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Overview

The objective of this course is to provide a background in economic issues related to softwareengineering. It determine how new software development technologies affect the economics and

risks of software development. Moreover, it also enable the students to understand the

fundamental principles underlying software engineering and economics; to analyze engineeringsituations via case studies; to analyze software cost/schedule trade-off issues via software cost

estimation tools and microeconomics techniques; and to apply the principles and techniques to

practical situations. Additionally this course also provides Project evaluation methods form thebasis on which the decision-making process takes place in the context of business and

government applications. The course has a practical orientation and it is based on a collection of

case studies drawn from real-world engineering situations with particular emphasis on those

applications found in software engineering practice.

Course Plan

Week Major Topics Covered

1Introduction to Economics, Economic Theory, Models, Behavioral Analysis and

Rational Behavior

2 Laws of Demand and Supply, Price System and Market Equilibrium, Business Firm,

3Companies in Business, Business Decisions in For-Profit and Non-ProfitOrganizations, Business Decisions in your own Personal Finances

4Economic Profit and Economic Costing, Product Cost, Average and Marginal Cost,

Law of Diminishing Marginal Returns, Engineering Economics

5 Business Proposals i.e. RFP, RFQ, The Software Work Breakdown Structure (WBS)

6Cash-Flow Instances and Cash-Flow Streams, Cash-Flow Diagrams, Developing Cash-Flow Streams.

7Break-even Analysis, Break-Even Analysis with Two Alternatives, introducing the

Business Decision-Making Process, Understand the Real Problem.

8Define the Selection criteria, Identify All Reasonable technically feasible solution,Evaluate each proposal against the selection Criteria, Select the Preferred Proposal,

Monitor the Performance of the Selected Proposal

9 Using Different Interest Periods and Compounding Frequencies

10The Relationship between Cash-Flow Instances and Compounding Interval, Discrete

Payment, Determining Actual Interest Rates.11 Capital, NPV, IIR, ROI, Composite cash flows

12 Capital, NPV, IIR, ROI, Composite cash flows with exercise questions

13Comparison of Two Proposals, Simple Equivalence, Equivalence with Varying Cash-

Flow Instances

14 Approaches to equivalence, Equivalence Under Different Interest Rates

15 Project Analysis and figures of merit, Planning Horizons and Economic Life

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Module Expected

week

Assignments

Quizzes Quizzes in

week 2 to 8,

and 11 to 13

Mid Term 9th week

Presentations Week 15 &

16

Final Exam

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Lecturenotes,

articles,

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reference

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