It is an optimum time that the equipment should be held from an over all income / cost view point.

It is
define d as the life in which the annual worth is maximized. If no income is generated the economic life
is the life for which the annual costs are minimized. Ideally, when a piece of equipment is brought, the
estimated useful life will be equal to the actual economic life.

In general, economic life is the period over which the equipment can operate at an acceptable operating
cost and productivity. It is generally measured in terms of years, hours or sometimes in terms of
kilometers. It depends on variety of factors such as physical deterioration, technological obsolescence or
change in economic condition.
Physical deterioration can arise from factors such a corrosion, chemical decomposition or due to wear
and tear due to abrasion, shock and impact. Change in economic condition such as fuel prices, tax
investment, incentives and rate of interest can also affect the economic life of the equipment.