Variance and standard deviation – a real world example
How may variance and standard deviation be applied to a real-world business-related problem? Provide a specific application in which these measures are useful. Solution Preview
Variances and standard deviations are very useful in business. Among many of their uses, finance is probably the single most important area where these are needed.
First, you should know that the square of standard deviation is variance, so they are essentially the same. I will provide an example of how they are used in business (in marketing), and I will explain why variance and s.d. are slightly differently.
Consider a marketer, who wants to sell a product to consumers. Suppose that the current price of this good is $10. Of course, not everyone will want to pay $10. If one really needs this …
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