Answer to Question #170528 in Economics for SRIJITA

Question

Which of the following statement is correct? Engineering economics provides a set of methods by which economic worth of alternatives can be compared

Answer 1

Engineering economics is a subset of economics associated with the use and "... application of economic principles" in the analysis of engineering solutions. As a discipline, it focuses on a branch of economics known as microeconomics, as it studies the behavior of individuals and companies in making decisions about the allocation of scarce resources. Thus, he focuses on the decision-making process, its context, and the environment. It is a pragmatic character, combining economic theory with engineering practice. But it is also a simplified application of microeconomic theory in which elements such as price determination, competition, and supply/demand are assumed to be fixed inputs from other sources. However, as a discipline, it is closely related to other disciplines such as statistics, mathematics, and cost accounting. It draws on the logical framework of economics but adds to this the analytical power of mathematics and statistics. Engineers look for solutions to problems and, along with technical aspects, the economic viability of each potential solution is usually viewed from a specific perspective that reflects its economic value to a group of customers. Essentially, engineering economics involves formulating, evaluating, and evaluating economic outcomes when alternatives are available to achieve a specific goal. In some civil engineering undergraduate programs in the United States, Engineering Economics is a required course. This is the subject of the Engineering Fundamentals exam, and the Engineering Principles and Practices exam questions may also be asked; both are part of the registration process for a professional engineer. Accounting for the time value of money is central to most economic engineering analyzes. Cash flows are discounted using interest rates, excluding the most basic economic studies. There are usually many possible alternatives for each problem. One option that needs to be considered in every analysis and is often chosen is the “do nothing” alternative. The cost must also be considered to make one choice over the other. Non-economic factors such as color, style, public image, etc. should also be considered; such factors are called attributes. Costs, as well as revenues, are recorded for each alternative during the analysis period, which is either a fixed number of years or the estimated life of the project. The cost of disposal is often overlooked, but it is important and represents the net worth or income from decommissioning a project. Some other topics that can be considered in engineering economics are inflation, uncertainty, substitutions, depreciation, resource depletion, taxes, tax breaks, accounting, cost estimation, or capital financing. All of these topics are core areas of knowledge and skills in the field of value engineering.