In the world of statistics, we are introduced to the concept of probability. On page 146 of our text, it defines probability as "a value between zero and one, inclusive, describing the relative possibility (chance or likelihood) an event will occur" (Lind, 2012). When we think about how much this concept pops up within our daily lives, we might be shocked to find the results. Oftentimes, we do not think in these terms, but imagine what the probability of us getting behind the wheel of a car twice a day, Monday through Friday, and arriving at work and home safely. Thankfully, the probability for me has been 'one'! This means that up to this point I have made it to work and returned home every day without getting into an accident. While probability might have one outcome with one set of circumstances, this does not mean it will always turn out that way. Using the same example, just because I have arrived at work every day without getting into an accident, this does not mean it will always be true. As I confess with my words, and pray it does stay the same, probability tells me there is room for a different outcome.
In business, we often look at the probability of success or financial gain when making a decision. There are several things to take into consideration such as the experiment, potential outcomes, and possible events. An experiment is a process that leads to the occurrence of one and only one of several possible observations, while an outcome is a particular result of an experiment (Lind, 2012, p.146). An event is a collection of one or more outcomes of an experiment (Lind, 2012, p.147). There are three different types of probabilities that may be used in business decisions. The first is classical probability, which means that the outcomes of an experiment are equally likely. For example, say a business places an opening for job and the only requirement is the applicants are over the age of 18. Let's assume four people applied,...
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