Final answer:
The organization is using scenario analysis, which is a component of decision theory where different demand outcomes are explored to inform strategic decisions, integrating fundamentals like opportunity cost, marginal decision making, and diminishing returns.
Step-by-step explanation:
When an organization separates the future into three possible outcome categories of low demand, normal demand, and high demand, it applies the traditional concept of decision theory known as scenario analysis. This approach is part of strategic planning and risk management, and involves creating and analyzing various potential scenarios to make better-informed decisions. By considering different levels of demand, the organization can prepare various strategies to optimize its outcomes, reflecting the economic way of thinking in terms of opportunity cost, marginal decision making, and diminishing returns.
The decision theory assists in evaluating choices under uncertainty, complementing the concepts of opportunity cost, where each decision involves forgoing an alternative; marginal decision making, which analyzes the incremental benefits and costs of a decision; and diminishing returns, which indicate that continuing the same action might yield lower incremental benefits over time.