Question

Discuss the real–world applications where probabilities are used. (Ex. Stock market trading; Medical treatment plans; etc.)

Answer 1

Uses of Probability in Real World

Probability and Manufacturing

The basic principle of probability applies to a near infinite parade of situations. Basically, analysts use probability as a means of determining the likelihood of outcomes and occurrences given a range of variables. In business situations, companies use probability during the decision-making process by attempting to ascertain the best course of action given a series of variables. Small manufacturing businesses with limited resources in particular may benefit from the use of probability.

Probability in Manufacturing

Probability applies to manufacturing in numerous practical instances. Manufacturing businesses can use probability to determine the cost-benefit ratio or the transfer of a new manufacturing technology process by addressing the likelihood of improved profits. In other instances, manufacturing firms use probability to determine the possibility of financial success of a new product when considering competition from other manufacturers, market demand, market value and manufacturing costs. Other instances of probability in manufacturing include determining the likelihood of producing defective products, and regional need and capacity for certain fields of manufacturing.

Purpose of Probability in Manufacturing  

The purpose of probability in manufacturing lies in its ability to positively inform the decision-making process. For instance, determining the regional need and capacity for manufacturing helps business owners know where to open a business and what type of business to open. If an area contains a large pool of individuals with knowledge of farm equipment and/or automotive systems, a new farm equipment manufacturing business faces a higher likelihood of success than a manufacturer of new kitchen products, particularly in an area with a largely agrarian economy with high needs for farm equipment. Basically, manufacturing businesses use probability to determine success rates and the best path to maximizing profits.

Provability for Small Manufacturers

In particular, small manufacturing businesses with limited income may benefit from the use of probability. The reasons for this lie in the increased risk of failure inherent in small business ventures. For instance, a small business can use probability to determine the likelihood of defects present in certain types of products while using specific manufacturing processes. If the likelihood of defects in baseball bats, for instance, proves higher when using maple wood than when using bamboo, a small sporting equipment manufacturer can minimize losses and thereby the prospect of imminent failure by producing only bamboo bats, or a higher volume of bamboo than maple bats. Similarly, small manufacturing businesses can determine the best technology for the manufacturing process by determining probable costs and profits associated with all available options.

Probability Basics

The success of probability in manufacturing or any other field depends completely upon using the proper variables. For instance, assume you start a steel mill. Probability of success seems high based on regional variables such as a large pool of available workers with experience in the field and the availability of facilities. But you neglect to consider that an area possess no natural source of iron ore, requiring the importation of ore, and no facilities for the transportation of heavy metal. Neglecting such variables may lead to complete ruin. Aside from choosing variables, probability constitutes the relatively simple process of creating a percentage based on available statistics.

HOW PROBABILITY USED IN STOCK MARKETS

There are several formulae known as indicator which are used in stock market. These are normally represented daily chart, several softwar,, online platform mostly provided by brokerages firms, which can gave directly give buy and sell signal.

All of these tools use concept of probability in calculation . However these tools are still used in fundamental investors and traders to predict the right time to enter in the market.

HOW PROBABILITY USED IN MEDICAL TREATMETREATMENT-

The term "probability", apparently vague, is defined as the ratio of favourable and all cases, e. g. 1/4. Sometimes is expressed as "odds", in the above example 1:3. Mathematical (a priori) probability is calculated according to the following consideration: during accidental tossing of an intact coin the probability of head is 1/2. Statistical (a posteriori) probability is assessed experimentally. If randomization is not respected, the result is doubtful. We call it bias. Probabilities are multiplied (added) if one and (or) another phenomenon should occur. Phenomena which occur or do not occur are frequently governed by binomial division. According to the law of large numbers the a posteriori probability will become the closer to the a priori probability, the larger the number of experiments. Forecasts based on probability are made possible by interferential statistics. In this respect they differ from mere statistical description. Thus optimal decision is achieved under conditions of uncertainty, typical for medicine. This applies to diagnosis as well as treatment. In this way a cut-off value can be selected for a given diagnostic test to achieve an optimal combination of the resulting sensitivity and specificity and the probability of disease (health) in case of a positive (negative) finding can be expressed. The results of statistical testing (e. g. the effectiveness of treatment) is as a rule presented by means of the probability value p, as compared with error alpha which should be assessed in advance. It is, however, necessary to respect also an alternative hypothesis. The latter is unfortunately formulated only rarely.

Also probability can be apply in any related this. These depends on our decision.