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Section 1.pptx

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This document discusses the importance of economics in chemical engineering and provides examples to illustrate key concepts. It notes that economics involves dealing with scarce resources efficiently to achieve optimal results at lowest cost. A case study compares the economics of an old versus new refrigerator design over time, factoring in capital costs, operating costs, and interest earnings. The document emphasizes choosing the optimum option by evaluating how variable factors like pipe diameter and insulation thickness impact both capital and operating costs. The overall goal is selecting designs that minimize total lifetime costs.

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Economics of Chemical Plants Introduction Lecturer Assistant: Kareem H. Mokhtar Chemical Engineering Department
You are one step away from achieving your dream
Why is it Important • Economics is all about Scarcity • You are an engineer, your duty is to deal with scarce resources in an ideal way to get the optimum results with the lowest cost. • The best available technique is not always the best option, you need to evaluate all possible techniques regarding their cost and productivity.
Grading System Item Grade 1 Quizzes 25 2 Assignments 5 3 Project 10 4 Total 40
Do you remember these definitions • Income • Profit • Productivity • Interest • Supply • Demand • Market • Return on investment
Do you remember these definitions • Capital • Asset • Taxes
Think about the best option 7000 LE 5000 LE
Case Study • Initially the old designed refrigerator is going to be more profitable than the new one, as it saves 2000LE in capital investment. • When the electrical consumption is studied, it was found that the old refrigerator consumes 400 LE/ month, and the new one is more energy efficient so it consumes 150 LE/month only. • Which means you will save 250 LE/ month. • So in 8 months only the difference in price can be collected back. Capital cost Operating cost
Case Study • But what about interest! • If the 2000 LE was saved and kept in the bank we can get around 15% as interest rate. • In 12 months we can get 300 LE only from interest. • Now we can choose the new refrigerator because it is more economical.
Choosing the optimum condition • Sometimes as an engineer you need to choose from several options, some of them are interconnected in such a way you need to choose the optimum choice that guarantee the best output for your factory. • Consider a pipe used in the factory, taking into consideration that the pipe length is constant, what other variables that can be changed?
1- Pipe diameter • As long as the pipe diameter increases the cost of the pipe increases • As long as the pipe diameter increases the pumping cost decreases Capital cost Operating cost
2- Pipe insulation • As long as the pipe insulation thickness increases the cost increases • As long as the pipe insulation thickness increases the utility cost needed for heating or cooling decreases Capital cost Operating cost
Choosing the optimum condition Op. cost Cap. cost $ Variable Total cost
Section 1.pptx

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Section 1.pptx

  • 1. Economics of Chemical Plants Introduction Lecturer Assistant: Kareem H. Mokhtar Chemical Engineering Department
  • 2. You are one step away from achieving your dream
  • 3. Why is it Important • Economics is all about Scarcity • You are an engineer, your duty is to deal with scarce resources in an ideal way to get the optimum results with the lowest cost. • The best available technique is not always the best option, you need to evaluate all possible techniques regarding their cost and productivity.
  • 4. Grading System Item Grade 1 Quizzes 25 2 Assignments 5 3 Project 10 4 Total 40
  • 5. Do you remember these definitions • Income • Profit • Productivity • Interest • Supply • Demand • Market • Return on investment
  • 6. Do you remember these definitions • Capital • Asset • Taxes
  • 7. Think about the best option 7000 LE 5000 LE
  • 8. Case Study • Initially the old designed refrigerator is going to be more profitable than the new one, as it saves 2000LE in capital investment. • When the electrical consumption is studied, it was found that the old refrigerator consumes 400 LE/ month, and the new one is more energy efficient so it consumes 150 LE/month only. • Which means you will save 250 LE/ month. • So in 8 months only the difference in price can be collected back. Capital cost Operating cost
  • 9. Case Study • But what about interest! • If the 2000 LE was saved and kept in the bank we can get around 15% as interest rate. • In 12 months we can get 300 LE only from interest. • Now we can choose the new refrigerator because it is more economical.
  • 10. Choosing the optimum condition • Sometimes as an engineer you need to choose from several options, some of them are interconnected in such a way you need to choose the optimum choice that guarantee the best output for your factory. • Consider a pipe used in the factory, taking into consideration that the pipe length is constant, what other variables that can be changed?
  • 11. 1- Pipe diameter • As long as the pipe diameter increases the cost of the pipe increases • As long as the pipe diameter increases the pumping cost decreases Capital cost Operating cost
  • 12. 2- Pipe insulation • As long as the pipe insulation thickness increases the cost increases • As long as the pipe insulation thickness increases the utility cost needed for heating or cooling decreases Capital cost Operating cost
  • 13. Choosing the optimum condition Op. cost Cap. cost $ Variable Total cost