Question

Outline the technique of cost benefit analysis and discuss how it can be used to inform decision making in the public sector.

Answer 1

Answer - The technique of cost benefit analysis is a process of analysing business decesions.The business analyst adds the benifits of the situation or action and then deducted the costs related with that action. Some analysts build theory or model to measure cost benefit analysis.

Before installing a new a new project managers adopt a cost benefit analysis to evaluate all costs and revenue that may generate from the project.The result of the analysis gives idea whether the project is financially possible or not or if the company should work another new project. In this cost benifit analysis the concept of opportunity cost is considered while taking business decesions.

Cost benefit analysis has become an important and useful instrument in public sector also.It improves the decesion making in public sector.Many countries adopted this approach in decesion making of providing public services very efficiently.One of the main criteria for decesion making in public sector is to identify the public investment project among others and giving investment priority to every factor i.e sports, education,welfare services, infrastructure etc.according to urgency and requirement.and makes each investment allocation efficient and giving better results,makes all possible with the help of cost benefit analysis. Social welfare is an important indicator of strong functioning of public sector.It comes in to practice well with the adoption of cost benefit analysis.