What cause the difference in costs given by the proposed system as compared with the present system?

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gsenviro | College Teacher | (Level 1) Educator Emeritus

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Its not very clear whether you are talking about an industry or business or process, in particular, or if this is a more general question. I will try to be as inclusive as possible.

The present or existing system is something that is already present and available, whereas the proposed system is a modification to the existing system. The proposed system could be a minor modification, major modification, or whole different concept. 

Depending on the change or the level of difference from the existing or present system, the cost associated with change/modification can vary. For example, if we think about the personal transportation system, the existing system is based on gasoline cars. The future is most likely with electric or hydrogen fuel-cell based cars. Since other facilities such as roads will be the same between the two systems, the cost would be lower (and will include the development cost, charging stations, disposal of gasoline cars, etc.). Compare this with transition from ships to airplanes as medium of long-distance transport. The entire infrastructure had to be developed for this transition and hence the costs were high. 

Another example is the healthcare system. Imagine if the eligibility age for medicare is reduced to 55 years as compared to 65 years in the present system. More people will be able to take advantage of the benefits in this proposed system and this will drive the costs up. 

In general, the level of modification will determine the cost differences between proposed and present systems.

Hope this helps.

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