Final answer:
A decision tree is a graphical tool used to visually represent decision problems and can demonstrate all possible outcomes in a probability problem. Economic models also use graphs such as line graphs, pie graphs, and bar graphs to illustrate data visually and represent relationships.
Step-by-step explanation:
A decision tree is used for visualizing a formal representation of a decision problem graphically. All decision matrices can be converted into decision trees, but some decision trees cannot be converted into decision matrices, especially trees with more than one choice node.
Example of Using a Decision Tree
Consider an urn containing eleven balls: three red (R) and eight blue (B). When drawing two balls, one at a time, with replacement, the tree diagram demonstrates all possible outcomes. With replacement means that after drawing the first ball, it is placed back into the urn before selecting the second ball. Because the selection is made from the same group each time, the events are independent of each other, making the tree diagram highly useful for visualizing the possible outcomes of this probability problem.
Graphs in Economic Models
In economics, problems can also be solved using various types of graphs like line graphs, pie graphs, and bar graphs. These graphs help to illustrate data visually, showcasing comparisons, patterns, trends, and how things are apportioned. They provide an intuitive sense of relationships in the data by presenting a visual condensation of numerical data, thus complementing algebraic solutions.