Economic analysis essentially entails the evaluation of costs and benefits. It starts by ranking projects based on economic viability to aid better allocation of resources. It aims at analyzing the welfare impact of a project. Economic analysis can address the following questions/issues:

Should the project be undertaken by the public or private sector?
What will be the fiscal impact of the project?
How will we ensure efficiency and equity of cost recovery?
What will be the environmental impact of a project?

Indeed, economic analysis entails three main elements: These are:

1.Identification and estimation of costs related to an investment
2.Identification and estimation of benefits to be obtained from an investment
3.Comparing the costs with benefits to determine the appropriateness of the investment.