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LECTURE 1
HUMA FAWAD
HITEC, TAXILA
SEPTEMBER 2018 –JANUARY 2019
1
Course Learning Objectives
Students will have the ability to understand about the
Economics Principles implied in Businesses,
Manufacturing and Service Concerns and how an
engineer evaluate the dynamics of an organization to take
decisions for the economic well being of the concerned
entity.
3 Assessment Criteria
• Distribution of marks is as follows:
• Assignment: 20%
• Quizes: 10%
• Sessional 1 & 2 Exams: 30%
• Final Exam: 40%
• Class Attendance Schedule as per standard 75% in the Semester would be followed.
• Books:
• Economics by Stanley
• Engineering Economics (Schaum Outline Series)
• Engineering Economy by William G. Sullivan, Elin W. Wicks, C. Patrick Koelling (16th
Edition)
• Macro Economics by Paul Crompton, Micheal Swann
• Microeconomics by Micheal Swann, William A. Mceachern
• Principles of Microeconomics by Joshua Gans, Stephen King, N. Gregory Mankiw
Economics
Economics is a social science that analyzes the production,
distribution and consumption of goods and services.
It is the study of how individuals and societies choose to us
the scarce resources that exsist in nature to fulfill their wants
and needs through a decision-making mechanism, social
customs, and political realities of the society.
• The three central coordination problems any economy
must solve:
1. What, and how much to produce
2. How to produce it
3. For whom to produce it
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Introduction:
Thinking Like an Economist 1
Objectives
The objective is the goal or desired outcome of a choice
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Introduction:
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Scarcity
• Scarcity exists because individuals want more than can
be produced
• Scarcity means the goods available are too few
to satisfy individuals’ desires
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THE ECONOMIC PROBLEM: SCARCITY & CHOICE
Economics is the study of choices when there is scarcity.
Here are some examples of scarcity and the trade-offs
associated with making choices:
• You have a limited amount of time. If you take a part-time
job, each hour on the job means one less hour for study or
play.
• A city has a limited amount of land. If the city uses an acre
of land for a park, it has one less acre for housing, retailers,
or industry.
• You have limited income this year. If you spend $17 on a
music CD, that’s $17 less you have to spend on other
products or to save.
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THE ECONOMIC PROBLEM:
SCARCITY AND CHOICE
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1-8
FACTORS OF PRODUCTION
The resources used to produce goods and services; also known as production
inputs.
• Natural resources/Land
Resources provided by nature and used to produce goods and services.
• labour
The physical and mental effort people use to produce goods and services.
• human capital
The knowledge and skills acquired by a worker through education and experience.
• entrepreneurship
The effort used to coordinate the factors of production—natural resources, labor,
physical capital, and human capital—to produce and sell products.
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Introduction:
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Economic Terminology
• Goal of this class is to describe how economics works
in the real world
• You will be introduced to many terms that occur in
business and in discussions of the economy
• For example:
• Opportunity cost
• Marginal benefit and marginal cost
• Market and economic forces
• Demand Supply
• Production Function
• Optimization, etc
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Introduction:
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Opportunity Cost
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Opportunity Cost
Examples of opportunity cost:
1. Individual decisions
• The opportunity cost of college includes:
• Items you could have purchased with the
money spent for tuition and books
• Loss of the income from a full-time job
2. Government decisions
• The opportunity cost of money spent on the war
on terrorism is less spending on health care or
education
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Economic Insights
• Theories tie together economists’ terminology and
knowledge about economic institutions
• Theories are too abstract to apply in specific cases and
are often embodied in economic models and principles
• An economic model is a framework that places
the generalized insights of the theory in a more
specific contextual setting
• An economic principle is a commonly held
insight stated as a law or general assumption
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The Scope of Economics
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Economic Institutions
• To apply economic theory to reality, you've got to have
a sense of economic institutions
• Economic institutions are laws, common practices,
and organizations in a society that affect the economy
• Economic institutions differ significantly among nations
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Introduction:
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ENGINEERING ECONOMICS
LECTURE 2
HUMA FAWAD
HITEC , TAXILA
SEPTEMBER 2018–JANUARY 2019
24
Engineering Economics Systematic evaluation of
the economic merits of proposed solutions to engineering
problems
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Introduction:
Thinking Like an Economist 1
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Rational Decision-Making Process
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1. Recognize a decision
problem
2. Define the goals or
objectives
3. Collect all the relevant
information
4. Identify a set of feasible
decision alternatives
5. Select the decision criterion
to use
6. Select the best alternative
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Decision Making
1. What is
Decision Making? 2. Barriers to Good
Decision Making
3. Decision
Making Process
4. Decision Making
Tools
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What is Decision Making?
2. Gather Information Successful decision makers explore all of the possible choices of
the situation.
3. Analyze Situation In fact many of the less obvious choices turn out to be the most
effective ones.
4. Develop Options
In many cases, we may lack sufficient information to make an
informed decision.
6. Select the preferred Synthesize all what you learned in previous steps and make a
conclusion that you believe to be your “best” choice.
alternatives
7. Act on decision and Once you have selected your best choice, you need to develop
and implement a specific and concrete plan of action.
monitor the results, As you begin taking the steps in your plan, you will discover that
making necessary adjustments need to be made.
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adjustments.
Introduction:
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• SWOT ANALYSIS
• SIX THINKING
• DECISION MATRIX
• FORCE FIELD ANALYSIS
• ISHIKAWA DIAGRAM
• MIND MAPPING
• SOCRATIC QUESTIONING
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Introduction:
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SWOT Analysis
Strengths Weaknesses
Attributes of the organization Attributes of the
that are helpful to achieving the organization that are harmful
objective. to achieving the objective.
Opportunities Threats
External conditions that are External conditions that are
helpful to achieving the harmful to achieving the
objective. objective. 1-35
SWOT Analysis – Creative Use
Opportunities Threats
How can we Exploit each How can we Defend against
Opportunity? each Threat?
Source: http://en.wikipedia.org/wiki/SWOT_Analysis 1-36
SWOT Analysis – Internal and External
Factors
Weaknesses
Opportunities
External Factors
External Environment
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Threats
Introduction:
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Decision matrix
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Introduction:
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Force field analysis
• Force Field Analysis is best carried out in small group of about six to eight
people using flip chart paper or overhead transparencies so that everyone
can see what is going on.
• The first step is to agree the area of change to be discussed. This might be
written as a desired policy goal or objective.
• All the forces in support of the change are then listed in a column to the left
(driving the change forward) while all forces working against the change are
listed in a column to the right (holding it back).
• The driving and restraining forces should be sorted around common themes
and should then be scored according to their 'magnitude', ranging from one
(weak) to five (strong).
• The score may well not balance on either side.
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Introduction:
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Six Thinking Hats
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Introduction:
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Six Thinking Hats
Western Thinking = Argument
Parallel Thinking
A
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Six Thinking Hats
Parallel Thinking
Spear
Snake
The wise man calmly explained to them, "All of you are right.
The reason every one of you is telling it differently is because
each one of you touched a different part of the elephant. So,
actually the elephant has all those features.“
White Hat
Blue Hat
Red Hat
Yellow Hat
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Six Thinking Hats
The WHITE Hat = Facts and Data
When you are asked for White Hat thinking, you are being
asked to put aside proposals and arguments - and to focus
directly on the information.
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Six Thinking Hats
The RED Hat = Feelings / Intuition
Because the Red Hat signals feelings, they can come into
the discussion without pretending to be anything else.
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Six Thinking Hats
The BLACK Hat = Issues / Concerns
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Six Thinking Hats
• White Hat: Looks objectively at data and information. Is neutral
and concerned with facts and figures.
• Blue Hat: Controls the thinking process. The blue hat is concerned
with control and the organization of the thinking process.
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Introduction:
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White Hat:
Red Hat:
Information Feelings, Intuition,
Information we know Emotions
Information we would like Permission to express
to know feelings
Information we need No need to justify
Information that is missing Represents feelings right
now
How are we going to get
that information Keep it short
Includes hard facts to A key ingredient in decision
doubtful information making 1-60
Introduction:
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Yellow Hat:
Black Hat:
Logical Positive
Logical Negative The optimistic view
The pessimistic view Reasons must be
Reasons must be given given
Points out thinking that Needs more effort
does not fit the facts, than the black hat
experience, regulations, Looks for the
strategy, values concept behind the
Points out potential idea
problems
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