Engineering Economics

Dr. Tamer A. Mohamed

Room A-104
Book: Global Engineering Economics
 Aim

• The aim of this module is to introduce the student to

the concepts and methods of economic analysis, and
provide the student with information necessary to
help him/her in decision making.

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 Intended learning Outcomes

• Knowledge and understanding

1. the basics of engineering economics;
• Subject-specific cognitive skills
2. know how to solve real life problems in decision making
based on economic considerations;
• Subject-specific practical skills
3. conduct necessary calculations;
• Key/transferable skills
4. appreciate relevance of other fields in the engineering
context.

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 Teaching and Learning

• 22, 1 hr lectures. This method informs learning

outcomes 1, 2.
• 12, 1 hr tutorials. This method informs learning
outcomes 3, 4.

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 Reading

• Niall M. Fraser, Elizabeth M. Jewkes, Irwin Bernhardt,

May Tajima, “Global Engineering Economics:
Financial decision making for engineers”, 013-
2071614, (2008).
• Donald G. Newnan, Ted G. Eschenbach, and Jerome
P. Lavelle "Engineering Economic Analysis ",
0195168070, Oxford, Inc. , (2004)
• Chan S. Park, “Fundamentals of Engineering
Economics”, Prentice Hall, 9780132209601, (2008).

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Global Engineering Economics

Chapter 1
Engineering Decision Making

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 Outline

1.1 Engineering decision making

1.2 What Is Engineering Economics?
1.3 Making Decisions
1.4 Dealing With Abstractions

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 1.1 Engineering Decision Making

• All engineering projects use resources such as raw

materials, money, labour, and time.
• Technology usually provides more than one
alternative means of completing a project.
• Engineers must be able to choose among several
technically feasible alternatives.
• The practical science of Engineering Economics was
originally developed to deal with determining which
alternative was the best, taking into account costs
and benefits.

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 1.2 What Is Engineering Economics?

• Engineering Economics: The science that deals

with techniques of quantitative analysis useful for
selecting a preferable alternative from several
technically feasible ones.

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 1.3 Making Decisions

• All decisions are made, in the end, on the basis of

belief as opposed to logic.
• Engineering economic analysis typically deals with
factual information about costs and benefits of a
project.
• Although decisions ultimately may be made on the
basis of preferences, politics and people, engineering
economic analysis facilitates establishing facts upon
which a decision can be based.

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Figure 1.1 Decision Pyramid

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 1.4 Dealing With Abstractions

• When dealing with the complexities of reality, it is

necessary to use a model.
• A model is a simplification of reality that captures
information useful and appropriate for a specific purpose.
• Models can be used to analyze a situation and perhaps
make some predictions about the real world.
• Engineering economic models typically represent a project
through estimates of its costs and benefits over time.

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Figure 1.2 The Modelling Process

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