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# Probability and Statistics

This appendix is intended to serve as a brief review of the probability and statistics concepts used in this text. Students requiring more review than is available in this appendix should consult one of the texts listed in the bibliography.

## A.1 PROBABILITY

Uncertainty in organizational decision making is a fact of life. Demand for an organization's output is uncertain. The number of employees who will be absent from work on any given day is uncertain. The price of a stock tomorrow is uncertain. Whether or not it will snow tomorrow is uncertain. Each of these events is more or less uncertain. We do not know exactly whether or not the event will occur, nor do we know the value that a particular random variable (e.g., price of stock, demand for output, number of absent employees) will assume.

In common terminology we reflect our uncertainty with such phrases as “not very likely,” “not a chance,” “for sure.” But, while these descriptive terms communicate one's feeling regarding the chances of a particular event's occurrence, they simply are not precise enough to allow analysis of chances and odds.

Simply put, probability is a number on a scale used to measure uncertainty. The range of the probability scale is from 0 to 1, with a 0 probability indicating that an event has no chance of occurring and a probability of 1 indicating that an event is ...

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