Question

Section 1: Essay Questions Please read carefully the questions below and answer any two (2) of the four (4) questions. Each question holds 8 marks. 1. Engineering economy involves technical analysis, with emphasis on the economic aspects, and has the objective of assisting decisions. Analyze the 7 Principles of Engineering Economics. 2. Cost is the value of money that has been used up to produce something. Describe the Opportunity Cost, the Direct and Indirect Cost and the Fixed and Variable Cost by using examples. 3. Government intervention: Explain why this is important for the economies. 4. The graph below shows the curves of the cost. Analyze what you can see.

Answer 1

page : 1 PAGE HO DATE: 201 SI 7 PRINCIPEE of ECONOMICS ENGINEERING PRINCIPLE 1: Develop the Alternatives Carefully defined the problems Than the choice (decision) is among . alternatives. The alternatives need to be identifi- ed and then defined hos subsequent Il analysis A decision situation involues making a cholce among two os noce alternatives of Creativity and unnovation are ossential o to the process. Enquells and managers should place a high prio Kity on thes responsiblity.

Inainn page 2 PAGE 2 DATE: 201 PRINCIPLE 2FOCUS ON THE DIFFERENCE Only the difference in the future outcom of of the alternatives are important outcomes that are common to all alternatives can be dis regarder in the comparesion and de dision. for example, if you feasible housung alterbaldues Uwere two residences willha the same purchas Cor rental) price, price woull be inconsa, uential to your final choice gnstead the decision would depend on other factoes, such as location and annhal operating and maintenance expanse. was choice

page:-3 Emo PAGE No DATE: 201 I PRINCIPLE Zi- use consistent viewpoint the prospective outcome of the alternatives economic and other should consistently developed from a defined viewpoint. Tende The perspective of decision maker which is often that of the owners of the filem, would normally o be used Co, vieo Age boe-4 см воз decision be first defined and then used consisteklly in the description analysis, and comparison of the alternatives.

Page:-4 PAGE NO DATE: 201 PRINCIPLE 4: use a common Unit of Mec &use. for measuring consequences, as collar is the economic a monetary unit such the common measure you should also try to translate other outcomes (which do not initiale appear to be economic uito the monetary unit. Usung more than one monetoly unit for Economic Analysis o will complicate the loves all analysus of a project.

I PRINCIPLE 5: All relevant consider Criteria The decision maker will normally select the alternative that will best serve the long term interest of the owher of the organisatione I on engineering economic analysis the primlary crittrion relates to the clond term financial uinterest of the owners! This is based on the assumption that available capital will be allocated to provide maximum monetary return to the ownes

page: 6 G B PRINCIPLE 6: Make Risk and Uncertainly Explicit Rusk and uncertainty are inherent un estimating the future I outcomes of the alternatives and should be recognized The analysis of the alternative involves bprojecting or estimating the future consequences o Associated with each of them. The magnitude and the impact of future outcomes of any course o of action are uncelt lais e The probability us high that a today's estirates of for eg, future cash reciepts and expenses will not be what eventually Occurs.

Page:t Peter PRINGIPAL : Revisit your Decisions A good decision making process can result in a deci Usion that has an unclesirable outcome other decision, even though relatively successful, will hewe results o significally different from the initial estimates of the consequence learning from and adapting based o ond our experiencé ate essential and are undicators ol a good olganesation. Thank's TABASSUM RIZWI

Date Expt. No. Page No. 05 GOVERNMENT INTERVENTION IN TRADE Government intervene in markets when they inefficieilly allocate ! resources. . Govelnment intervene in market to address inefficiency. on an optimally efficient market crescuees are pekfectly allocated Leto those that I need them in the amounts they need on efficient market that is not to the case; some may howe too much of a resource while others do not have enough. gnefficiency can take mand dilterent forms. Here why are some government impoet art bouts untereal un maialret The government tries market inequalities to combat through Teacher's Signature: ---

Date Expt. No. Page No. I regulation, taxation and subsidies Government may also intervent in market sol promote gearral economic growth. Maximizing social welfare us one of oule most common and best o cuderstood reason for government utervention t O Examples of this include boleaking up monopoles and regulalton neqative exelenatibues like pollution. I Government may sometimes intervene in markets to bromote ouer goals such as national unity and allvanomect.

Expt. No.. Page No. 3 Maximizing social welfare 097 obude on an unregulate market, cartels and other types of organisations I can wield molho polisdeed power daussung eally cast and limiling the development of Infrastructe Another examples of intervention to promote social welfare I involves pubille goods. Celtain clepletable goods. T 20*economic factor soero Government may also will were in market to promote General economico fewness. Government often try through taxation and welfare belograms to reallocate financial resources. Other reason include employment lows to protect Teacher's Signature:--- --

Date Expt. No. Page No. 4 certain seqmer segment of population • Macro-Economiel factor Government also interveal to minimize the damage caused by naturally occurul economic Ivents. Recession and inflation are part of the natuede buusness Cycle but can have devasting Efect on culi zens.