Important of probability - probability distributioin , Operation Research

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Important of Probability

The  various practical applications  of the  theory  of probability are:

a.The fundamental  laws of statistic viz   the law  of statistical regularity and the law  of inertia  of large  numbers  are based on the  theory  of probability.

b.The very  inception of  the theory of probability  has been  to unlock the intricacies  of betting  and games. It  is now  possible  to decide whether  it is  worthwhile  betting  at a game. This  is done  by  calculating  the expected value of an action with  likely return  on each  of the  outcome given  the  chances  of success attached  to each  outcome.

c.Decision  theories  are based  on fundamental  laws  of probability  and expected value. the empirical probability  concept based on  experimental  tests provides  scope  for the  application  of probability  to real life  situations.

d.The use of probability  theory  is increasing in  economic decision making. The theory  of probability  is very  helpful  in situation of risk  and uncertainty. For example  a sales  manager  may  want to know  the probability  of doubling  the sales  of a particular product, management  may like  to know  the probability  of the  success of  a new product or of a plant at its new location etc. In  order  to  make proper decisions in the face of uncertainty we use the fundamental  laws   of probability.

e.The use of subjective probabilities  is made when  actual  measurement  is not  possible . it has  added  a new  dimension to the  theory  of probability. Such  subjective  probabilities can  however be revised  in the  light of experience by the  Bayesian  rule  of revisions of prior probability estimates.

 


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