Business Maths Chapter 2
Business Maths Chapter 2
Permutations is the process of arranging. Thus, the number of permutation refers to the number of
arrangements. The factorial function is used to find the number of arrangements for objects. For 𝑛
different items, there are 𝑛! arrangements.
Example 1:
Evaluate
(a) 3! = (3)(2)(1) = 6 (b) 4! (4)(3)(2)(1)
= = 24
0! 1
Example 2: If there are three different routes from X to Y and five different routes from Y to Z,
determine how many routes are there from X to Z.
Solution:
Number of routes = 3 × 5 = 15
If there are 𝑛 distinct objects, then the permutations of 𝑛 objects means the number of arrangements
possible for the set of objects. The number of permutations of 𝑛 objects = 𝑛!
i.e.
n
𝑃𝑛 = 𝑛!
Example 3:
There are three letters, A, B, and C. In how many ways can the letters be arranged?
Solution:
Exercise 1:
Five members of a social organization have volunteered to serve as officers to take up positions as
President, Assistant President, Treasurer, Assistant Treasurer and Secretary. In how many ways
can the five members assume the position?
Solution:
10 10! 10!
𝑃5 = (10−5)! = = 30240
5!
If there are a total of 𝑛 objects with 𝑟1 alike, 𝑟2 alike, …, 𝑟𝑘 alike, the number of permutations of all
objects is
𝑛!
𝑟1 ! 𝑟2 ! … 𝑟𝑘 !
Example 5:
In how many ways can 3 red, 4 blue and 2 green pens can be distributed among nine students
seated in a row if each students receives one pen?
Solution:
Number of possible allocations,
9!
= = 1260
4! 3! 2!
Exercise 2:
There are 10 students out of whom six are females. How many possible arrangements are there if
(a) They are arranged in a row?
(b) Males always sit on one side and females on the other side?
When 𝑟 objects are taken out from among 𝑛 distinct objects, where order is not taken into
consideration, then it is called the combination of 𝑛 objects taken 𝑟 at a time, and the designation is
n 𝑛!
𝐶𝑟 = (𝑛−𝑟)!𝑟!
The difference between permutations and combinations is permutations are used when order is
important while combinations are used when order is not important.
Example 6:
You have five spaces left for stamps in your stamp book and you have eight different stamps. How
many different selections are there?
Solution:
It is a combination of 5 items from 8 items, thus there are 8𝐶5 = 56 combinations.
Example 7:
In how many ways can a committee of 6 be chosen from 5 teachers and 4 students if:
(a) All are equally eligible?
(b) The committee must include three teachers and three students?
Solution:
9
(a) 𝐶6 = 84
5
(b) 𝐶3 ×4𝐶3 = 40
(MORE EXAMPLES)
Example 8. Travel Routes
Two roads connect cities A and B, four connect B and C, and five connect C and D. To drive from
A, to B, to C, and then to city D, how many different routes are possible?
When a coin is tossed, a head (H) or a tail (T) may show. If a die is rolled, a 1, 2, 3, 4, 5, or 6 may
show. Suppose a coin is tossed twice and then a die is rolled, and the result is noted (such as H on
first toss, T on second, and 4 on roll of die). How many different results can occur?
In how many different ways can quiz be answered under each of the following conditions?
a. The quiz consists of three multiple-choice questions with four choices for each.
b. The quiz consists of three multiple-choice questions (with four choices for each) and five true-
false questions.
Solution: The number of ways the entire quiz can be answered is (4 ∙ 4 ∙ 4)(2 ∙ 2 ∙ 2 ∙ 2 ∙ 2) = 43 ∙
25 = 2048.
From the five letters A, B, C, D and E, how many three-letter horizontal arrangements (called
“words”) are possible if no letter can be repeated? (A “word” need not make sense.) For example,
BDE and DEB are two acceptable words, but CAC is not.
A club has 20 members. The offices of president, vice president, secretary, and treasurer are to be
filled, and no member may serve in more than one office. How many different slates of candidates
are possible?
A politician sends a questionnaire to her constituents to determine their concerns about six important
national issues: unemployment, the environment, taxes, interest rates, national defense, and social
security. A respondent is to select four issues of personal concern and rank them by placing the
number 1, 2, 3, or 4 after each issue to indicate the degree of concern, with 1 indicating the greatest
concern and 4 the least. In how many ways can a respondent reply to the questionnaire?
Lawyers Smith, Jones, Jacobs, and Bell want to form a legal firm and will name it by using all four
of their last names. How many possible names are there?
Solution: The number of ways to reach a majority decision in favor of a promotion is 5𝐶3 + 5𝐶4 +
5𝐶5 = 10 + 5 + 1 = 16.
b) GERM
Probability as a general concept that can be defined as the chance of an event occurring. Most of
us are familiar with probability from playing or observing games of chance, such as football matches,
card games, slot machines or lotteries.
Probability theory is used in various fields for decision making such as investments, insurance and
weather forecasting. Probability theory allows us to measure such uncertainty.
A random experiment is an action or process that leads to one of several possible outcomes. An
outcome of an experiment is an observation or measurement from the implementation of the
experiment. The followings are examples of random experiments and its outcome.
Experiment Outcomes
a) Toss a coin Head, Tail
b) Roll a die 1, 2, 3, 4, 5, 6
c) Toss two coins Head-Head, Head-Tail, Tail-Head, Tail-Tail
d) Record the condition of a computer Good, defective
part produced
It is important to note that the list of outcomes must be exhaustive and mutually exclusive.
Exhaustive means that all possible outcomes must be included and mutually exclusive or disjoint
means no two outcomes can occur on the same time.
For example, when a coin is flipped, we either get head or tail. These outcomes are exhaustive and
mutually exclusive.
A sample space of a random experiment is a list of all possible outcomes of the experiment. The
sample space is usually denoted as 𝑆. The outcomes must be exhaustive and mutually exclusive.
2.2.2 Events
An event is a collection or one more outcomes from a sample space. In other words, an event is a
subset of the sample space.
Example 1:
If a die is rolled once, the event of getting odd numbers is {1, 3, 5}. {1, 3, 5} is a subset of the sample
space, S = {1, 2, 3, 4, 5, 6}.
Intersection events: The intersection of events A and B is the event that occurs when both A and B
occur. It is denoted by 𝐴 ∩ 𝐵. The probability of the intersection is called the joint probability.
Complementary event: The complement of event A with respect to S is the subset of all elements of
S that are not in A, denoted as A’ or 𝐴𝐶 . Thus, P(A’) = 1 – P(A).
Mutually Exclusive Events: Two events A and B are mutual exclusive or disjoint if 𝐴 ∩ 𝐵 = ∅, where
∅ denotes the empty set. This means that events A and B have no common element, or events A
and B cannot occur together.
Example 2:
What are the outcomes and sample space for the following experiments?
(a) Tossing a coin once
Solution:
(a) Outcomes: H, T where H = Head, T = Tail, S = {H,T}
(b) Outcomes: HH, HT, TH, TT, S = {HH, HT, TH, TT}
(c) Outcomes: 1, 2, 3, 4, 5, 6, S = {1, 2, 3, 4, 5, 6}
b) Determine the number of sample points in the sample space if two jelly beans are selected in
succession without replacement and the colors are noted.
Solution: The number of sample points is 12.
Example 6: Events
A coin is tossed three times, and the result of each toss is noted. The usual sample space is {HHH,
HHT, HTH, HTT, THH, THT, TTH, TTT}. Determine the following events.
a) E={one head and two tails}
b) F={at least two heads}
c) G={all heads}
2.3 PROBABILITY
Probability is a measurement of the likelihood that an event will occur. In any random experiment,
there is always an uncertainty as to whether a particular event will or will not occur.
It is convenient to assign a number between 0 and 1 to represent the probability of the occurrence
of the event. An event M that cannot occur has zero probability; such an event is called an impossible
event, that is P(M) = 0. An event C that is certain to occur has a probability equals to 1 and is called
a sure event, that is P(C) = 1.
In general, the probability that an event A will occur is denoted by P(A) and is defined as
n(A)
P(A) =
n(S)
Equiprobable spaces (Definition: A sample space S is called an equiprobable space if and only if all
1
the simple events are equally likely to occur, (𝑠𝑖 ) = 𝑁 )
Solution:
(a) n(S) = 6. If E is the event of getting 4, then n(E) = 1.
1
P(E) =
6
By the complement rule, the probability that 4 will not appear is
1 5
P(E′) = 1 − =
6 6
(b) Let L = late for school
1 3
P(Not late) = P(L’) = 1 − =
4 4
Events that cannot occur together called mutually exclusive events. In set notation, if A and B are
exclusive events in the sampling space, then 𝐴 ∩ 𝐵 = { }. This situation is shown by a Venn
diagram.
When there are more than two events involved, all events are mutually exclusive only if every pair
of the events is exclusive. In set notation, if A, B and C are exclusive events in the sampling space,
then 𝐴 ∩ 𝐵 = { }, 𝐴 ∩ 𝐶 = { }, 𝐵 ∩ 𝐶 = { }, and 𝐴 ∩ 𝐵 ∩ 𝐶 = { }. This situation is
shown in Venn diagram.
Example 2: The probabilities of event A and B are 𝑃 (𝐴) = 3/5 and 𝑃 (𝐵 ) = 3/4. If 𝑃(𝐴 ∪ 𝐵 ) =
9/10, determine whether event A and event B are mutually exclusive.
Solution:
If events A and B are mutually exclusive, then 𝑃 (𝐴 ∪ 𝐵 ) = 𝑃(𝐴) + 𝑃(𝐵)
Given that,
9
𝑃 (𝐴 ∪ 𝐵 ) = ,
10
3 3 27 9
𝑃 (𝐴 ) + 𝑃 ( 𝐵 ) = + = ≠
5 4 20 10
Thus, the two events are not mutually exclusive.
3𝐶2 ∙ 4𝐶2 18
𝑃(𝑡wo males and two females) = =
7𝐶4
35
Example 6. Dice
A pair of well-balanced dice is rolled, and the number on each die is noted. Determine the probability
that the sum of the numbers that turns up is
1
(a) 7 Answer:
6
2
(b) 7 or 11 Answer: 9
11
(c) greater than 3 Answer: 12
We frequently need to know how two events are related. In particular, we would like to know the
probability of one event given the occurrence of another related event. We call it as conditional
probability.
Conditional probability is the probability that an event will occur given that another event has already
occurred. If 𝐴 and 𝐵 are two events, then the conditional probability of 𝐴 given 𝐵 is written as
𝑃(𝐴|𝐵)
Since event B is known to have occurred, it becomes the new sample space replacing the original
S. From this, we led to the definition
𝑃(𝐴 ∩ 𝐵)
𝑃(𝐴|𝐵) = provided 𝑃(𝐵) ≠ 0.
𝑃(𝐵)
Likewise, the probability of B given that A has already occurred is given by
𝑃(𝐴 ∩ 𝐵)
𝑃 (𝐵 | 𝐴 ) = provided 𝑃(𝐴) ≠ 0.
𝑃(𝐴)
From the formula,
(a) The joint probability of events A and B is
𝑃(𝐴 ∩ 𝐵) = 𝑃(𝐴|𝐵) ∙ 𝑃(𝐵)
or
𝑃(𝐵 ∩ 𝐴) = 𝑃(𝐵|𝐴) ∙ 𝑃(𝐴)
(b) If A and B are mutually exclusive events, then 𝑃 (𝐴 ∩ 𝐵 ) = 0. Thus,
𝑃 (𝐴 ∩ 𝐵 ) = 𝑃 (𝐴 | 𝐵 ) ∙ 𝑃 (𝐵 ) = 0
′ ′
(c) If 𝐴 ∪ 𝐴 = 𝑆, 𝐴 and 𝐴 are mutually exclusive, then
𝑃(𝑆|𝐵) = 𝑃(𝐴 ∪ 𝐴′ |𝐵) = 𝑃(𝐴|𝐵) + 𝑃(𝐴′ |𝐵)
(d) For any event B,
𝑃(𝑆 ∩ 𝐵) 𝑃(𝐵)
𝑃(𝑆|𝐵) = = =1
𝑃(𝐵) 𝑃(𝐵)
(e) 𝑃(𝐴′ |𝐵) = 1 − 𝑃(𝐴|𝐵)
(f) For complementary events, consider that 𝐵 = (𝐵 ∩ 𝐴) ∪ (𝐵 ∩ 𝐴′ ) as shown in the following
figure.
𝑃(𝐵) = 𝑃(𝐵 ∩ 𝐴) + 𝑃(𝐵 ∩ 𝐴′ ) = 𝑃(𝐵|𝐴) ∙ 𝑃(𝐴) + 𝑃(𝐵 |𝐴′ ) ∙ 𝑃(𝐴′ )
Example 2. Survey
In a survey of 150 people, each person was asked his or her marital status and opinion about floating
a bond issue to build a community swimming pool. The results are summarized in table below. If
one of these persons is randomly selected, find each of the following conditional probabilities.
Example 5. Advertising
A computer hardware company placed an ad for its modem in popular computer magazine. The
company believes that the ad will be read by 32% of the magazine’s readers and that 2% of those
who read the ad will buy the modem. Assume that this is true, and find the probability that a reader
of the magazine will read the ad and buy the modem.
Answer: 0.0064
The general multiplication law is also called the law of compound probability. The reason is that
it is extremely useful when applied to an experiment that can be expressed as a sequence (or a
compounding) of two or more other experiments, called trials or stages. The original experiment is
called a compound experiment, and the sequence of trials is called a stochastic process. The
probabilities of the events associated with each trial (beyond the first) could depend on what events
occurred in the preceding trials, so they are conditional probabilities. When we analyse a compound
experiment, a tree diagram is extremely useful in keeping track of the possible outcomes at each
stage. A complete path from the start to a tip of the tree gives an outcome of the experiment.
Two cards are drawn without replacement from a standard deck of cards. Find the probability that
both cards are red.
25
Answer: 𝑃(𝑅1 ∩ 𝑅2 ) = 102
Two events are said to be independent if the occurrence of one event does not affect the probability
of another event occurring. Thus, events A and B are independent if
𝑃 (𝐴 | 𝐵 ) = 𝑃 (𝐴 ) or 𝑃(𝐵|𝐴) = 𝑃(𝐵)
Thus,
𝑃 (𝐴 ∩ 𝐵 ) = 𝑃 (𝐴 | 𝐵 ) ∙ 𝑃 (𝐵 ) = 𝑃 (𝐴 ) ∙ 𝑃 (𝐵 )
or
𝑃(𝐵 ∩ 𝐴) = 𝑃(𝐵|𝐴) ∙ 𝑃(𝐴) = 𝑃(𝐵) ∙ 𝑃(𝐴)
Example 1: The probabilities for event A and event B are 𝑃 (𝐴) = 0.4 and 𝑃(𝐵 ) = 0.33
respectively. Find 𝑃 (𝐴 ∪ 𝐵 ),
(a) If A and B are mutually exclusive;
(b) If A and B are independent.
Solution:
(a) If A and B are mutually exclusive, then
𝑃 (𝐴 ∪ 𝐵 ) = 𝑃 (𝐴 ) + 𝑃 (𝐵 )
= 0.4 + 0.33
= 0.73
(b) If A and B are independent, then
𝑃(𝐴 ∩ 𝐵) = 𝑃(𝐴) ∙ 𝑃(𝐵) = 0.4 × 0.33 = 0.132
∴ 𝑃 (𝐴 ∪ 𝐵 ) = 𝑃 (𝐴 ) + 𝑃 (𝐵 ) − 𝑃 (𝐴 ∩ 𝐵 )
= 0.4 + 0.33 − 0.132
= 0.598
Solution:
(a) 𝑃(𝐴)
𝑃 ( 𝐴 ∩ 𝐵 ) = 𝑃 ( 𝐵 |𝐴 ) 𝑃 ( 𝐴 )
1 1
= 𝑃 (𝐴 )
12 3
1
𝑃(𝐴) =
4
(b) 𝑃(𝐴|𝐵)
𝑃 (𝐴 ∩ 𝐵 )
𝑃(𝐴|𝐵) =
𝑃 (𝐵 )
1
= 12
1
6
1
=
2
(c) 𝑃(𝐴|𝐵′ )
𝑃(𝐴) = 𝑃(𝐴|𝐵) 𝑃(𝐵) + 𝑃(𝐴|𝐵′ ) 𝑃(𝐵′ )
Example 5: A survey was made among 100 graduates to report on their employment status. The
sample comprises 50 male and 50 female graduates. The result shows that 60 graduates are
unemployed with 2/3 of them male, while the remainders are employed with 3/4 of them female. If a
graduate is chosen randomly,
(a) Calculate the probability that the graduate is a male and unemployed
(b) If the graduate is a female, find the probability that she is unemployed
(c) If gender does not have any effect on employment, calculate the probability that the graduate
chosen is a female or unemployed.
Solution:
The above information may be summarized in the following table,
Employed Unemployed Total
Males 10 40 50
Females 30 20 50
Total 40 60 100
(a) 40
𝑃(Unemployed ∩ Male) = = 0.4
100
(b) 𝑃(Unemployed ∩ Female)
𝑃(Unemployed|Female) =
𝑃(Female)
20
= 100
50
100
0.2
=
0.5
= 0.4
Exercise 3. Dice
Two fair dice, one red and the other green, are rolled, and the numbers on the top faces are noted.
Let E and F be the events
E={number on red die is even}
F={sum is 7}
For a family with at least two children, let E and F be the events
E={at most one boy}
F={at least one child of each gender}
Assume that a child of either gender is equally likely and that, for example, having a girl first and a
boy second is just as likely as having a boy first and a girl second. Determine whether E and F are
independent in each of the following situations:
Bayes’ theorem combines conditional probability and the theorem of total probability. In most
probability analysis, we begin with initial or prior probabilities. Then we obtain some additional
information from the sample drawn. Given, this additional information, we calculate the revised or
posterior probabilities using Bayes’ theorem.
Example 1: The probability of events 𝐴1 and 𝐴2 are 0.4 and 0.6 respectively. It is also known that
𝑃(𝐴1 ∩ 𝐴2 ) = 0. Suppose 𝑃(𝐵|𝐴1 ) = 0.2 and 𝑃(𝐵|𝐴2 ) = 0.05.
(a) Are 𝐴1 and 𝐴2 independent events?
(b) Compute 𝑃(𝐴1 ∩ 𝐵) and 𝑃(𝐴2 ∩ 𝐵).
(c) Compute 𝑃(𝐵).
(d) Compute 𝑃(𝐴1 |𝐵) and 𝑃(𝐴2 |𝐵).
Solution:
(a) 𝑃(𝐴1 ∩ 𝐴2 )
𝑃(𝐴1 |𝐴2 ) = = 0 ≠ 𝑃(𝐴1 ) −→ Dependent events
𝑃(𝐴2 )