AP Notes, Outlines, Study Guides, Vocabulary, Practice Exams and more!

Probability, Expected Value, Variability

measuring risk - must know all possible outcomes, probability of each outcome 

  • sum of probabilities = 1
  • objective interpretation - based on past events/experiments
  • subjective interpretation - based on educated guess about future
  • expected value, variability >> characterize payoff/risk
  • expected income (value) = sum of product of probability and payoffs
    • probability of each case can change based on personal skills/tendencies
    • expected values same >> variability not always the same
    • E(X) = probability1(X1) + probability2(X2) + ...
  • deviations - difference between expected and actual payoff
    • based on deviations from the mean
    • standard deviation - measures risk, equal to square root of average of squares of deviations
    • Ö(probability1(deviation1)2 + probability2(deviation2)2)
    • people generally want less risk
Subject: 
Economics
Subject X2: 
Economics

Need Help?

We hope your visit has been a productive one. If you're having any problems, or would like to give some feedback, we'd love to hear from you.

For general help, questions, and suggestions, try our dedicated support forums.

If you need to contact the Course-Notes.Org web experience team, please use our contact form.

Need Notes?

While we strive to provide the most comprehensive notes for as many high school textbooks as possible, there are certainly going to be some that we miss. Drop us a note and let us know which textbooks you need. Be sure to include which edition of the textbook you are using! If we see enough demand, we'll do whatever we can to get those notes up on the site for you!