3.3.3 Decision trees

Theme 3 Business ( paper 2)

What is a decision tree?

A diagram that weighs all options and compares the probability of success for each option.

When might a business use a decision tree?

When it can't afford to follow every option and needs to analyze the probability of success in choosing strategies.

What are some decisions that can be analyzed using a decision tree?

Launching a new product, starting a new marketing campaign, or relocating the business.

What shape represents a decision point in a decision tree?

A square.

What shape represents a chance point in a decision tree?

A circle.

What is a limitation of using decision trees?

Probabilities are just estimates and predictions, which may not accurately reflect reality.

What type of data does a decision tree primarily use?

Quantitative data.

Does using a decision tree guarantee reduced risk in decision-making?

No, it does not necessarily reduce the amount of risk.

What is a significant uncertainty factor in decision trees?

They do not account for unforeseen costs and circumstances.