A Guide to Business Statistics

Chapter 4Probability

We live in a world of uncertainty. You cannot even be certain you will finish this sentence. Or this one. OK, you made it, but you get the point. Most of the decisions we make in life are made under uncertainty, and most of the consequences of those decisions are uncertain as well. If you are reading this book as part of a course in statistics, then you are likely pursuing a degree in higher education. On the other hand, if you are reading this book simply out of enjoyment, then you are crazy. That is one thing we can be certain about. In the likely case that this book is being used toward a degree program, your choice of what degree to pursue is made under tremendous uncertainty. You cannot be sure what career options will be available when you graduate, how much you will earn, whether you will relocate, or whether you will want to.

In the midst of uncertainty, we often want to know the likelihood, or chance, of certain events happening. Before leaving the house, for example, we may check the weather on our phones or on a weather channel. In doing so, we are informed about the chance of specific events occurring – like rain or snow – presented in percentage terms. For example, the weather channel may report a 90% chance of rain today. We then use that information to make decisions about how to dress and what to bring to protect ourselves from the rain. When the chance is 10% we might leave behind the umbrella, but at 99% we will take it. Thinking again ...