Explanation

Probability helps decide best choice under uncertainty.

Example:

• Gamble 1: Win $10, 50% → Expected $ = 0.5×10 = $5

• Gamble 2: Win $20, 20% → Expected $ = 0.2×20 = $4

Choose gamble with higher expected value.

Quiz

1. What can probability help with?

2. Which gamble is better if expected value is higher?

3. Formula for expected value?

4. Can probability quantify risk?

5. Is it always accurate?

Answer Key

1. Making decisions

2. Higher expected value

3. E(X) = Σ(P × value)

4. Yes

5. No, just an estimate