Cost-effectiveness Analysis - General Application

General Application

The concept of cost effectiveness is applied to the planning and management of many types of organized activity.It is widely used in many aspects of life. In the acquisition of military tanks, for example, competing designs are compared not only for purchase price, but also for such factors as their operating radius, top speed, rate of fire, armor protection, and caliber and armor penetration of their guns. If a tank's performance in these areas is equal or even slightly inferior to its competitor, but substantially less expensive and easier to produce, military planners may select it as more cost effective than the competitor. Conversely, if the difference in price is near zero, but the more costly competitor would convey an enormous battlefield advantage through special ammunition, radar fire control and laser range finding, enabling it to destroy enemy tanks accurately at extreme ranges, military planners may choose it instead—based on the same cost effectiveness principle.

Cost effectiveness analysis is also applied to many other areas of human activity, including the economics of automobile usage.

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