(BQ) Part 2 book "Quantitative methods for business" has contents: Uncertainty and probabilities, probability distributions, using samples, testing hypotheses, making decisions, quality management, inventory management,.and other contents. | CHAPTER 12 Uncertainty and probabilities Contents Chapter outline Measuring uncertainty Calculations with probabilities Conditional probabilities Chapter review Case study – The Gamblers’ Press Problems Research projects Sources of information 313 313 317 323 331 332 333 334 335 Chapter outline Previous chapters have assumed that we can describe a problem with certainty. This chapter looks at situations where this is not true, and there is some level of uncertainty. We can measure uncertainty with probabilities, where the probability of an event is its likelihood or relative frequency. This basic measure is used in many types of analyses. Probabilities are used in all the following chapters, so it is important that you understand the basic ideas before moving on. If you have any difficulties it is worth spending the time to sort them out. If you want more information you might find some of the further reading at the end of the chapter useful. After finishing this chapter you should be able to: n n n n n n n appreciate the difference between deterministic and stochastic problems define probability and appreciate its importance calculate probabilities for independent events calculate probabilities for mutually exclusive events understand the concept of dependent events and conditional probabilities use Bayes’ theorem to calculate conditional probabilities draw probability trees. Measuring uncertainty So far, in this book we have largely assumed that we can describe a problem with certainty. We know the number of sales and the prices charged with certainty and can say, ‘PhoneLoft sells 1,000 units a year’. When you look at 314 Uncertainty and probabilities production you can say with certainty, ‘Bionorm makes 120,000 units a year at an average cost of $8 a unit’; when you look at employees you know how many are employed, their hours of work, the number of customers they serve and so on. Such situations are called .
