Question

What is engineering economy? How can it be useful to an engineer? Write an essay that persuades the reader to want to study engineering economy.

Answer 1

Engineering economy refers to the branch of economics that uses the different economic applications to analyze engineering problems and help engineers take informed engineering decisions. In this way, the engineering economics helps people to take decisions regarding the selection of the right technology, right project investment opportunities and proper usage of the capital to help the firm generate profits.

The learning of engineering economy can be useful to an engineer in different following ways.

1. The Engineering economy helps the engineers to apply the time value of money concepts that helps the future cash flows (costs and or benefits) to become equivalent to the present time cash flows. It helps the engineers to select the right capital expenditure projects.

2. The engineering economy equips the engineers with the skills that can help them to analyze the financial viability of the engineering projects. Tools such as discounted techniques, incremental return analysis, Useful life analysis and modified & traditional B/C ratio analysis, help the engineer to get the efficient utilization of scarce resources and maximize the benefits for the firms.

3. The engineering economy makes the engineers to forecast the future demand and bring capabilities to the firm. A good forecasting not only helps the firm to capitalize on the sudden increased level of demand, but also prevents the stock-out cost. It saves the firm from incurring losses and it only happens when the engineers are equipped with the engineering economic principles.

4. The Engineers can use cost volume profit analysis, break even analysis and decision analysis under the risk and uncertainty as a part of the engineering economy. It improves the decision quality that makes the firm to choose the best alternative offered to them.

Above usefulness of the subject, make the engineers to necessarily opt for the study of engineering economy as it makes them a better professional as well as the best person to help other take right decisions.