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Decision trees are a key quantitative tool in AQA A-Level Business for analysing and evaluating business decisions under conditions of uncertainty. They allow managers to map out different options, assign probabilities and financial values, and calculate the expected value of each course of action. This lesson covers how to construct, interpret, and evaluate decision trees.
Key Definition: A decision tree is a diagrammatic representation of a business decision that shows the different options available, the possible outcomes of each option, the probabilities of those outcomes, and the expected financial returns.
Decision trees are a tool of scientific decision making — they impose structure and quantitative rigour on complex decisions.
| Symbol | Meaning | Description |
|---|---|---|
| Square node (□) | Decision point | Represents a choice the manager must make |
| Circle node (○) | Chance node | Represents an uncertain outcome (with probabilities) |
| Branch (line) | Option or outcome | Connects nodes — labelled with the option, probability, and/or financial value |
A typical decision tree reads from left to right:
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