13 - Engineering Economics

Abstract

Engineering economics can be divided into macro- and microeconomics. Macroeconomics involves problems associated with notions such as trade, trade deficits, monetary policy, national productivity, growth of the economy, inflation, budget deficits, national debt, unemployment, and tariffs. Microeconomics involves problems of firms and of individuals. Engineering economics is a special branch of microeconomics largely involved with the analysis of engineering alternatives and their performance. The cost of designing, producing, or using an engineering structure or device is an extremely important engineering variable and should be quantitatively treated just as carefully as strength, rigidity, output, or efficiency. Many engineering economics problems involve the choice, based upon cost, between two or more alternative solutions. It is important to recognize that economic considerations may lead to a design or structure that is less perfect than could be achieved if costs were not considered. Frequently, a design variable that affects unit cost can be changed continuously over a range of values. The main variable of engineering economics is cost measured in units of dollars. In dimensional analysis problems in economics, the dollar is a fundamental quantity.