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Engineering Economics Lecture - MIT OpenCourseWare

Engineering Economics Overview and Application in Process Engineering Industry ICE Kangyi MAO 02 OCT 2006 WHAT IS Economics ? Economics is the study of how people and society choose to employ scarce resources that could have alternative uses in order to produce various commodities and to distribute them for consumption, now or in the future, .. from Paul Samuelson and William Nordhaus, Economics , 12th Ed., McGraw-Hill, New York, 1985. WHAT IS Engineering Economics ? The application of economic principles to Engineering problems, for example in comparing the comparative costs of two alternative capital projects or in determining the optimum Engineering course from the cost aspect. 1 WHY DO WE NEED TO KNOW ABOUT THIS?! Optimal cost-effectiveness Alternative possibilities (Cal Tech Industries!) WHAT DO WE NEED TO KNOW? Time value of money Estimation of cash flows Quantitative measurements of profitability Systematic comparison of alternatives Time Value of Money The fundamentals underlying all financial activities!

treatment, etc. • Fixed (indirect) - Land taxes, insurance, plant administration, etc. • General expenses- Corporation, sales&marketing, R&D, etc. production production Lab o r Material stre production am s 11

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