Question.2919 - 1. When would you use descriptive over inferential statistics? Provide a specific scenario and explain your rationale. 2. Why is using Bayes' theorem important to help answer business-related questions? What does this theorem allow you to do that traditional statistics do not? What are some prerequisites for using Bayesian statistics? 3. As a manager, what are some benefits of applying probability concepts to solve business-related problems? Would business decisions suffer without probability concepts? Explain.
Answer Below:
1. When would you use descriptive over inferential statistics? Provide a specific scenario and explain your rationale. Both descriptive and inferential statistics can be used in an analysis exercise. Descriptive statistics essentially provides a broad view of the data and these statistics can further be used in inferential statistics. Descriptive statistics includes various techniques and measures by which a collection of data can be described and summarised. On the other hand, inferential statistics involves techniques which enable us to make valid inferences from particular to general; therefore, we would use inferential statistics when we want to draw conclusions for the population from the given sample. Inferential statistics are also used to assess the strength of relationship between two or more variables. For example, we want to determine if a targeted food subsidy programme has been able to reduce malnutrition in a region. To gauge its effectiveness, a sample will have to be drawn from the targeted population of the region (considering the population is too large) and basis the calculated sample statistics, inferences will have to be drawn regarding the population. One can also access if there exists a relationship between food subsidy and malnutrition. 2. Why is using Bayes' theorem important to help answer business-related questions? What does this theorem allow you to do that traditional statistics do not? What are some prerequisites for using Bayesian statistics? Bayes’ theorem is extensively used by business firms because Bayes’ method facilitates the modification of the hypothesis in the light of some new information and eventually converges towards the correct results. Segmentation is an apt example, which anchors on Bayes’ method, used in formulation of business strategies. Using segmentation, one can segment any group of individuals – customers, distributors, vendors – based on pre-existing information. By assigning an artificial grouping to this set of individuals, you can uncover additional information that helps advance your understanding of how each group contributes to your business goals. Then, you can adjust your strategy based on that updated understanding. Prior probabilities ? New Information ? Application of Bayes’ Theorem ? New required probability The conventional statistics are however constrained when it comes to finding conditional outcomes. Bayes’ theorem provides probability obtained from the additional information that some other event has already occurred. Prerequisites: The method can be applied to Sequential events, where new information is received for a subsequent event, and that new information is used to revise the probability of the initial event. 3. As a manager, what are some benefits of applying probability concepts to solve business- related problems? Would business decisions suffer without probability concepts? Explain. In business, the application of probabilistic models to solve business-related problems has evolved during the time. The benefits accrued to using probability concepts range from financial to operation performances. These models can be used for forecasting, inventory management, risk management, formulating advertising strategies, etc. to name a few. Yes indeed, not using the probabilistic models/concepts can have a negative bearing on the business. With the advent of the big data and analytics, the business firms are at an advantage of exploring and delving deeper into the insights provided by the historical information which can help them understand the business and its requirements in a much efficient way. Imagine a situation where the business firm is able to forecast the demand for its goods with the help of a probability model. Such a development can help the firm plan its strategy in advance and more become efficient and profitable.More Articles From Statistics
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