Application of Managerial Economics in Decision Making

1. 0 penetration7 1. 1 Definition of managing directorial frugals7 1. 2 survival of the fittest and prospect damage9 2. 0 Basic concerns of political economy9 3. 0. 0 Theories of scotchs12 3. 1. 0 The possibility of exact13 3. 1. 1 Tastes14 3. 1. 2 Number of bargainers14 3. 1. 3 Income14 3. 1. 5 Expectations15 3. 2 The system of provide16 3. 3 The opening of crossroadion16 3. 4 The opening of expense( in g e truly figuretnment)17 3. 5 The speculation of l pull in concertr demeanor17 3. 5. 1 Rational conduct17 3. 5. 2 Preferences17 3. 5. 3 Budget constraint18 3. 5. 4 Prices18 4. 0 managerial Economics and Economic Theories18 5. 0 global overview of the dominance of the fair playyer ordinary19 6. Decision- denounce centres under the ability of the uprightnessyer ecumenical20 6. 1 Decisions in the force of the attorney ecumenical21 6. 2 The telephone lineament of humankinds procurance Act, 2007 in ratiocination-making and finishings programme f rugalal theories23 6. 3 opposite finishs25 6. 3. 1 Employment decisivenesss25 6. 3. 2 instruct lasts25 6. 4 Economic conclusions of the armament post of the virtueyer General and cipher constraint25 7. 0 Conclusion26 References28 yieldAPPLICATION OF MANAGERIAL ECONOMICS IN DECISION MAKING Introduction This musical theme try to discourse the finishing of managerial political economy in conclusion-making in an administration of my workplace.In discussing managerial political economy a link has been do to whatever stinting theories and their influence in decision making. The physical composition haveed is the dapple of the Attorney General. The first get d avow of the paper discusses what managerial frugals is and how it relates to frugals the scheme of opportunity cost and its industry what be the concerns of sparings and how they impart been responded. The punt part of this paper discusses theories of frugals which the means of the Attorney Genera l apply presently or indirectly in its decisions.The theories which impart been looked at argon hypothesis of withdraw, theory of supply, theory of consumer behaviour, increaseion theory and disbursal theory. It is in this part w here a picture discussion on the relationship of scotch theories and managerial political economy is vex, emphasis world make on the general decision-making execute. The tertiary and fourth part of this paper discuss the general overview of the chest of the Attorney General, its statutory functions, non-homogeneous decisions make under the postal table service and decision criterion. Also the berth of unexclusive Procurement Act, 2007 in procurance decisions is in brief looked into.The last part of the paper discusses the pertinence of scotch theories in decision making under the conditions of work out constraints and global pecuniary and economic crisis. 1. 1 Definition of managerial economics managerial economics has several(preno minal) definition as define by dissimilar economists and authors. Thomas J. Webster defines managerial economics as the application of economic theory and quantitative manners (mathematics and statistics) to the managerial decision-making process. Simply posit managerial economics is applied microeconomics with superfluous emphasis on those tipics of greatest matter to and immenseness to managers.McGuigan and Moyer define managerial economics as a branch of economics subject atomic number 18a which deal with the application of microeconomics conclude to real world decision-making problem face by private, humans, and non- salary institutions. Managerial economics extracts from microeconomic theory those appraisals and techniques that depart a decision maker to select strategic direction, to solelyocate expeditiously the utility(a)s of the validation, and to respond effectively to tactical solutions. The type of managerial economics in a globalised environm ent slew non be overemphasized.From the above definitions it is obvious that managerial economics stems from the primary(prenominal) subject of economics. It at that placefore authoritative to in in brief look at what economics is nigh so as to appreciate the disposition of managerial economics. According to Lipsey in that location ar ternion economics concerns i)The from tot whollyy(prenominal) oneocation of a cab argonts imaginations among preferences ingestions and the scattering of the societys turn upput among individuals and groups ii)The behaviors in which employment and distri preciselyion swop over sentence and iii)The efficiencies and inefficiencies of economic systems.The definitions above ar found on the fact that the resources of for distributively one society consists non provided of the cede dedicates of nature, such as land, forests and minerals, but too of human electrical condenser, both mental and physical, and of e real ar tificial aids such as tools, machinery and buildings. It is roughtimes useful to divide those resources into three chief(prenominal) groups (1) solely those free gift of nature, such as land, forests, minerals,etc. greennessly c onlyed inwrought resources and completen to economists as LAND (2) all human resources, mental and physical, both contagious and acquired, which economists crab LABOUR and (3) all those man-made aids to only drudgery, such as tools, machinery, fancyt and equipment, including everything man-made which is non consumed for its own sake but is utilize in the process of making an asheser(a)(prenominal) superbs and returns which economists call CAPITAL. These resources argon cal direct FACTORS OF push throughput signal because they ar utilize in the process of performance. very very much a fourth operator, ENTERPRENEURSHIP is distinguished.The entrepreneur is the nonp atomic number 18il who apportions risk by introducing both overb old products and parvenu guidances of making products. He organises the other factors of proceeds and directs them a hanker invigorated lines. The things that atomic number 18 reveald by the factors of return be called COMMODITIES. Commodities whitethorn be divided into uncorrupteds and serve reas integrityds ar tangible, as be gondolas or shoes serve ar intangible, as be haircuts or education. This perspicuousion, however , should non be exaggerated rock-steadys ar cherished because of the service they confer on their proprietors.A car, for subject is valued because of the transportation that it provides-and mayhap similarly for the flow of plea true the owner gets from displaying it as a status symbol. It is sure fact that every nations resources atomic number 18 insufficient to produce the quantities of respectables and services that would be necessitate to see all of its citizens requires. closely of the problems of economics arise out of the use of only resources to satisfy illimitable human wants. This problem brings economists and other persons to the concept of choice and opportunity cost. 1. 2 prime(a) and opportunity cost Choices ar requirement because resources ar unparalleled.Because we skunk non produce everything we would like to consume, on that point moldiness exist several(prenominal) mechanics to decide what bequeath be do and what left undone what totals bequeath be produced and what left unproduced what measure of each good volition be produced and whose wants ordain be convenient and whose left unsatisfied. In al close to societies umpteen different people and organizations either make or influence those choices. soulfulness consumers, cable agreements, ram unions and disposal body officials all exert rough influence. If you postulate to guide more of one thing, then , where at that place is an effective choice, you mustiness curb miniature roughthing else.Thin k of a man with a trusted income who considers spoiling bread. We could say that the cost of this extra bread is so m most(prenominal) shillings per skulk. A more revealing expressive style of looking at the cost, however, is in term of what other consumption he must forge in order to support his bread. Say that he decides to give up pic attention. If the statutory injury of a loaf is one fifth of the legal injury of a cinema seat, then the cost of 5 more loaves of bread is one cinema attendance forgone or, put other way round, the cost of one cinema attendance is five loaves of bread foregone.The concept of opportunity cost emphasizes the problem of choice by measuring the cost of obtaining a measuring stick of one commodity in harm of the measure of other commodities that hand over been obtained instead. 2. 0 Basic concerns of economics at that place atomic number 18 grassroots suspenses which economists in either society or organization need to acquire and cod suffices as part of the process of resolving the problem of scarcity of resources and choices of satsfiable ask among the likely alternatives. The sp atomic number 18-time activity are slightly of the staple fiber straitss economists should ask and attempt to answer i) What commodities are organism produced and in what quantities? This question arises directly out of scarcity of resources. It concerns the apportioning of scarce resources among alternative uses or resource apportionment. The question what determines the allocation of resources in heterogeneous societies? and what are the consequences of conscious attempts to change resource allocation? comport occupied economists since soonest days of the subject. In free-market economies, most decisions concerning the allocation of resources are made through the scathe system.The study of this system whole shebang is the main issue in the THEORY OF scathe (ii) By what methods are these commodities produced? Thi s question because in that location is continuously one technically come-at-able way in which goods and services finish be produced. Agricultural goods, for face, butt end be produced by farming a petite bill of land very intensively, victimization monumental quantities of fertilizer, tug and machinery, or by farming a mammoth measuring stick of land extensively, employ only base quantities of fertilizer, labour and machinery.Both methods can be utilise to produce the resembling quantity of some good one method is frugal with land but uses large quantities of other resources. The comparable is true of manufacture goods it is usually possible to produce the akin output by several different techniques, ranging from ones employ large quantity of labour and a few machines to one using a large quantity of super automated machines and only a very underage number of workers.Questions strong-nigh wherefore one method of production is used rather than a nonher, and the consequences of these choices astir(predicate) production methods, are among the issues resolved in THEORY OF PRODUCTION (iii) how is societys output of goods and services divided among its members? why can some individuals and groups consume large per centum of capital of the natonal output while other individuals and groups consume only a small share? The superficial answer is because the former realize a large incomes while the posterior earn small incomes. merely this only pushes the question one stage back.Why do some individuals and groups earn large incomes while others earn only small incomes? The basic question concerns the member of the heart and soul national product among individuals and groups. Economists wish to sleep with why each particular division occurs in a free-market society and what forces, including administration intervention, can cause it to change. All these questions are discussed in discussed in the theory of dissemination OF INCOME, which i s non dealt with in Managerial Economics. (iv) How efficient is the societys production and dissemination?These questions quite naturally arise out of questions i, ii and iii. Having asked what quantities of goods and services are produced, how they are produced and to whom they are distributed, it is natural to go on to ask whether the production and distribution decisions are efficient. The concept of talent is quite distinct from justice. The latter is a normative concept, and a just distribution of the national product would be one that our value judgements told us was a good or co veterinaryed distribution. (v) are inelegants resources being fully utilized, or are some of them lying idle?As we have noted that the existing resources of any country are not sufficient to satisfy flat the most pressing complicate of all the individual consumers. It may see strange, thitherfore, that we must ask this question at all. Surely if resources are so scarce that at that place ar e not adequacy of them to produce all of those commodities which are urgently, there can be no question of leaving idle any of the resources that are operable. Yet one of the most sad characteristics of free-market economies is that such waste sometimes occurs.When this happens the resources are said to be in involuntarily unemployed. Unemployed workers would like to have line of productss, the factories in which they could work are available, the managers and owners would like to be able to operate their factories, raw materials are available in abundance and the goods that could be produced by these resources are urgently required by individuals in the community. (vi) is the purchasing spot of specie and savings constant, or is being eroded because of inflation? The worlds economies have often experienced consummations of lengthen and rapid changes in impairment levels.oer the pine swing of history, terms levels have sometimes risen and sometimes fallen. In recent dec ades, however, the course of prices has almost always been upward. (vii) is the economys cognitive content to produce goods and services growing from family to course of instruction or is it remain static? The capacity to produce goods and services differ in different economies. In some economies the capacity grows rapidly but averse or stagnant in others. Stagnation and slow capacity growth is the main blow of economies of little developing countries.There are, of course, other questions that arise, but these seven questions are the mojor ones common to all slips of market economies. 3. 0. 0 Theories of economics The world is a very perplex place. In understanding how markets operate, for example, the economists make a number of simplifying assumptions. Without these assumption, the ability to make predictions about the cause-and effect relationship becomes unmanageable. The lawfulness of shoot asserts that the price of a good or service and its quantity withdrawed are in return connect, ceteris paribus.This theory asserts that, other factors remaining constant, individuals provide tend to procure ontogenesis numbers of a good or service as prices fall and decreasing amounts as the prices rise. Of, course, other things do not remain unchanged. a ache with ,changes in the price of the good or service, disposable income, the prices of relate commodities, tastes, and so on, may also change. It is difficult, if not impossible, to generalize consumer behaviour when multile rent determinants are simultaneously changing. It is good to remember that economics is a social, not a physical, science.Economics cannot conduct ascendanceled, science lab experiments, which makes economic theorizing all the more difficult. It also makes economists vulnerable to ridicule. One economic quip, for example, asserts that if all the economists in the world were laid to end, they would never reach a conclusion. This is, of course, an unfair criticism. In busines s, the object is to reduce un certain(prenominal)ty. Economic theories and principles are statements about economic behaviour or the economy that enable prediction of the probable effects of certain fulfills. Good theories are those that do a good job of explaining and predicting.They are supported by facts concerning how individuals and institutions truly behave in producing, exchanging, and consuming goods and services. But these facts may change in time, so economists must continually check theories against the happy chance economic environment. Despite the fact that decision making in the regime is not solely based on economic theories it is worthy discussing some of the common theories and later on see if they are relevant to the voice of the Attorney General. The discovering are some of the theories which are used in managerial economics 3. 1. 0 The theory of guideThe train function asserts that there is a measurable relationship surrounded by the price that a com pany charges for its products and the number of units that buyers are volition and able to leveraging during a specified time period. Economists refer this behavioural relationship as the law of engage, which is sometimes called the first fundamental law of economics. The law of charter states that the quantity demanded of a good or service is inversely related to the selling price, ceteris paribus( all other determinants remaining unchanged). The demand scroll is the saucer-eyedst form of the demand relationship.It is merely a list of prices and same quantities of a commodity that would be demanded by some individuals at uniform prices. This can be illustrated as shown below price of maize Tshs per tonQuantity demanded tons per month 100,000200 150,000250 200,000300 250,000350 300,000400 350,000450 400,000500 The concept of demand is based on the theory of consumer choice. separately consumer faces optimization problem, where the objective is to lease among the combinatio n of goods that maximize his or her satisfaction or commonplace utility, subject to a constraint on the amounts of funds available(i. e. reckon) to purchase these goods. Economists scoop that price is the most influencing factor of quantity of any product purchased. But economists know that other factors can and affect purchases. These factors, called determinants of demand. The basic determinants of demand are (i) consumer tastes(preference), (ii) the number of consumers in the market, (iii) consumers incomes, (iv) the price of related goods, and (v) consumer expectations about upcoming prices and incomes. The determinants are expressed mathematically as follows Qd=f(P, I, T, Ps, Pc, Pe, N.. ) 3. 1. 1 TastesA fortunate change in consumer taste(preference) for a product, a change that makes the product more preferred means the more of it leave alone be demanded at each price. Demand provide attach the demand abridge will slope rightward. An unfavarouble change in consume r preferences will step-down demand, shifting the demand curve to the left. New products may affect consumer tastes for example the introduction of compact discs greatly fall the demand for cassette tapes. Consumers concern over the wellness hazard of cholesterol and obesity have gaind for broccoli, low-calorie beverages, eggs, and whole milk.Over the historical several years, the demand for coffee drinks, bottled water, and sports utility vehicles has greatly accessiond, driven by a change in tastes. So, too for DVDs and digital cameras. 3. 1. 2 Number of buyers An growth in the number of buyers in the market increases demand. A decrease in the of buyers in a market decreases demand. For example improvement in communications have apt(p) pecuniary markets international range and have consequently increased the demand for stocks and bonds. Also, an increase in manners expectancy can increase the demand medical care, retirement communities, and care for homes. transnationa l trade agreements have reduced foreign trade barriers to most of the countries in the world, thus increasing the demand for those products. 3. 1. 3 Income How changes in income affect demand is a more complex matter. For most products, a rise in income causes increase in demand. Consumers typically buy more steaks, steaks, furniture, and electronic equipment as their incomes increase. Conversely, the demand for such products declivity as their incomes fall. Products whose demand varies directly with capital income are called superior goods or blueprint goods.Although most products are normal goods, there are some exceptions. As incomes increase beyond some point, the demand for used clothing, retread tires, and third-hand automobiles may decrease, because the higher(prenominal) incomes enable consumers to buy juvenile versions of those products. Rising incomes may also decrease the demand for soy-enhanced hamburger. Similarly, hike incomes may cause the demand for wood coal g rills to decline as wealthier consumers switch to float grills. Goods whose demand varies inversely with money income are called inferior goods. 3. 1. 4 Price of related goodsA change in the price of a related good or service may either increase or decrease the demand for a product, depending on whether the related good is a substitute or a compliment. A substitute good is one that can be used in place of another good. A complimentary good is that can be used unneurotic with another good. Substitutes skreigh and chicken ars example of substitute goods or simply, substitutes. When the price of beef rises, consumers buy less beef, increasing the demand for chicken. Conversely, as the price of beef falls, consumers buy more beef, decreasing the demand for chicken.When deuce products are substitutes, the price of one and the demand for the other roleplay in the same direction. Examples may include coca and Pepsi, and Kilimanjaro beer and Serengeti beer. equilibrate Ccomplementary g oods are goods that are used together and demanded together. If the price of gasoline falls and, as a result you drive your car more often, the extra driving increases your demand for motor crude. Thus, gasoline and motor oil are jointly demanded they are compliments. So it is with ham and eggs, tuition and text books, movies and popcorn, cameras and films.When cardinal products are compliments, the price of one good and demand for the other good move in opposite directions. Unrelated goods The Brobdingnagian majority of goods that are not related to one another are called free-lance goods. Examples include butter and golf balls, potatoes and automobiles, and bananas and radiocarpal joint watches. A change in the price of one has little or no effect on the demand for the other. 3. 1. 5 Expectations Changes in consumer expectations may shift demand. A crudely formed expectation of higher future prices may cause consumers to buy now in order to criterion the anticipated price ri ses, thus increasing modern demand.Similarly, a change in expectations relating to future product availability may affect current demand. change in demand is to be distinguished with change in quantity demanded. A change in demand is a shift of the demand curve to the right (an increase in demand) or to the left (a decrease in demand). A change in quantity demanded is a movement from one point to another point, from one price quantity combination to another on a fixed demand schedule or demand curve. In summary, an increase in demand may be caused by the following factors A aureate change in consumer tastes An increase in the number of buyers Rising incomes if the product is a normal good Falling incomes if the product is an inferior good An increase of the price of a substitute good A decrease in the price of a complimentary good A new consumer expectation that either prices or income will be higher in the future. 3. 2 The theory of supply While we have discussed some of the cond itions under which consumers are willing , and able, to purchase quantities of a particular good or service, we also need to say something about the willingness of producers to produce those very same goods and services.This is discussed by the law of supply. The law asserts that quantity supplied of a good or service is directly related to the selling price, ceteris paribus. 3. 3 The theory of production The theory of production is centered around the concept of production function. A production function relates the supreme quantity of output that can be produced from granted amounts of various inputs for a granted technology. It is a technical relation between what is fed into the productive apparatus by way of inputs of factor services and what is turned out by way of product.The production function is mathematically expressed as Q=q(L,K), Where Q is tons of output per day, L is labour days employed, and K is units of capital services( e. g. , machine days) used. In varying t he combinations of the factor inputs the presidency has to consider three distinct types of decisions decisions to be made over the short drag, decisions to be made over the desire break out and decisions to be made over the very long run. The short run is define as the period of time over which the inputs of some factors, called fixed factors, cannot be alter.The factor that is fixed in the short run is usually an element of capital( such as plant and equipment), but force be land, or the service of direction, or even the supply of skilled labour. In the short run, production must be varied by changing the quantities used of those inputs that can be varied these are called varying factors. It worth to take note here that the short run does not suss out to a fixed time period, it is a matter of fact. The long run is defined as the period long plentiful for the inputs of all factors of production to be varied, but not so long that basic technology of production changes.In our simple both factor example above, the unfaltering varies q in the long run by varying L and K. The importance of the long run in the production theory is that it corresponds to the situation facing the sign when it think to go into business, or to expand or contract the scale of its operations. The very long run is concerned with situations in which the technological possibilities open to the firm are subject to change, leading to new and improved products and new methods of production. 3. 4 The theory of price( in governing body)The decision-taking units in economic theory are households for demand, firms for supply, and primordial authorities for political science regulation and control. devoted the resources at their command, each household is untrue to act systematically to maximize its satisfaction, and each firm is assumed to act consistently to maximise its loots. 3. 5 The theory of consumer behaviour In addition to explaining the law of demand, the theme of di minishing marginal utility explains how consumers allocate their money incomes among the many goods and services available for purchase.The typical consumers situation has the following dimensions 3. 5. 1 Rational behaviour The consumer is a able person, who tries to use his or her money income to educe the greatest amount of satisfaction, or utility, from it. Consumers want to get the most of their money or, technically, to maximize their total utility. They engage in a rational behaviour. 3. 5. 2 Preferences Each consumer has trig preferences for certain of the goods and services thathat are available in the market.It is assumed that buyers as well have a good idea of how much marginal utility they will get from successful units of the various products they might purchase. 3. 5. 3 Budget constraint At any point in time the consumer has a fixed, limited amount of money income. Since each consumer supplies a finite amount of human and property resources to society, he or she ear ns only limited income. Thus, every consumer faces what economists call a cypher constraint( work out limitation), even those who earn millions of dollars a year. f course reckon constraint are more heavy to consumers with average incomes than for those with extraordinarily high incomes. 3. 5. 4 Prices Goods are scarce relative to the demand for them, so every good carries a price tag. We assume that price tags are not affected by the amounts of specialised goods each person buys. The consumer cannot buy everything wanted. So, the consumer must compromise he must opt the most satisfying mix of goods and services. dissimilar individuals will choose different mixes. . 0 Managerial Economics and Economic Theories Most decisions made by managers usually involve questions of resource allocation within the organisation in both the short and the long run. In the short run, a manager may be interested in estimating demand and cost relationship to make decisions about the price to char ge for a product and the quantity of output to produce. The areas of microeconomics dealings with demand theory of cost and production are obvious useful in making decision on such matters.Macroeconomic theory also enters into decision making when a manager attempt to forecast future demand based on forces influencing the boilersuit economy. In the long run, decisions must be made about expanding or contracting production and distribution facilities, developing and marketing new products, and possibly acquiring other firms. Basically, these decisions require the organisation to make capital outgo that is, intake made in the current period that are expected to yield returns in future periods.Economists have developed a theory of capital budgeting that can be used in deciding whether to assay limited capital spendings. It is therefore not realistic to think that a firm will make decisions based on one theory or a combination of two. Application of economic theories is an issue w hich depends on each case. There may be cases which are not complex, these may be simple decisions to be made by organisation which are not face up with constraints. 4. 1 General decision-making knead The ability to make good decisions is the tell apart to successful managerial performance.All decision making shares several common elements. First, the decision maker must establish or identify the objectives of the organization. The failure to identify organisational objectives correctly can result in the complete rejection of an otherwise well-conceived and well employ plan. for the most part, economic decision-making process involves the following steps 1. Establish and/or identify Objectives 2. coiffe the problem 3. Identify possible alternative solutions 4. Evaluate alternatives and select the best alternative . Implement and monitor the decision. 5. 0 General overview of the subroutine of the Attorney General hold 59(1) of the Constitution of the united majority rule o f Tanzania establishes the business office of the Attorney General. It states there shall be an Attorney General for the administration of the join res commonplacea, who in subsequent articles of this record shall be referred to as the Attorney-General who shall be appointed by the president. Thus, the office of the Attorney General is inbuiltly established.The constitution also prescribe the main role and function of the Attorney General in article 59(3). It provides the Attorney General shall be the adviser of the authorities of the United Republic on legal matters and for that purpose he shall be responsible for advising the political relation on all legal matters, and to discharge any other functions pertaining to or connected with law which are referred or assigned to him by the president and also to discharge such other duties or functions which shall be entrusted to him by this constitution or by any law 5. Statutory functions of The Attorney General As the causa litys and functions of the Attorney General are derived from the constitution it is undisputed fact that decision making in this office is channelize by law. In accordance with the Attorney General(Discharge of duties and functions) Act prescribe the following as functions of the Attorney General (a)To advise the governing activity on legal matters b)To institute and operate criminal cases in courts of law and apply criminal appeals, revisions and applications on be half of the United Republic (c)To litigate civil cases including primitive and human rights matters on behalf of the organisation (d)To draft and vet legislative instruments, translate and revise formula (e)To research, analyse and advice the Government on constitutional and human rights matters (f)To represent the Government in civil and criminal matters (g)To represent the governance in International Arbitration, mediation and negotiations of contacts, Government Loans and international agreements. . 0 Decisio n-making centres under the place of the Attorney General From the organisation bodily structure of the ministry of justice and constitutional affairs(attached as appendix) the following are main subdivisions or directorates useful subdivisions man Prosecutions component Civil and International Law department Legislative particle Constitutional Affairs and Human Rights particle Supporting departments Administrative and Personnel Division Policy, planning and Information improvements Division 6. 1 Decisions in the patch of the Attorney General (a)Statutory decisionsIn making statutory decisions the decision makers are channelize by law as to which option to take and the procedure of making the decision. For instance, the decision to censure a criminal is both legal and economical but much good will is abandoned to legal. The criminals have to be prosecuted though the costs associated with prosecution may be very high. In these decisions the decision makers are less fle xible. Thus, economic theories are given consideration at the level when the Government as a whole makes a decision of allocating its resources in accordance to preference of the services to offer to the citizens. b)Economic decisions Most of the economic decisions of the Attorney Generals social occasion are based on the budget which is approved by the sevens. Generally the budget is of two types of expenditures, provision expenditure and repeated expenditure. Development expenditure In the outgrowth expenditure each department proposes the festering activities which it intends to implement in the next pecuniary year. Each department is categorize as a vote and identified by vote number. Some department have divisions which are mandated to control their funds, these are categorised as sub-votes.As between various development requirements the department must choose which calculates require immediate implementation, this is because each department has more demands of these expenditures, however, the funds allocated by the parliament in each year are meagre. The decisions for development expenditure are made by top management of each department, each department being led by its core functions. Some of the expenditures which are development include rehabilitation of offices, purchase of office furniture, computers, motor vehicles, etc.The foresaid expenditures are those payd solely by the government. There are expenditure which are financed by conferrers, these are also divided in two categories basket funding and aim funding. ring funding are donations by donor countries which are to the general budget of the government. Each donor country individually or in groups contribute to the budget without specifying the project or activities which they wish to assist. The decision as how to spend the money is left to the government through normal budget process. escort funding is done by donor countries(development partners) whether individually or in gro ups who are interested to assist in specific area which they are interested. There are two main development projects in the ministry of constitutional affairs and justice, these are the court-ordered Sector Reform Programme(LSRP) and the Tackling of Corruption Programme(TCP). In these programmes the decisions of what activities to be undertaken in each is a prior bargaining between the Government of the United Republic and the development partners.normally the agreement in the form of enrolment of understanding(MOU) which stipulates the scope and focus of the project and the role of each party. The AGs Office being one of the beneficiary of these project is responsible for implementation and monitoring of the progress. In the course of implementation and monitoring economic theories have to be applied. These theories include demand and supply and consumer behaviour. Generally development expenditure are determined by the government at top level and employ by the departments. Ther e is very little influence of the management of departments in this type of expenditure. hus, at this level application of economic theories is so indirect as most of the decision are made top-bottom. perennial expenditure The budget process of the government on repeated expenditure does not differ much from development expenditure but there is a exquisite variation. While the great part of development budget is decided by the top level of the government recurrent expenditure is in the ambit of management of each department. From the start to the implementation of the budget there are various decisions which are frequently made by departments. However, the decision made must confine to other liming factors.When the budget of the ministry has been approved by the parliament each department has to prepare its action plan which is sent to the ministry of finance. The action plan enables the ministry of finance to determine amounts of money which should be issued by way of treasury issues to each department. An action plan is a timeframe based plan for implanting the budget(see appendix). In the action plan management of each department has to make an decisions on the following issues (a)Activities which are to be implement in each pull back, the department may choose an activity to be apply in the 1st, 2nd , 3rd or 4th quarter.Some of the activities may be dispersed evenly in all the 4 quarters. The decision as to which quarter an activity should be carried is very particular due to the following reasons Prices of goods and services may rise and affect the budget adversely Funds may not be available at the time when the goods or services are needed unpredicted event or state may occur. (b)Activities which are not to be utilize as caused by changes in the approved budget (c)Activities which may require application for approval of reallocation and timing of the same. 6. The role of Public Procurement Act, 2007 in decision-making and application economic theories Enactment of the Public Procurement Act, 2007 has made the application of the theories of demand and supply and theory of consumer behaviour to be feasible. The law makes it a mandatory requirement to follow certain procedures when purchasing goods and services for public offices. Section 28(1) requires each ministry, independent department of Government, Region, District and others to establish a cutlery board for procural of goods, services and works. split up 4(1) of Government Notice No. 7 states the rationale of the law as the public procurement policies are based on the need to make the best possible use of public funds, whilst conducting all procurement with honesty and fairness. Paragraph 4(2)(a) goes further to state that all public officers and members of the public and members of the tender boards who are undertaking or approving procurement shall be guided the following basic considerations of the public procurement policy- The need for economy and efficiency in the use of public funds and in the implementation of projects including the provision of related goods and services. The best interests of a public authority, in giving all eligible suppliers, contractors, and service providers equal opportunities to struggle in providing goods or executing works or providing services. The importance of integrity, accountability, fairness and transparency in the procurement process. To achieve the above objectives the law requires that tenders are awarded by way of competitive tendering in which suppliers, contractors or consultants are invited by the procuring entity to compete with each other in submitting priced tenders for goods, works or services.By providing these legal requirements the enhances the application of economic theories in public procurement. barely as demand theory states that other factors remaining constant a consumer will increase quantity of goods demanded when its price is lower, Public procurement Act requires among ot her things to select the lowest bidder( assuming other things are equal to all bidders, for instance fictitious character and time of supply) The process of budgeting in the Government is both top-down and bottom-top depending on the stage of the budget.The process starts by the Ministry of Finance(MoF) issuing budget guidelines and instruction which are to be followed by all Ministries and departments when preparing the budget. Included in the guidelines are government priorities in the financial year in reference. Budget for the AGs Office is proposed for both the development and recurrent expenditure is done in departments on the following sequences (i)Budget guidelines, budget ceiling and instruction manual issued by the Ministry of Finance (ii)Top Management of the ministry discusses the guidelines and priorities to contemporise with the ministrys priorities. iii)The top management of AGs Office make budget strategies and sets the way forward. (iv)Instructions to the Heads o f departments are issued for implementation of the guidelines, overall government priorities and ministerial priorities. (v)Head of departments implements the above by proposing their expenditures in the year under reference. 6. 3 Other decisions 6. 3. 1 Employment decisions Generally all matters related to staff requirements of any government office are dealt with the chairwomans office Public Service office.When the Attorney Generals Office is need of staff of a certain category, it will have to report the of necessity to this office. drill has shown that the Public Service Office will scrutinise the demand and if satisfied will grant a permit to the department to employ subject to the given conditions. Thus, the room to make decision is not based on the application of the production theory, theory of demand but on policies of the government on employment.For instance, salaries payable are not based on the demand and supply for labour but on what are the government scales of sa laries. 6. 3. 2 provision decisions Training of staff in the office of Attorney General is based on the readiness plan. The training plan shows the training needs of all employees and proposed period of training. It is from this plan that each department has to ensure that it includes in its budget funds for training staff. Practice has proved that the plan is hardly apply due to the fact that funds allocated to training are always inadequate.This poses a problem as to what criterion will be used to select employees to attend training. There is no set criterion for this construction and remains to be a challenge. 6. 4 Economic decisions of the Office of the Attorney General and budget constraint When budget of the ministry of constitutional affairs is approved by the parliament implementation does not start until the ministry of finance disburses funds by way of exchequer issues. It from exchequer issues that the ministry and its departments can start spending. exempt of funds b y the Ministry of Finance is made monthly and the amount depends on levy collections in the preceding month. It is therefore evident that the funds availed to each ministry and department is not necessarily equivalent to the approved budget, in most of the times is less than the budget(see appendix). This compels the ministry or the department to revisit its decisions which were based on approved budget. In this regard some of the decisions are not based economic theories, but on other factors, e. g. , political and social factors. globular financial crisis and economic crisis has contributed to the above mentioned problem by create a depression in the business sector which has a negative encounter on tax revenue. Application of economic theories to make decisions is done both by the top government management and also departmental management. At the government levels directives are issued to cut down expenditures which are deemed not necessary. For instance in the year 2007, the flush minister issued a directive which qualified government spending on workshops, seminars and uncalled-for conferences.In 2008, the government restricted purchase of expensive vehicles. All these measures were aimed at ensuring that the scarce resources of the government are directed towards provision of essential services. This is linked to the theory of consumer behavior and the government as a consumer acts rationally and wisely in spending taxpayers money. samewise, all departments after having been allocated with monthly funds less than their budgets are expected to act rationally by spending money in areas where they will maximize the value for money.They are automatically required to revisit their needs in the budget and rescale the preferences. 7. 0 Conclusion Managerial economics as a science is used as a road-map to show and aid decision makers in arriving at optimal decisions given various constraints. In its application managerial economics uses microeconomics pri nciples and economics theories. Managerial economics is mostly relevant to risk analysis, production analysis, pricing analysis, and capital budgeting. However, practical life tells that almost all businesses apply managerial economics in one way or another.Managerial economics is used and applied in both shekels-making and non- winnings making organisations. While the objective of profit making entities is to maximize profit the objective of non-profit making entities is to achieve and maximise the objectives for their establishment. The government as an institution is also approach with economical and social dilemma some of which need application of managerial economics. Like any other institution, the government is faced with the problem of limited resources against unlimited wants. The resources in the orm of capital, Land, Labour, and Management are not generous to satisfy an endless list of their uses. In addition to this problem the world is direct in uncertainty, if de cisions are made without reconciling the risk component adverse results are likely to happen. Examples of uncertainties which have relateed government resources in Tanzania include electric power crisis which compelled the government to incur cost to buy fuel for IPTL(Independent Power Tanzania Ltd) power plant. The crisis was erroneously not anticipated and therefore not pre-planned.This has impacted negatively government budget as it had to forgo some of the economic and social activities which were envisaged to be carried in the financial year 2009/2010. Explosion of bombs at Mbagala military camp caused blemish of lives and properties of citizens and caused injuries and mental cuff of thousands of Dar-es-salaam residents. The government made compensation for alter property. All these events were likely to be foreseen and the risks minimised or eliminated. Elimination or minimization of these risks entails using techniques under managerial economics(risk analysis).Together with uncertainties which the government can analyse using managerial economics as above there are uncertainties which are beyond the control of the government. For instance, the global financial crisis (GFC) started in the United States of America in the second half of 2007. The crisis was prompted by increase defaults in subprime mortgages. The crisis spread all over the world and has much impacted developing countries than others. Impacts include hurt of employment due to closure of businesses, loss of revenue and decline in new investments.Despite the importance and use of economic theories in decision-making process, the government sometimes use non economic factors to make decisions. This is so because consort to the nature of some of the activities of the government and laws and rules governing the same. For instance, a decision to build a school in a certain area does not depend on expected revenue in the form of fees but the factor will be provision of education services. Thus, in some of the problems economic theories do not apply.The theory which assumes that the objective of the firm is to maximise profit does not apply to government because its humankind does not depend on profit but on welfare of the people. Decisions of the office of the Attorney General apart from applying managerial economics, have to be in line with government policies and in some aspects with the law governing such decisions. It therefore important for decision makers in the governments and its department to make sure that not only policies and laws are considered in making decisions, they should make sure managerial economics together with applicable economic theories are taken on board.References McMconnell, C. R and Brue, S. L,(2005) Economics Principles, Problems, and Policies (16th edn). McGraw-Hill Companies, inc. , New York. McGuigan, J. R. , Moyer, R. C, etal (2005), Managerial Economics Application, Strategy and Tactics. (10th edn), United States of America. Lipse y, R. G, An Introduction to Positive Economics. (6th edn), Butler & Tanner Ltd, capital of the United Kingdom Jehovaness, A. ,(2009), The Impact of Global Financial Crisis on Developing Countries.A paper presented in the seminar on International Accounting Standards and Global Financial Crisis, 28th March, Dar es Salaam. Ngowi, H. P. (20100. The current Global Financial and Economic Crisis and its impact on Africa. A paper for the Medals for question on Development at the 11th Annual Global Development Conference, Prague, Czech Republic. The Constitution of the United Republic of Tanzania The Public Procurement Act, 2007