Understanding Engineering Economics - Engineering and Economics

Engineering Economics is sub discipline of Economics which deals with application of economic theory and principles in the engineering decision making. Main subject matter of Engineering Economics is Interests and time value of money, cash flow statement, depreciation, break even analysis etc.

Introduction

Engineering is defined by ABET (Accreditation for Engineering and Technology) as the profession in which the knowledge gained in physics, chemistry, life sciences, and mathematics is applied to make products in large scale that increase the prosperity of man. Economy consists of the sum total of all income from goods produced and services offered in a state or nation. It deals with the interactions between people and wealth. According to Oxford advanced learners English dictionary, an Engineer is a person whose job involves designing and building engines, machines, roads, bridges, etc or a person who is trained to repair and control engines. Economics can be defined in many ways Economics is the human Science which studies the relationship between scarce resources and their various uses which compete for these resources.

Economics is important part of engineering Job 

Engineers must translate idea and invention into the system for betterment of mankind 

Idea need to make sense economically 

Engineers need to control system to achieve goal within bounds of limited resources

Most of the major issues that face the country and the world, such as climate change, water availability, poverty, unemployment's and energy security, need engineers to fix them

Sustainable economic development is the challenge of meeting human needs for natural resources, induce trials products, energy, food transportation, shelter and effective waste management  

More Over

Technically literate businesspeople (engineers, technologists and scientists who have learnt business) who are likely to be able to attract capital and use it wisely so that internationally competitive businesses can be built.

Technically literate government officials (engineers and scientists who have learnt public policy) who can advise on key policies, e.g. deforestation, environmental standards etc., and who can create the policy conditions to attract and responsibly use potential foreign direct investment

Engineers with the skills and knowledge to spend public capital effectively to deliver the most useful infrastructure projects for a nation, and then to operate and maintain those assets. Improving value creation per hour worked also requires a technically literate workforce (to run modern technologies), but also technical capability to undertake investment projects. 

Engineering Economic Decision 

Role of Engineers in Business Process

Engineering economics is a topic that all industry-bound students should learn because of its real-world applications. There are a number of key topics, among many others, that are generally covered: time value of money, cost analysis, interest rates, economic fluctuations, and depreciation 

❖ Time value of money is the idea that money has a different value now than it will in the future.

 ❖ Cost analysis is a key tenant for balancing a business’s budget, as well as for calculating the viability of a project. 

❖ Interest is another concept that is important to economical engineers. Many times, engineering firms take out significant loans to finance construction of major projects. 

❖ Economic fluctuations characterize the changes in the market economy as peaks, recessions, troughs, or expansions. 

❖ Depreciation is the loss of value in an asset over time

Subject Matter of Economics

Micro Economics 

❖Consumer Behavior's 

❖Producer Behavior's 

❖Cost and Revenue

 ❖Market Structure 

❖Distribution

Macro Economics 

❖National Income- GDP
 ❖Money Supply & Inflation 
❖Growth and Development

 ❖International Economics 

Economics and Engineers

Engineering and Technology role in an Economy 

Seven Principles of Engineering Economy

The foundation of the discipline of Engineering Economy can be seen in terms of seven principles These seven principles are:

 1.Make a List of Alternates: Plan A, Plan B, etc.

 2.What Is Different among the Alternates?

 3.Be Clear on What You Want.

 4.Develop Common Performance Measures.

 5.Meet ALL Relevant Criteria. 

6.Weigh the Risk Against the Projected Rewards. 

7.Check the Results of Action Plan and Revise Plan If/When Necessary

Conclusions 

The marriage between economics and engineering is one that is crucial to the success of engineers in the 21st century; the interdisciplinary nature of the topic offers key insight into the underlying mechanisms that drive daily business operations.