Explain Engineering Economics in detail?

ECONOMICS

v  The branch of social science that deals with the procurement, production, distribution and consumption of goods and services

v  The study of how limited resources are used to satisfy unlimited human wants

v  The study of how individuals and societies choose to use limited resources that nature and previous generations have provided

v  Social Science

Ø  The branch of science that studies society and the relationships of individual within a society

v  Economy

Ø  The system of production, distribution and consumption

Ø  The efficient use of resources

v  System

Ø A group of independent but interrelated elements comprising a unified whole.

ENGINEERING

v  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

v  This definition emphasizes the applied nature and economic aspects of engineering.

ENGINEERING ECONOMICS

v  Engineering Economics is a subset of economics for application to engineering

v  Engineers seek solutions to problems, and the economic viability of each potential solution is normally considered along with the technical aspects

v  Viability: Capable of being done in a practical and useful way

WHY STUDY ENGINEERING ECONOMICS?

Ø  There is a traditional perception stating that engineers deal with technical part of projects and financial matters are left to economists and financial analysts

Ø  Nowadays, the situation is different

Ø  Engineers are not limited to their conventional (core) activities

Ø  Their role is expanding

Ø  They are actively involved in strategic and operational decision making processes of their companies

Ø  On top of that many engineers are expected to establish their own firms

      In this scenario, they need to acquire broad knowledge to run their companies             effectively and efficiently

EXAMPLE

Ø  A child tricycle could be built with an aluminum frame or a composite frame

Ø  Some may argue that the composite frame will be stronger and lighter, it is a better choice

Ø  However, there is not much of a market for thousand dollar tricycle

Ø  This scenario reinforces the idea that the economic factors of a design weigh heavily in the design process, and that engineering economics is an integral part of that process, regardless of the engineering discipline

PHYSICAL AND ECONOMIC EFFICIENCY

Ø  System efficiency =system output/system input

Ø  Economics efficiency=system worth/system cost

Reference:

                     By Sir Engr. Rafid Mehmood

Qualification :

v  MSc in Engineering Management (Specialization in Manufacturing Management), 2014 (CASE, Islamabad)

v  BSc in Mechanical Engineering, 2012 (UET, Taxila)