.
Allows Scrutiny
Allows for the scrutiny and evaluation of potential outcomes.
Essential for Engineers
It is essential for making engineers well-equipped to excel in their roles.
New Machinery vs. Upgrading
A company deciding between buying new machinery or upgrading existing equipment.
Cost Benefit Analysis for Highways
A government agency performing a cost-benefit analysis for a new highway.
Life Cycle Cost of Devices -
A business analyzing the total life-cycle cost of a new electronic device.
Develop the Alternatives
Consider all possible options.
Focus on the Differences
Pay attention to what sets each option apart.
Use a Consistent Viewpoint
Analyze each option from the same perspective.
Use a Common Unit of Measure
Ensure all options are evaluated using comparable metrics.
Consider All Relevant Criteria
Take into account every factor that could affect the decision.
Make Uncertainty Explicit
Acknowledge and plan for any uncertainties in the decision-making process.
Revisit Your Decisions
Be open to re-evaluating decisions as new information becomes available.
Pyramid Model of Decisions
Decisions are often visualized through a pyramid model, moving from broad problem definitions to specific solutions.
Use of Models
Engineers use models to represent problems and their potential solutions, integrating both technical and economic perspectives.
Pioneers of Engineering Economy
Arthur M. Wellington and Eugene Grant are credited with the development of modern engineering economy principles.