ETM 310/610 (Fall 2020)

Homework-1

Question 1: Some of the following problems would be suitable for solution by engineering
economic analysis. Which ones are they?
Answer: Engineering economic analysis is used to determine the costs, profits and income with
different purchases and decisions which we make time to time.
(a)
The purchase cost of diesel car is higher as compared to gasoline car. But the running cost of
diesel car is lower compared to gasoline car because fuel price is lower compared to the price of
gasoline. So, it would be better to drive a diesel car because diesel engines are more efficient
than gasoline engines.
(b)
If you replace the workers with an automatic machine it would be very economic and emotional
at the same time because three people will lose their jobs. The machine will cost more at the time
of purchase but it will be more profitable in future.
(c)
The early morning classes are economical if you are willing to leave the bed early and are ready
to face the morning rush.
(d)
I will not change my major because I like what I am studying and I really enjoy it.
(e)
We cannot answer this question based economic engineering analysis only because this is an
emotional decision. Marrying a person with professional job and an excellent salary sounds like
a good choice if you really like to be with that person. So, before making a decision one must set
some standards and assign them values. It will help in making the final decision.

Question 2: Car A initially costs $3000 more than Car B, but it consumes 0.04 gallons/mile
versus 0.06 gallons/mile for B. Both last 10 years and B’s salvage value is $500 smaller than
A’s. Fuel costs $2.70 per gallon. Other things being equal, beyond how many miles of use
per year (X) does A become preferable to B?

Answer:
Total cost difference = $3000-$500
= $2500
Fuel cost = $2.70 per gallon
Fuel consumption = (0.06-0.04) gallons/mile
= 0.02 gallons/mile
Total fuel cost in 10 years:
(Fuel consumption)*(fuel cost)*(duration) = 0.02*2.70*10
= 0.54
Let;
Miles per year = X
Therefore;

Total fuel cost *X = total cost difference

0.54*X = 2500
X = 2500 / 0.54
= 4629.6296 miles.