Question

Discuss the difference between probability and statistics. Describe a business scenario that utilizes statistics and probability. Provide an example of each.

Answer 1

Both probability and statistics are used to predict something be it quality of a lot from a sample or the demand . But their lies difference in them .

Statistics is used to predict future conditions based on past records . Suppose in a business of motor cylcle selling , the company has to forcast the demand of the m/c in the coming year . It do so by gathering previous year data of no. of m/c sold in previous years . They will analyse the data ,group them , will try to form a pattern ( like the no. of m/c may sold may be increasing by 10% + or - 1% ) and then they will predict the demand . Also many other factors play a important role in this like the cost , population , other companies policies , govt policies tax etc. All these factors are taken into account and then demand is calculated .

Probability deals with finding the chances of a particular thing to happen given the sampled data or some conditions . For example , when you want to find out which product to be manufactured from the sampled data . In this case the business management doesnt use the previous year data . They do a survey . Suppose they make three items in same category . They ask a sample of people to give their choice of preference . After data is collected , it is found out how much percentage of people prefered first item or second or third . On the basis of that they manufacture the items .

To make clear more consider a example a different from business .

Suppose you roll a unbiased dice thrice and you get 4 , 4 , 4 . If you predict what will be the next outcome , then according to statistics it will be 4 as in all previous times 4 has come . But according to probability it will say the chance of every no. is same that is 16.67 % . So this is the basic difference . statistics takes into account past records where as probability takes into account the randomness.