Department of Computer Science & Software Engineering Software Engineering Economics (ECON 403)

  Room: Portable-4, Room- 2  ECON403: Section 001 (Boys) Section 101 (Girls)

 Production Model  Cost Model  Market Model

 Production models study the forms of production systems and their efficiencies between the input and output.  Productivity  Marginal Product

 The productivity, or the average product, P ̅, is a ratio between the total output O and the variable input or labor I v, i.e.:  P ̅ = O/I v

 The marginal product P ̅ ∆ is a ratio between the incremental output and the incremental input, i.e.:  P ̅∆ = Δ O/ Δ I v

 Costs of production systems can be classified as the fixed and variable costs.  C = c f + c v

 C ̅ = C/O (C f +C v )/O (C f +C v )/P*I v o Marginal Cost, C ̅ Δ = Δ C/ Δ O (C f + Δ C v )/P Δ * Δ I v

 The market is an economic domain in which buyers and sellers exchange commodity and services  Classification: Perfect Competitive Monopolistically Competitive Oligopoly Monopoly

 A perfect competitive market is a free- entry market where many sellers supply identical products or services so that none of them may dominantly influence the market prices.

 A monopolistic market is a market where only a sole supplier provides a good or service without any close substitutes.

 The markets may also be classified as surplus and shortage markets, which can be illustrated by the interactions of demands and supplies over time as shown in Figure on the next slide, where:  a) A surplus market: t i ’ D(t i )  b) A shortage market: t i ’’ >t i ⇒ S’’(t i )<D(t i )

 Surplus Vs Shortage Markets