Scientific Decision making

• What does the scientific approach to decision-making rely on?

  Data and logic
• Why do businesses want to reduce uncertainty in decision-making?

  To minimize risk
• What is scientific decision-making?

  Using data and logic for decisions
• What role does data mining play in scientific decision-making?

  It sources relevant data for decisions
• How do predictive models contribute to decision-making?

  They analyze scenarios logically
• What is the purpose of forecasts in scientific decision-making?

  To consider implications of decisions
• What models are linked to scientific decision-making?

  • Decision trees
  • Investment appraisal
  • Sales forecasting
  • Sensitivity analysis
  • Network analysis
• Why is scientific decision-making becoming more popular?

  Due to more data availability
• What has contributed to the sophistication of data analytics?

  Skills and experience of data analysts
• What do management expect regarding data usage in decision-making?

  Data should be used whenever possible
• What is opportunity cost?

  The cost of missing out on the next best alternative
• How does opportunity cost represent benefits?

  It shows benefits from a different decision
• Why do businesses have to make choices?

  Choices have implications for the business
• What is a common condition under which business decisions are made?

  Resources are usually scarce or limited
• How does uncertainty affect business decisions?

  It influences the choice of actions taken
• What does opportunity cost measure?

  The cost of a choice in terms of alternatives
• What are some examples of opportunity cost in business and economics?

  • Work-leisure choices: Lost wages from not working extra hours
  • Government spending: £10 billion less for education or defense
  • Investing today: Consumer goods production given up for capital goods
  • Scarce farming land: Less food production due to bio-fuel crops
• What is the opportunity cost of not working extra hours?

  Lost wages given up
• What might be the opportunity cost of government spending on the NHS?

  Less funding available for education or defense
• What is the opportunity cost of investing in new capital goods?

  Production of consumer goods given up
• What is the opportunity cost of using farmland for bio-fuel?

  Less wheat available for food production
• What is a trade-off in business?

  • A situation where more of one thing results in less of another
  • Often arises due to resource scarcity