Question

why is estimation ised in business math ? please support your answer with examples, college level answer

Answer 1

Estimation is the process of finding an estimate or approximation from the given input data. This value is useful as it is derived from the best information available and helps make important decisions. Estimation involves using the value of a statistic derived from a sample to estimate the value of a corresponding population parameter.

Estimation becomes extremely important in business math as a business needs to make a lot of decisions about the future and not all information about all parameters is available. A business can't just wait for all the uncertainty to clear up and all parameters to appear automatically, as it will be too late. Estimation helps fight that uncertainty by giving a probable direction in which the business-related factors will sway, thus helping us improve our business.

To elaborate with an example, a shoe brand manufacturer needs to determine how much quantity of winter boots he should produce for the upcoming winter season. He can't just wait for the winter to come and start producing as er demand, as the lead time to manufacture and distribution takes three months. Also, no customer will wait, if the shoe is not available and will walk to the nearest competitor. Hence, the quantity to produce needs to be determined, and for that the manufacturer will need an estimation of the total demand in the winter season based on all the available present and past input factors such as last year sales, average YOY growth, environmental factors (expected winter temperatures), marketing budget etc.

Hence, it is very important to estimate for your business to be successful in today's world.