Application of Managerial Economics in Decision Making

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1.0 Introduction7
1.1 Definition of managerial economics7
1.2 Choice and opportunity cost9
2.0 Basic concerns of economics9
3.0.0 Theories of economics12
3.1.0 The theory of demand13
3.1.1 Tastes14
3.1.2 Number of buyers14
3.1.3 Income14
3.1.5 Expectations15
3.2 The theory of supply16
3.3 The theory of production16
3.4 The theory of price( in government)17
3.5 The theory of consumer behaviour17
3.5.1 Rational behaviour17
3.5.2 Preferences17
3.5.3 Budget constraint18
3.5.4 Prices18
4.0 Managerial Economics and Economic Theories18
5.0 General overview of the office of the Attorney General19 6.0 Decision-making centres under the Office of the Attorney General20 6.1 Decisions in the Office of the Attorney General:21
6.2 The role of Public Procurement Act, 2007 in decision-making and application economic theories23 6.3 Other decisions25
6.3.1 Employment decisions25
6.3.2 Training decisions25
6.4 Economic decisions of the Office of the Attorney General and budget constraint25 7.0 Conclusion26
References28

TOPIC:APPLICATION OF MANAGERIAL ECONOMICS IN DECISION
MAKING

Introduction

This paper attempt to discuss the application of managerial economics in decision-making in an organisation of my workplace. In discussing managerial economics a link has been made to some economic theories and their influence in decision making. The organisation selected is the Office of the Attorney General. The first part of the paper discusses; what managerial economics is and how it relates to economics; the concept of opportunity cost and its application; what are the concerns of economics and how they have been responded. The second part of this paper discusses theories of economics which the office of the Attorney General apply directly or indirectly in its decisions. The theories which have been looked at are: theory of demand, theory of supply, theory of consumer behaviour, production theory and price theory. It is in this part where a brief discussion on the relationship of economic theories and managerial economics is made, emphasis being made on the general decision-making process. The third and fourth part of this paper discuss the general overview of the office of the Attorney General, its statutory functions, various decisions made under the office and decision criterion. Also the role of Public Procurement Act, 2007 in procurement decisions is briefly looked into. The last part of the paper discusses the applicability of economic theories in decision making under the conditions of budget constraints and global financial and economic crisis. 1.1 Definition of managerial economics

Managerial economics has several definition as defined by different economists and authors. Thomas J. Webster defines managerial economics as the application of economic theory and quantitative methods (mathematics and statistics) to the managerial decision-making process. Simply stated managerial economics is applied microeconomics with special emphasis on those topics of greatest interest and importance to managers. McGuigan and Moyer define managerial economics as a branch of economics subject which deal with the application of microeconomics reasoning to real world decision-making problem faced by private, public, and non-profit institutions. Managerial economics extracts from microeconomic theory those concepts and techniques that enable a decision maker to select strategic direction, to allocate efficiently the resources of the organisation, and to respond effectively to tactical issues. The role of managerial economics in a globalised environment cannot be overemphasized. From the above definitions it is obvious that managerial economics stems from the main subject of economics. It therefore important to briefly look at what economics is about so as to appreciate the nature of managerial economics. According to Lipsey there are three economics concerns: i)The...
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