A-level Business Studies Lesson 09 (3.2.2)

Question 1

Decision tree

Answer 1

A tree-like model of the various options available in a decision,
including the probability of different outcomes and their
estimated costs and returns.

Question 2

Expected value (EV)

Answer 2

The monetary value of an outcome of a decision; calculated by
multiplying the value of the outcome (the payoff) by the
probability of that outcome occurring.

Question 3

Net gain

Answer 3

The value to be gained from making a particular decision or
selecting a particular option; calculated by adding together the
expected value of each possible decision (or option) and
deducting the costs associated with the decision (option).