Define engineering economics; capitalistic or socialistic economy

Engineering economics

Engineering economics is the application of economic principles and techniques to evaluate and compare engineering alternatives, so that the one with the best economic result (lowest cost or highest net benefit over time) is chosen. It deals with time value of money, cost estimation, and selection among projects.

Capitalistic economy

(In a capitalist economy, the means of production are privately owned and run for profit.)

• Private ownership of land, factories and capital; individuals can own and inherit property.
• Free enterprise: people are free to choose their business, job and consumption.
• Profit motive drives production.
• Market mechanism: prices set by demand and supply decide what, how and for whom to produce; minimum government interference.
• Competition keeps prices low and quality high.
• Consumer sovereignty; wide choice.
• Demerits: inequality of income, monopolies, neglect of unprofitable social needs, unemployment cycles. Examples: USA, Japan.

Socialistic economy

• The main means of production are owned and controlled by the state or society.
• A central planning authority decides what, how much and for whom to produce.
• The aim is social welfare and equal distribution of wealth, not profit.
• Prices and wages are largely fixed by the state; little private property.
• Merits: reduced inequality, full employment, balanced use of resources. Demerits: low efficiency and incentive, delays, little consumer choice. Examples: former USSR, Cuba, North Korea.

Many countries, including Nepal, run a mixed economy combining both.