Ch1 - Overall Objective of Engineering Economic Analysis Ch...

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source: Economics textbook 1 Ch 1. Making Economic Decisions source: Economics textbook 2 Overall Objective of Engineering Economic Analysis Develop the tools for analyzing and solving economic problems that are commonly faced by engineers source: Economics textbook 3 Objectives • Distinguish between simple and complex problems • Discuss the role and purpose of engineering economic analysis • Describe and give examples of the nine steps in the economic decision making process source: Economics textbook 4 Objectives (cont.) • Select appropriate criteria for use with different types of problems • Solve simple problems associated with engineering decision making
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source: Economics textbook 5 Types of Problems • Simple eg: Should I buy a buss pass or use individual tickets • Intermediate (primarily economic) eg: Should I buy or lease a car source: Economics textbook 6 Types of Problems (cont.) • Complex (mixture of economic, political and humanistic elements) eg: deciding where to build a new factory source: Economics textbook 7 Role of Engineering Economic Analysis Engineering economic analysis is most suitable for intermediate problems and economic aspects of complex problems source: Economics textbook 8 Characteristics of intermediate problems and economic aspects of complex problems • Problem is important enough to justify our thought and effort to do the analysis • Problem cannot be solved “in our head;” we must organize the problem and all its consequences for careful analysis • Problem has economic aspects important in reaching a decision
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source: Economics textbook 9 Engineering Economic Analysis • applies to not only problems in the business world but also in one’s personal life • focuses on costs, revenues and benefits that occur at different times source: Economics textbook 10 Examples of Engineering Economic Analysis to Answer Business Questions • What engineering projects are worthwhile? • What engineering projects should have a higher priority? • How should the engineering project be designed? source: Economics textbook 11 Examples of Engineering Economic Analysis to Answer Personal Questions • How to achieve long-term financial goals • How to compare different ways to finance purchases • How to make short- and long-term investment decisions source: Economics textbook 12 The Decision Making Process (rational decision making) 1. Recognize the problem 2. Define the goal or objective 3. Assemble relevant data 4. Identify feasible alternatives 5. Select the criterion for determining the best alternative
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source: Economics textbook 13 The Decision Making Process (rational decision making, cont.) 6. Construct a model 7. Predict the outcomes or consequences of each alternative 8. Choose the best alternative 9. Audit the result source: Economics textbook 14 1 Recognize the Problem • Sometimes a problem has existed for a long time but was not recognized eg: lead in paint • Most of the time recognition of the problem
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This note was uploaded on 12/07/2011 for the course ENGR 301 taught by Professor Gg during the Fall '11 term at Concordia Canada.

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Ch1 - Overall Objective of Engineering Economic Analysis Ch...

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