Abstract Probabilities can be utilized in a wide range of real life scenarios. In this text, I discuss a number of real life scenarios that would require the computation or estimation of probabilities. Further, I examine and offer a concise definition of median, mean and mode with an aim of determining which of the measurements could be regarded more relevant than the other.
Probability
Probabilities according to Becker and Parker (2011) are used in both simulations and real life scenarios to help in the estimation of the occurrence of events. In the words of Gravetter and Wallnau (2008), "for a situation in which several different outcomes are possible, the probability for any specific outcome is defined as a fraction or a proportion of all the possible outcomes." In that regard, chance and randomness are some of the critical components of probability. It is important to note that in most cases, the ability of individuals to make sound decisions is largely dependent on how accurate they are in their estimation of the occurrence of future events. From time to time, it is not unusual to find ourselves confronted with probabilistic problems. In the next section, I will concern myself with four real life scenarios where the calculation and/or estimation of probability could come in handy.
To begin with, assuming I was granted a license to operate a small insurance firm in my neighborhood, probability estimation and computation would come in handy in the determination of the amount of premiums to be charged to my clients for the various covers extended to them. For instance, assuming I only offered one insurance product i.e. accident cover, I would compute premium rates on the basis of a number of parameters including but not limited to age of the applicant, number of accidents an individual has been involved in, etc. I would set a high premium for individuals with bad driving records as the probability of such individuals causing accidents in future could be high. Thus the probability of an individual being engaged in an accident in future would in this case be based on the number of accidents such an individual has been involved in previously.
Secondly, assuming my doctor told me I had a growth that would require a risky surgical operation to remove, my decision on whether or not to go for surgery would depend on the success rate of the said procedure. In seeking to determine the success rate of the procedure, I would have to look at statistics in an attempt to determine how many individuals have survived the said operation in the past. Based on my findings and using probability concepts, I could easily determine my chances of surviving the said procedure.
Next, suppose I was planning a friend's wedding and the couple preferred that the event take place in an open space, it would be prudent on my part to determine the probability of there being a downpour on the wedding day. A high probability of there being a downpour would force me to either reschedule the said wedding for another day or organize for another venue. In this particular case, I could compute the likelihood of rain by examining the prevailing weather conditions in the past week or so.
Lastly, I could use probability concepts in an attempt to determine my chances of winning in a wheel spinning game. In a game spinner or wheel spinning competition, participants are required to spin a wheel with several colored sections. A winner is identified when a predetermined color aligns itself with a fixed pointer. In this particular case, my chances of winning would effectively be determined by the number of colors in the game spinner. For instance, four colors would give me a 25% chance of winning. The more the colors, the lesser my chances of winning would be. The reverse is true.
Determining the Most Important Measurement from a Business Perspective
Before deciding on the most important statistical measurement, it would be prudent to first offer a definition of each. The mode according to Black (2009) "is the most frequently occurring value in a set of data." On the other hand, the author defines the median as the value in the middle of an array of numbers presented in an ordered manner. By an ordered manner, the author means that in seeking to determine the median, values must be arranged from the smallest to the largest. Lastly, "the arithmetic mean is the average of a group of numbers…" (Black, 2009). In that regard, the same could be computed by dividing the summation of all data values with the number of the said data values.
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