Engineering economics

Engineering economics, previously known as engineering economy, is a subset of economics concerned with the use and “…application of economic principles”[1] in the analysis of engineering decisions.[2] As a discipline, it is focused on the branch of economics known as microeconomics in that it studies the behavior of individuals and firms in making decisions regarding the allocation of limited resources. Thus, it focuses on the decision making process, its context and environment.[1] It is pragmatic by nature, integrating economic theory with engineering practice.[1] But, it is also a simplified application of microeconomic theory in that it avoids a number of microeconomic concepts such as price determination, competition and demand/supply.[1] As a discipline though, it is closely related to others such as statistics, mathematics and cost accounting.[1] It draws upon the logical framework of economics but adds to that the analytical power of mathematics and statistics.[1] Continue reading “Engineering economics”