Estimation is a problem-solving strategy that is frequently used by anyone who is living on a budget. One example would be the estimated cost of a week's worth of school lunches and another would be estimating how much milk to buy at the supermarket each week. From these examples how can estimating have negative effects if you over or under estimated?
To use resources in the most efficient way it is essential to make an accurate estimate of how much is required and purchase an amount as close to the actual requirement as possible. This requires information of what the average consumption is over an adequate length of time.
Consider the example of how much milk to buy at the supermarket each week. A family consists of 4 members and on one particular day it is seen that the average consumption of milk of each member of the family is 400 ml. The total consumption in the day is 1.6 L. If milk is bought once in a week the volume required to be bought is 11.2 L. Usually, large packs of any product are priced lower per unit than smaller packs. A 10 L pack of milk would be considerably less expensive that 10 packs of 1 L each. But products like milk do not have a very long shelf life once the pack has been opened. To optimize resources, the best strategy would be to buy one 10 L pack and smaller packs for the remaining 1.2 L. If the estimate of the volume of milk consumed daily was incorrect and each member only requires 300 ml per day on an average, there is milk left over at the end of the week that would most likely have to be disposed off. On the other hand, if each member uses 500 ml per day, there would be no milk left for the last two days of the week. In both the situations the family would be inconvenienced; either money would be wasted when the leftover milk is thrown away or they would have no milk to drink.
To avoid any problems, the estimate should be as accurate as possible. The person who does the weekly shopping should first determine how much each member requires, and create as accurate an estimate as possible. This would require monitoring of the usage of resources over a prolonged time duration to arrive at the average.