Lec%205_Full(1)

# Lec%205_Full(1) - IE 343 Engineering Economics Lecture 5...

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IE 343 Engineering Economics Lecture 5: Chapter 2 - Cost Concepts and Design Economics Instructor: Tian Ni Aug. 31, 2011 IE 343 Fall 2011 1

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• Homework 1 is due Friday Sep. 2, 4:30PM in class • You can submit your homework to the TAs in the office hour or to me at GRIS376 • We only accept hardcopy/printout • No e-copies or scanned version will be accepted • Please make sure to use the HW1_template • Failure to submit your homework with the template will lead to a grade deduction. IE 343 Fall 2011 Announcement – HW1 2
• General Economics Concepts • Inverse Demand Curve • Total Revenue Function (TR) Total Cost Function (TC) • Total Profit Function ( π ) IE 343 Fall 2011 Last Time … 3 0 , 0 , 0 > > = b a b a D bD a P 2 bD aD TR = 0 , 0 C where C C TC F F F T > > + = + = = v v V c D c C C D) c -(C aD-bD TR-TC v F + = = 2 π

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• Profit Maximization Analysis Six Steps: 1. Determine the profit equation 2. Set the first order derivative of the profit equation to zero 3. Solve for D* 4. Check the second derivative at D* 5. If second derivative is less than zero, then D* indeed maximizes the profit. 6. Evaluate P at D*. (P*, D*) maximizes the profit function IE 343 Fall 2011 Last Time … 4
• Profit Maximization Analysis Six Steps: IE 343 Fall 2011 Last Time … 5 = = = = bD a P D D , D π D π D D π TC TR π * : 6 Step profit maximizes 0 If : 5 Step Check : 4 Step for Solve : 3 Step 0 : 2 Step : 1 Step 2 2 2 2

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• Profit Maximization Analysis Six Steps: IE 343 Fall 2011 Last Time … 6 2 2 : 6 Step profits maximize 2 0, 2 : 5 Step 2 Check : 4 Step 2 for Solve : 3 Step 0 2 0 : 2 Step ) ( : 1 Step * 2 2 2 2 2 2 2 v v v v * * v v F v F c a b c a b a bD a P b c a D b D π b D π D π b c a D D c bD a D π D) c (C bD aD D) c (C D bD a TC TR π + = = = = = = = = = + = + = =
• Breakeven Analysis: • Cost Driven Design Optimization Definition: The cost driven design optimization refers to how to design the product in order to minimize the cost. (only cost is considered ) IE 343 Fall 2011 Last Time … 7 2b ] 4bC ) c [(a ) c (a 2 4 F 2 v v 2 ± = ± = a ac b b D

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Revisit Cost Driven Design Optimization - Example 2.10 IE 343 Fall 2011 8
IE 343 Fall 2011 9 Example 2.10

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IE 343 Fall 2011 10 Example 2.10 – Solution cost total : hour per cargo perishable of cost given : 500 , 1 \$ cargo perishable of cost : mile per operation of cost average : 100 \$ r) (miles/hou city given velo : 12 ality proportion of constant : miles in length trip : velocity : operation of cost : T C o C C k n v C
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Lec%205_Full(1) - IE 343 Engineering Economics Lecture 5...

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