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  • What Is Engineering Economy?

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    Aina Syafawati
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    Engineering economy involves systematically evaluating the economic merits of proposed solutions to engineering problems. It follows fundamental principles such as developing alternatives, focusing on differences between them, using a consistent viewpoint and common unit of measure, considering all relevant criteria, making uncertainty explicit, and revisiting decisions. There is a difference between macroeconomics, which studies an overall economy, and microeconomics, which analyzes individual elements within an economy like specific markets or industries. Explicit costs can be directly observed and measured, while implicit costs are more indirect and difficult to quantify precisely.

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    Engineering economy involves systematically evaluating the economic merits of proposed solutions to engineering problems. It follows fundamental principles such as developing alternatives, focusing on differences between them, using a consistent viewpoint and common unit of measure, considering all relevant criteria, making uncertainty explicit, and revisiting decisions. There is a difference between macroeconomics, which studies an overall economy, and microeconomics, which analyzes individual elements within an economy like specific markets or industries. Explicit costs can be directly observed and measured, while implicit costs are more indirect and difficult to quantify precisely.

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    8 views3 pages

    What Is Engineering Economy?

    Uploaded by

    Aina Syafawati
    Engineering economy involves systematically evaluating the economic merits of proposed solutions to engineering problems. It follows fundamental principles such as developing alternatives, focusing on differences between them, using a consistent viewpoint and common unit of measure, considering all relevant criteria, making uncertainty explicit, and revisiting decisions. There is a difference between macroeconomics, which studies an overall economy, and microeconomics, which analyzes individual elements within an economy like specific markets or industries. Explicit costs can be directly observed and measured, while implicit costs are more indirect and difficult to quantify precisely.

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    © All Rights Reserved
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    of 3

    Question 1

    1. What is engineering economy?

     Involves the systematic evaluation of the economic merits of proposed solutions to


    engineering problems

    2. Step in fundamental principles

     Develop alternatives
     Focus on the differences
     Use a consistent viewpoint
     Use a common unit of measure
     Consider all relevant criteria
     Make uncertainty explicit
     Revisit your decisions

    3. Different between macro and micro economy


    Question 2

    1. Different and give example on explicit and implicit cost

    2. Cost Terminology

     Fixed cost: unaffected by changes in activity level


     Variable cost: vary in total with the quantity of output
     Total cost: total of cost resulting from fixed cost and variable cost
     Direct cost: can be measure and allocated to a specific work
     Indirect cost: difficult to attribute or allocate to specific output or work activity
     Standard cost : are planned cost per unit of output, established in advance of production or
    service delivery
     Sunk cost : a cost that has occurred in the past and has no relevance to estimates of future
    costs and revenues related to an alternative course of action
     Opportunity cost: the monetary advantage foregone due to limited resources. The cost of
    the best rejected opportunity
     Cash cost : a cost that involves a payment of cash
     Book cost : a cost that does not involve a cash payment
     Life cycle cost: the summation of all cost related to a product, structure, system or service
    during its life span
    Question 5

    1. Project benefits and disbenefits

     Public sector

    Benefits : advantages to public; • New jobs and salary money


    income and savings • Reduced property taxes
    • Lower transportation costs due to less gas used
    Disbenefits : expected undesirable,  the public; usually these are economic
    negative consequences of project disadvantages estimable in monetary units
    to owners

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