- The extent to which the possible outcomes of uncertain event may vary
* Variability: A Scenario
- Assume that you are choosing between two part time sales jobs which have the same expected income ($1,500)
- The 1st job is based entirely on commission.
- The 2nd is a salaried position.
- There are 2 equally likely outcomes in the 1st job--$2,000 for a good sales job and $1,000 for a modestly successful.
- The 2nd pays $1,510 most of the time (that is .99 probability), but you will earn $510 if company goes out of business (that is .01 probability). Job 2 Expected Income * While the expected values are same, variability is not same.
* Greater variability from the expected values signals greater risk.