--- title: "Importance of engineering economics for engineers" subject: "Engineering Economics" chapter: 1 key: "semester_6/engineering_economics:importance-ee-decision-making" source: https://www.bctengineer.com/q/semester_6/engineering_economics/importance-ee-decision-making site: BCT Engineering --- # Importance of engineering economics for engineers Engineering Economics · Chapter 1: Introduction - Asked in: 2072 Asoj, 4 marks; 2070 Bhadra, 5 marks (asked 2 times) - Video: [Importance of Economics in Engineering, Subject Matter of Economics, & Basic Problems of Economy](https://www.youtube.com/watch?v=SfLRHB2h608) — Academic Gain Tutorials - Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14 - Page: https://www.bctengineer.com/q/semester_6/engineering_economics/importance-ee-decision-making - Whole chapter: https://www.bctengineer.com/md/semester_6/engineering_economics/chapter-1 ## Question Explain why the subject of engineering economics is important to a Civil Engineer. ## Short answer Civil engineers make large, long-lived infrastructure decisions. Engineering economics compares lifetime costs using time-value-of-money methods (PW, AW, IRR, B/C) to select the best design, ensure feasibility, control costs, and evaluate public projects, preventing technically sound but economically wasteful choices. ## Answer A civil engineer designs and builds roads, bridges, dams, buildings and water systems that use large public or private funds over a long life. Engineering economics is important because every such project needs both a technically sound and an economically sound decision. 1. **Selection among alternatives.** Many designs can meet the same purpose (e.g. concrete vs steel bridge, rigid vs flexible pavement). Engineering economics compares their lifetime costs and benefits using PW, AW, IRR or B/C ratio. 2. **Time value of money.** Construction cost is paid now while benefits come over 20 to 50 years. Interest-based techniques allow cash flows at different times to be compared fairly. 3. **Feasibility of projects.** It decides whether a hydropower, irrigation or road project is worth building, with economic indicators such as B/C ratio and IRR needed by lenders and the government. 4. **Cost estimation and control.** Estimating, budgeting and break-even analysis help a contractor price tenders, control cost and avoid loss. 5. **Equipment decisions.** Buy or lease, replace or retain, and depreciation of construction equipment need economic analysis. 6. **Use of scarce resources.** Funds are limited; economic analysis directs them to the projects giving the largest return. 7. **Risk and uncertainty.** Cost overruns, inflation and delays are handled through sensitivity and risk analysis. 8. **Public welfare.** Public projects are judged on social benefits against costs, balancing economy, safety and environment. Hence an engineer without economic skill may produce a technically perfect but wasteful project. ## Check yourself The answer's key points as multiple-choice questions, with the correct option and why. 1. Concrete vs steel bridge is compared by engineering economics using: A. Lifetime costs and benefits through PW, AW, IRR or B/C ratio B. Only the lowest initial cost C. Only strength of the material D. Colour and appearance Answer: A. Alternatives are ranked on lifetime cost and benefit with interest-based techniques. (Key point: Selection among alternatives) 2. For civil projects, interest-based techniques are important mainly because: A. Costs are spread equally with benefits B. Costs are paid now while benefits arrive over 20 to 50 years C. Interest is charged only on loans D. All benefits arrive on day one Answer: B. Cash flows at different times must be compared fairly. (Key point: Time value) 3. Public projects are judged mainly on: A. Number of workers hired B. Private profit of the contractor C. Social benefits against costs, balancing economy, safety and environment D. Lowest design effort Answer: C. Public welfare is the criterion for public works. (Key point: Public projects) 4. Cost overruns, inflation and delays in civil projects are handled by: A. Ignoring them B. Choosing the cheapest design C. Increasing the interest rate to zero D. Sensitivity and risk analysis Answer: D. Sensitivity and risk analysis test how decisions change with the estimates. 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