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Explain Role Engineering Economics in Decision Making

Engineering economics plays an important role in decision making for engineers. It provides techniques and models to evaluate alternatives for projects, estimate their value, and identify the best option. This requires knowledge of both engineering and economics. Estimates used in analyses consider cash flows, timing, and interest rates over the future time frame of a project. Sensitivity analysis is also important since estimates may differ from actual future outcomes. Engineering economics helps engineers systematically develop and assess alternatives using consistent metrics while accounting for uncertainty.

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951 views1 page

Explain Role Engineering Economics in Decision Making

Engineering economics plays an important role in decision making for engineers. It provides techniques and models to evaluate alternatives for projects, estimate their value, and identify the best option. This requires knowledge of both engineering and economics. Estimates used in analyses consider cash flows, timing, and interest rates over the future time frame of a project. Sensitivity analysis is also important since estimates may differ from actual future outcomes. Engineering economics helps engineers systematically develop and assess alternatives using consistent metrics while accounting for uncertainty.

Uploaded by

harikrishnagk432
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Explain role engineering economics in decision making.

The techniques and models of engineering economy assists people in making decisions. The role of
engineers in the decision making is to evaluate the condition , feasibility and appropriateness of an
alternatives of a given project, estimates its value and justify it from an engineering stand point and
finally discover the best alternatives for implementation. For this, both the knowledge of civil
engineering and engineering economics is necessary, which clearly shows the importance of
engineering economics to civil engineer.

Since decision affect what will be done, the time frame of engineering economy is primarily the
future. Therefore, numbers used in an engineering economic analysis are best estimates of what is
expected to occur. These estimates often involve the three essential elements: cash flow, time of
occurrence and interest rate. These estimates are about future, and will somewhat different than
what actually occurs, primarily because of changing circumstances and unplanned for events. In
other words, stochastic nature of estimate will likely make the observed value in the future differ from
the estimate made now. Thus, sensitive analysis is to be performed during the engineering economic
study to determine how the decision might change based on varying estimate.
Some of the reasons to have knowledge of engineering economics for engineers in decision making
process are:

● Develop the alternatives


● Use a common unit of measure
● Use a consistent viewpoint
● Consider all relevant criteria
● Make uncertainty criteria
● Revisit the decision
Engineering economics can be used equally to analyze outcomes have met or not met a specified
criterion, such as rate of return requirement. The various steps involved in the problem- solving
approach i.e, decision making approach are (Roles of engineer in decision making)

1. Understand the problem and define objectives


2. Collect relevant information
3. Define the feasible alternative solutions and make realistic estimates.
4. Identify the criteria for decision making using one or more attributes.
5. Evaluate each alternative, using sensitive analysis to enhance the evaluation.
6. Select the best alternative.
7. Implement the solution and monitor the results

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