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Engineering economics

Engineering Econmics’definition is a research project (technology) in the field of economic and scientific theory of economics. Specifically, the study is to achieve a certain function and propose technically feasible solution through production processes, products or services, economically calculated analysis, comparison, and verification of the scientific method. The relationship between engineering and economic (Why engineering will develop with the economy): Engineering is referred to as civil engineering or other means of production, manufacturing sector with relatively large and complex equipment to carry out the work, and it includes civil engineering, mechanical engineering, traffic engineering, chemical engineering, mining engineering, and water conservancy and so on. Economics is the study of the use of scarce resources, which have alternative uses.2 A new technology is always limited by the economic development constraints and the impact of technological advances and also to promote economic development, it is the driving force for economic development and conditions.

Engineering is the technology that is driving the economic advances for development. In a word, the engineering and the economy is the dialectical unity that exists in the construction of the production process, and is mutually reinforcing each other's constraints. Economic development is the purpose of technological progress; engineering is a means of economic development. The history of the engineering economics

1.Formation (1887-1950) In 1887, Arthar M. Welington published“Railway Layout of the Economic Theory”. As a construction engineer, he believed that the cost of analysis could be applied to the railway line or length of the curvature in order to seek the best choices. This thought was proposed in order to create a project in the field of economic evaluation. The Engineering Economy (school) was created with Welington’s thoughts in mind. What is the economic project? Wellington thinks that engineering is not a simple definition as a kind of construction art, instead, he thinks it is a job about an art that uses less money. Eugene L. Grant published the works of "engineering economic principles" which is the classic book of engineering economy. He wrote it in 1930. Because of this book, Grant is regarded as the father of engineering economics.

2 Development (1950 -) After the Second World War, the engineering economy is affected by Keynesian economics, economic theory, research from the simple cost-benefit analysis to expand the market supply and demand and investment in the field of distribution, which made significant progress. Since the 1960s, the engineering economy (including company budget management) research focused on venture capital, analysis of the sensitivity of the decision-making and market uncertainties, such as analysis of the three areas. The main representative is United States professors De Jiamo, Carnahan and Takui.

In 1977, JL Riggs published "Project Economics" Over the past 20 years, works of Western economic theory emerged in the macro study of a new trend.

The methods to compare alternative projects3 1.	Minimum Attractive Rate of Return(MARR) 2.	The Present Worth Method 3.	The Future Worth Method 4.	The Annual Worth Method 5.	The Internal Rate of Return Method 6.	The External Rate of Return Method 7.	The Payback Period Method

An example for using the MARR method is the following: A company is planning to produce one of two products. Product A wants to invest 1000$ and the revenue is 1200$, product B wants to invest 2000$ and the revenue is 2300$. Which product should the company produce if the companies’ MARR is 18%. Solution: The return of product A is: Ra = (1200-1000)/1000 = 20% > MARR = 18% The return of product B is: Rb = (2300-2000)/2000 = 15% < MARR = 18% Hence, the company should produce product A, because the return of product A satisfies the MARR.

The characteristics of the engineering economy: 1. Comprehensive It includes the areas of operations research, statistics, probability theory, theory of technology, micro-macro economics, accounting, derivative, integral, management, marketing, and other disciplines; 2. Practice Indicators from the practice and guide practice; 3. Systemic To consider the ecological, social, cultural and military aspects; 4. Predictability To consider the history and facing reality, to grasp the future; 5. Selectivity Multi-factor, multi-program comparison

Reference 1. Fu Jiayi, Quan Runheng, , QingHua University Published, 1996 傅家骥,仝允桓,《工业技术经济学》,清华大学出版社,1996 2. Thomas Sowell “Basic Economics: A Common Sense Guide to the Economy” Basic Books, 2007

3) William G.Sullivan, Elin M.Wicks, James T.Luxhoj “Engineering Economy”  New Jersey, Pearson Education, Inc