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4933ch1-2 - Engineering Economic Analysis Newnan Lavelle...

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Engineering Economic Analysis - Newnan Lavelle and Ted G. Eschenbach Chapter 1-2 INTRODUCTION A. Decision Making and Problem Solving 1. Simple Problems: C can generally be worked in one's head without extensive analysis. 2. Intermediate Problems: C primarily economic and the principal subject of this course. C They are sufficiently important to justify serious thought and action. C They can't be worked in one's head; the solution must be organized. C The economic aspects are a significant component in the analysis leading to a decision. C The economic situation is assumed to be in equilibrium. C Single criteria decision making is generally adequate providing the equilibrium assumption holds. 3. Complex Problems : C Such problems represent a mixture of economic, political and humanistic elements. They are beyond the scope of this course from a decision making criteria point of view, but the economic aspects of complex problems will be discussed. C Classic economic theory assumes that the whole economy is in equilibrium (steady state). C However, Santa Fe Institute studies (Waldrop 1 , Gell-Mann 2 ) and current economic research indicates that the economy is a self-organizing complex adaptive system which is evolutionary in nature.
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