Introduction to economics and PPF #

Why should an engineering student study economics ? #

An engineer may wish to study economics because an understanding of economics will allow the engineer to make better, more well-informed choices in his/her everyday life, wether the choice is about spending various savings or having decided on how to allocate savings between different assets.

1. Fundamentally engineers are builders, designers, and creators, most of whatever they design are to be sold to the public the goods and services are governed by the market (Economy) Therefore sound understanding of how the economy works is crucial for success in engineering life.
2. As an engineer climbs the corporate ladder, there will be greater exposure to managing money and resources. Economics is all about the wise allocation and savings between different assets.
3. Engineering economy provides nigher order thinking similar to engineer discipline (Analyze , Evaluate, create)

Opportunity cost #

The best alternative that we have forgone when we make a choice.

4 factors of production: #

1. Land - Natural resources
2. Laber - Physical
3. Capital
4. Entrepreneurship

Explain PPF in concave downward. #

Production Possilbilty Frontiere (PPF) The possible combination of two goods that an economy can produce in a certain period of time under the given state of technology.

increasing oppertunity cost, As more of one good is produced the opportunity cost of that good increases.

Economic concepts in a PPF Framework. #

Production Possibility Frontier

1. Scarcity
2. Choice
3. Opportunity cost
4. Productive efficiency
5. Productive inefficiency
6. Unemployed resources
7. Economic growth

Scarcity #

We can have something but not all the things. Scarcity is shown by the frontier itself.

Choice #

Choice is charectarized by the available options we have.

Oppertunity cost #

The best alternative we have forgone while making a choice is called oppertunity cost.

Productive efficiency #

Productive efficiency is represented by the point (A-E) on the PPF

Productive inefficiency #

Productive efficiency is represented by the point F on the PPF

Unemployed resources #

Unemployed resources is represented by the point F on the PPF

Economic growth #

An increase in resource or advance in technology can increase the production capabilities of an economy, leading to economic growth a shift outward in the PPF.

Recommended book : Economics by Roger A Arnold