1.

The odds against student X solving a Business Statistics problem are 8 to 6, and odds in favour of
student Y solving the problem are 14 to 16.

a. What is the chance that the problem will be solved if they both try independently of
each other?
b. What is the probability that none of them is able to solve the problem?

2.The probability that a new marketing approach will be successful is 0.6. The probability that the
expenditure for developing the approach can be kept within the original budget is 0.50. The probability
that both of these objectives will be achieved at 0.30.

What is the probability that at least one of these objectives will be achieved. For the two
events described above, determine whether the events are independent or dependent.

3. A piece of equipment will function only when the three components A, B, and C are working. The
probability of A failing during one year is 0.15, that of B failing is 0.05, and that of C failing is 0.10.
What is the probability that the equipment will fail before the end of the year?

4. A market research firm is interested in surveying certain attitudes in a small community. There are
125 households broken down according to income, ownership of a telephone, and ownership of a TV.

1. What is the probability of getting a TV owner in at random draw?

2. If a household has an income of over Rs 8000 and is a telephone subscriber, what is the
probability that he owns a TV?

3. What is the conditional probability of drawing a household that owns a TV, given that the
household is a telephone subscriber?

4. Are the events ‘ownership of a TV’ and ‘telephone subscriber’ statistically independent?
Comment.

5. A company has two plants to manufacture scooters. Plant I manufactures 80 per cent of the scooters
and Plant II manufactures 20 per cent. In plant I only 85 out of 100 scooters are considered to be of
standard quality. In plant II, only 65 out of 100 scooters are considered to be of standard quality. What
is the probability that a scooter selected at random came from plant I, if it is known that it is of
standard quality?
6. A husband and wife appear in an interview for two vacancies in the same post. The probability of
husband's selection is 1/7 and that of wife's selection is 1/5. What is the probability that

1. both of them will be selected,

2. only one of them will be selected, and

3. none of them will be selected.

7. The odds that A speaks the truth is 3 : 2 and the odds that B speaks the truth is 5 : 3. In what
percentage of cases are they likely to contradict each other on an identical point?

8: The data for the promotion and academic qualification of a company is given below:

1. Calculate the conditional probability of promotion after an MBA has been identified.

2. Calculate the conditional probability that it is an MBA when a promoted employee has been
chosen.

3. Find the probability that a promoted employee was an MBA.

9. The probability that a trainee will remain with a company is 0.6. The probability that an employee
earns more than Rs 10,000 per month is 0.5. The probability that an employee who is a trainee
remained with the company or who earns more than Rs 10,000 per month is 0.7. What is the
probability that an employee earns more than Rs 10,000 per month given that he is a trainee who
stayed with the company?

10: Two computers A and B are to be marketed. A salesman who is assigned the job of finding
customers for them has 60 per cent and 40 per cent chances, respectively of succeeding for computers
A and B. The two computers can be sold independently. Given that he was able to sell at least one
computer, what is the probability that computer A has been sold?

11: A study of job satisfaction was conducted for four occupations: Cabin maker lawyer, doctor and
systems analyst. Job satisfaction was measured on a scale of 0–100. The data obtained are
summarized in the following table:
 1. Develop a joint probability table.

2. What is the probability of one of the participants studied had a satisfaction score in 80's?

3. What is the probability of a satisfaction score in the 80's, given the study participant was a
doctor?

4. What is the probability of one of the participants studied was a lawyer.

5. What is the probability of one of the participants was a lawyer and received a score under 50?

6. What is the probability of a satisfaction score under 50 given a person is a lawyer.

7. What is the probability of a satisfaction score of 70 or higher?

12. A market survey was conducted in four cities to find out the preference for brand A soap. The
responses are shown below:

1. What is the probability that a consumer selected at random, preferred brand A?

2. What is the probability that a consumer preferred brand A and was from Chennai?

3. What is the probability that a consumer preferred brand A given that he was from Chennai?

4. Given that a consumer preferred brand A, what is the probability that he was from Mumbai?

13: The personnel department of a company has records which show the following analysis of its 200
engineers.
If one engineer is selected at random from the company, find:

1. The probability that he has only a bachelor's degree.

2. The probability that he has a master's degree, given that he is over 40.

3. The probability that he is under 30, given that he has only a bachelor's degree.

PROBABILITY TREE DIAGRAM

Decision-makers at times face difficulty in constructing the joint probability table. Thus they
prefer to use the probability tree to probability calculations. The probability tree diagram for
tossing a coin three consecutive times is shown in Fig. 6.5.

Figure 6.5 Probability Tree Diagram

The probability tree diagram is convenient for calculating joint probabilities when events occur
at different times or stages. In probability trees, time moves from left to right. The complete
tree exhibits each outcome as a single path from beginning to end. Each path corresponds to a
distinct joint event. A joint event is represented by a path through the tree and its probability is
determined by multiplying all the individual branch probabilities for its path.

In this example of three tosses of a coin, at each toss the probability of either event's (H or T)
occurring remains the same, that is, the events are independent. The joint probabilities of events
occurring in succession are calculated by multiplying the probabilities of each event.

The events emanating from a single breaking point are mutually exclusive and collectively
exhaustive, so that exactly one must occur. All the probabilities on branches within the same
fork must therefore sum to 1.

In this case the results in the diagram should not be confused with conditional probabilities.
The probability of a head and then two tails occurring on three consecutive tosses is computed
prior to any tosses taking place. If the first two tosses have already occurred, then the
probability of getting a tail on the third toss is still 0.5, that is, P(T|HT) = P(T) = 0.5.

14: Each salesperson is rated either below average, average, or above average with respect to
sales ability. Each of them is also rated with respect to his or her potential for advancement-
either fair, good or excellent. These traits of the 500 sales person are given below:

1. What is the probability that a randomly selected salesperson will have above average
sales ability and excellent potential for advancement?
2. Construct a tree diagram showing all the probabilities. Conditional probabilities and
joint probabilities.

Self-Practice Problems 6B

6.10 Mr. X has 2 shares in a lottery in which there are 2 prizes and 5 blanks. Mr. Y has 1 share
in a lottery in which there is 1 prize and 2 blanks. Show that the chance of Mr. X's success to
that of Mr. Y's as 15 : 7.

6.11 Explain whether or not each of the following claims could be correct:
 1. A businessman claims the probability that he will get contract A is 0.15 and that he will
get contract B is 0.20. Furthermore, he claims that the probability of getting A or B is
0.50.
2. A market analyst claims that the probability of selling ten million rupees of plastic A
or five million rupees of plastic B is 0.60. He also claims that the probability of selling
ten million rupees of A and five million rupees of B is 0.45.

6.12 The probability is 0.3 that an applicant for a Management Accountant's job has a
postgraduate degree, 0.7 that he has had some work experience as a chief Financial Accountant,
and 0.2 that he has both. Out of 300 applicants, approximately, what number would have either
a postgraduate degree or some professional work experience?

6.13 A can hit a target 3 times in 5 shots; B, 2 times in 5 shots; C, 3 times in 4 shots. They fire
a volley. What is the probability that 2 shots hit?

6.14 A problem in business statistics is given to five students, A, B, C, D, and E. Their chances
of solving it are 1/2, 1/3, 1/4, 1/5, and 1/6 respectively. What is the probability that the problem
will be solved?

[Madras Univ., BCom, 1996; Kumaon Univ., MBA, 2000]

6.15 A husband and wife appear in an interview for two vacancies for the same post. The
probability of husband's selection is 1/7 and that of wife's selection is 1/5. What is the
probability that

1. only one of them will be selected?

2. both of them will be selected?
3. none of them will be selected?

6.16 A candidate is selected for interviews for three posts. For the first there are 3 candidates,
for the second there are 4, and for the third there are 2. What is the probability of his getting
selected for at least one post?

6.17 Three persons A, B, and C are being considered for appointment as Vice-Chancellor of a
university, and whose chances of being selected for the post are in the proportion 14 : 2 : 3
respectively. The probability that if A is selected, will introduce democratization in the
university structure is 0.3, and the corresponding probabilities for B and C doing the same are
respectively 0.5 and 0.8. What is the probability that democratization would be introduced in
the university?

6.18 There are three brands, say X, Y, and Z of an item available in the market. A consumer
chooses exactly one of them for his use. He never buys two or more brands simultaneously.
The probabilities that he buys brands X, Y, and Z are 0.20, 0.16, and 0.45.

1. What is the probability that he does not buy any of the brands?
2. Given that a customer buys some brand, what is the probability that he buys brand X?

6.19 There is 50–50 chance that a contractor's firm, A, will bid for the construction of a multi-
storeyed building. Another firm, B, submits a bid and the probability is 3/ 5 that it will get the
job, provided that firm A does not submit a bid. If firm A submits a bid, the probability that
firm B will get the job is only 2/3. What is the probability that firm B will get the job?

6.20 Plant I of XYZ manufacturing organization employs 5 production and 3 maintenance

foremen, plant II of same organization employs 4 production and 5 maintenance foremen. From
any one of these plants, a single selection of two foremen is made. Find the probability that one
of them would be a production and the other a maintenance foreman.

[Bombay Univ., MMS, 1997]

6.21 Two sets of candidates are competing for positions on the board of directors of a company.
The probability that the the first and second sets will win are 0.6 and 0.4 respectively. If the
first set wins, the probability of introducing a new product is 0.8 and the corresponding
probability if the second set wins is 0.3.

1. What is the probability that the new product will be introduced?

2. If the new product was introduced, what is the probability that the first set won as
directors?

6.22 If a machine is correctly set up, it will produce 90 per cent acceptable items. If it is
incorrectly setup, it will produce 40 per cent acceptable items. Past experience shows that 80
per cent of the setups are correctly done. If after a certain setup, the machine produces 2
acceptable items as the first 2 pieces, find the probability that the machine is correctly set up.

[Delhi Univ., BCom, (Hons), 1998]

6.23 A firm plans to bid Rs 300 per tonne for a contract to supply 1,000 tonnes of a metal. It
has two competitors A and B. It assumes the probability of A bidding less than Rs 300 per
tonne to be 0.3 and B's bid to be less than Rs 300 per tonne to be 0.7. If the lowest bidder gets
all the business and the firms bid independently, what is the expected value of the contract to
the firm?

6.24 An investment consultant predicts that the odds against the price of a certain stock going
up during the next week are 2 : 1 and odds in favour of the price remaining the same are 1 : 3.
What is the probability that the price of the stock will go down during the next week?

6.25 An article manufactured by a company consists of two parts A and B. In the process of
manufacture of part A, 9 out of 100 are likely to be defective. Similarly, 5 out of 100 are likely
to be defective in the manufacture of part B. Calculate the probability that the assembled part
will not be defective.

6.26 A product is assembled from three components X, Y, and Z, the probability of these
components being defective is respectively 0.01, 0.02, and 0.05. What is the probability that
the assembled product will not be defective?

6.27 The daily production of a machine producing a very complicated item gives the following
probabilities for the number of items produced: P(1) = 0.20, P(2) = 0.35, and P(3) = 0.45.
Furthermore, the probability of defective items being produced is 0.02. Defective items are
assumed to occur independently. Determine the probability of no defectives during a day's
production.
6.28 The personnel department of a company has records which show the following analysis
of its 200 engineers:

If one engineer is selected at random from the company, find:

1. the probability that he has only a bachelor's degree;

2. the probability that he has a master's degree given that he is over 40;
3. the probability that he is under 30 given that he has only a bachelor's degree.

[HP Univ., MBA; Kumaon Univ., MBA 1998]

6.29 In a certain town, males and females form 50 per cent of the population. It is known that
20 per cent of the males and 5 per cent of the females are unemployed. A research student
studying the employment situation selects unemployed persons at random. What is the
probability that the person selected is (a) male, (b) female?

[Delhi Univ. MCom, 1999; Kumaon Univ., MBA, 1998]

6.30 You note that your officer is happy in 60 per cent cases of your calls. Yo u have also
noticed that if he is happy, he accedes to your requests with a probability of 0.4, whereas if he
is not happy, he accedes to your requests with a probability of 0.1. You call on him one day
and he accedes to your request. What is the probability of his being happy?

[H P, MBA, 1996]

6.31 In a telephone survey of 1000 adults, respondents were asked about the expenses on a
management education and the relative necessity of some form of financial assitance. The
respondents were classified according to whether they currently had a child studying in a school
of management and whether they thought that the loan burden for most management students
is: too high, right amount, or too little. The proportions responding in each category are given
below.
Suppose one respondent is chosen at random from this group. Then

1. What is the probability that the respondent has a child studying management.
2. Given that the respondent has a child studying management, what is the probability that
he/she ranks the loan burden as ‘too high’.
3. Are events D and A independent? Explain.

6.32 In a colour preference experiment, eight toys are placed in a container. The toys are
identical except for colour-two are red, and six are green. A child is asked to choose two toys
at random. What is the probability that the child chooses the two red toys?

6.33 A survey of executives dealt with their loyalty to the company. One of the questions was,
‘If you were given an offer by another company equal to or slightly better than your present
position, would you remain with the company?’ The responses of 200 executives in the survey
cross-classified with their length of service with the company are shown below:

What is the probability of randomly selecting an executive who is loyal to the company (would
remain) and who has more than 10 years of service.

BAYES' THEOREM

In the 18th Century Reverend Thomas Bayes, an English Presbyterian minister, raised a
question: Does God really exist? To answer this question, he attempted to develop a formula
to determine the probability that God does exist based on evidence that was available to him
on earth. Later Laplace refined Bayes' work and gave it the name Bayes' Theorem.

Bayes' theorem: A method to compute posterior probabilities (conditional probabilities under

statistical dependence).

The Bayes' theorem is useful in revising the original probability estimates of known outcomes
as we gain additional information about these outcomes. The prior probabilities, when changed
in the light of new information, are called revised or posterior probabilities.

Suppose A1, A2,…, An represent n mutually exclusive and collectively exhaustive events with
prior marginal probabilities P(A1), P(A2),…, P(An). Let B be an arbitrary event with P(B) ≠ 0
for which conditional probabilities P(B | A1), P(B | A2),…, P(B | An) are also known. Given the
information that outcome B has occured, the revised (or posterior) probabilities P(Ai | B) are
determined with the help of Bayes' theorem using the formula:

where the posterior probability of events Ai given event B is the conditional probability P(Ai|B)

Since events A1, A2,…, An are mutually exclusive and collectively exhaustive, the event B is
bound to occur with either A1, A2,…, An. That is,

where the posterior probability of Ai given B is the given B is the conditonal probability
P(Ai|B).

Since (A1 ⋂ B), (A2 ⋂ B)…(An ⋂ B) are mutually exclusive, we get

Posterior probability: A revised probability of an event obtained after getting additional
information.

From formula (6-8) for a fixed i, we have

15: Suppose an item is manufacture by three machines X, Y, and Z. All the three machines
have equal capacity and are operated at the same rate. It is known that the percentages of
defective items produced by X, Y, and Z are 2, 7, and 12 per cent respectively. All the items
produced by X, Y, and Z are put into one bin. From this bin, one item is drawn at random and
is found to be defective. What is the probability that this item was produced on Y?

16: Assume that a factory has two machines. Past records show that machine 1 produces 30
per cent of the items of output and machine 2 produces 70 per cent of the items. Further 5 per
cent of the items produced by machine 1 were defective and only 1 per cent produced by
machine 2 were defective. If a defective item is drawn at random, what is the probability that
the defective item was produced by machine 1 or machine 2?

17: A company uses a ‘selling aptitude test’ in the selection of salesmen. Past experience has
shown that only 70 per cent of all persons applying for a sales position achieved a classification
‘dissatisfactory’ in actual selling, whereas the remainder were classified as ‘satisfactory’, 85
per cent had scored a passing grade in the aptitude test. Only 25 per cent of those classified
dissatisfactory, had passed the test on the basis of this information. What is the probability that
a candidate would be a satisfactory salesman given that he passed the aptitude test?

18: In a bolt factory machines A, B, and C manufacture respectively 25 per cent, 35 per cent
and 40 per cent of the total output. Of the total of their output 5, 4, and 2 per cent are defective
bolts, A bolt is drawn at random and is found to be defective. What is the probability that it
was manufactured by machines A, B, or C?

Self-Practice Problems 6C

6.34 A manufacturing firm produces steel pipes in three plants with daily production volumes
of 500, 1000, and 2,000 units respectively. According to past experience, it is known that the
fractions of defective output produced by the three plants are respectively 0.005, 0.008, and
0.010. If a pipe is selected from a day's total production and found to be defective, find out(a)
from which plant the pipe comes, (b) what is the probability that it came from the first plant?

[IIT Roorkee MBA, 2004]

6.35 In a post office, three clerks are assigned to process incoming mail. The first clerk, A,
processes 40 per cent; the second clerk, B, processes 35 per cent; and the third clerk, C,
processes 25 per cent of the mail. The first clerk has an error rate of 0.04, the second has an
error rate of 0.06, and the third has an error rate of 0.03. A mail selected at random from a day's
output is found to have an error. The postmaster wishes to know the probability that it was
processed by clerk A or clerk B or clerk C.

6.36 A certain production process produces items 10 per cent of which defective. Each item is
inspected before supplying to customers but 10 per cent of the time the inspector incorrectly
classifies an item. Only items classified as good are supplied. If 820 items have been supplied
in all, how many of them are expected to be defective?

6.37 A factory produces certain types of output by three machines. The respective daily
production figures are: Machine A = 3000 units; Machine B = 2500 units; and Machine C =
4500 units. Past experience shows that 1 per cent of the output produced by machine A is
defective. The corresponding fractions of defectives for the other two machines are 1.2 and 2
per cent respectively. An item is drawn at random from the day's production and is found to be
defective. What is probability that it comes from the output of (a) Machine A; (b) Machine B;
(c) Machine C?

6.38 In a bolt factory machines A, B, and C manufacture respectively 25 per cent, 30 per cent
and 40 per cent of the total output. Of the total of their output 5, 4, and 2 per cent are defective
bolts. A bolt is drawn at random from the lot and is found to be defective. What are the
probabilities that it was manufactured by machines A, B, or C?

6.39 In a factory manufacturing pens, machines X, Y, and Z manufacture 30, 30, and 40 per
cent of the total production of pens, respectively. Of their output 4, 5, and 10 per cent of the
pens are defective. If one pen is selected at random, and it is found to be defective, what is the
probability that it is manufactured by machine Z?

6.40 A worker-operated machine produces a defective item with probability 0.01, if the worker
follows the machine's operating instruction exactly, and with probability 0.03 if he does not. If
the worker follows the instructions 90 per cent of the time, what proportion of all items
produced by the machine will be defective?

6.41 Medical case histories indicate that different illnesses may produce identical symptoms.
Suppose a particular set of symptoms, ‘H’ occurs only when one of three illnesses: A, B or C
occurs, with probabilities 0.01, 0.005 and 0.02 respectively. The probability of developing the
symptoms H, given a illness A, B and C are 0.90, 0.95 and 0.75 respectively. Assuming that
an ill person shows the symptoms H, what is the probability that a person has illness A?

Formulae Used

1. Counting methods for determining the number of outcomes

o Multiplication method
1. n1 ×n2 ×…× nk
2. n1 ×n2 ×…× nk = nk

when the event in each trial is the same

 o

2. Classical or a priori approach of computing probability of an event A

3. Relative frequency approach of computing probability of an event A in n trials of

an experiment

4. Rule of addition of two events

o When events A and B are mutually exclusive

P(A or B) = P(A) + P(B)

o When events A and B are not mutually exclusive

P(A or B) = P(A) + P(B) – P(A and B)

5. Conditional probability
o For statistically independent events

P(A|B) = P(A); P(B|A) = P(B)

 o For statistically dependent events P(A and B)

6. Rule of multiplication of two events

o Joint probability of independent events

P(A and B) = P(A)×P(B)

o Joint probability of dependent events

P(A and B) = P(A|B)×P(B)

P(A and B) = P(B|A) × P(A)

7. Rule of elimination
1. P(B) = Σ P(Ai) P(B|A)
2. P(A) = Σ P(Bi) P(A|Bi)
Baye's rule

Basic rules for assigning probabilities

o The probability assigned to each experimental outcome

0 ≤ P(Ai) ≤ 1 for all i

o Sum of the probabilities for all the experimental outcomes

Σ P(Ai) = P(A1) + P(A2) +…+ P(A n) = 1

Complement of an event, P(A) = 1 – P( )

Review Self-Practice Problems

6.42 Suppose a nationwide screening programme instituted through schools is being considered
to uncover child abuse. It is estimated that 2 per cent of all children are subject to abuse.
Further, existing screening programmers are able to determine correctly that abuse occurs 92
per cent of the time and that abuse is incorrectly suspected 5 per cent of the time.

1. What is the probability that the results of screening indicating abuse are associated with
children who are actually not abused?
2. Based upon every 1,00,000 children screened, how many screenings can be expected
to lead to a false accusation of abuse?
3. Based upon your answer to part (a), is it valid to conclude that 73 per cent of the families
not abusing children would be falsely accused? Why or why not ?

[Delhi Univ., MBA, 1998]

6.43 If there is an increase in capital investment next year, the probability that the price of
structural steel will increase is 0.90. If there is no increase in such investment, the probability
of an increase is 0.40. Overall, we estimate that there is a 60 per cent chance that capital
investment will increase next year.

1. What is the overall probability of an increase in structural steel prices next year?
2. Suppose that during the next year structural steel prices in fact increase, what is the
probability that there was an increase in capital investment?

[Delhi Univ., MBA, 2000]

6.44 A product is assembled from three components X, Y, and Z, and the probability of these
components being defective is 0.01, 0.02, and 0.05. What is the probability that the assembled
product will not be defective?

[Delhi Univ., MBA, 2001]

6.45 A human resource manager has found it useful to categorize engineering job applicants
according to their degree in engineering and relevant work experience. Out of all applicants for
the job 70 per cent have a degree with or without any work experience, and 60 per cent have
work experience with or without the degree. Fifty per cent of the applicants have both the
degree and relevant work experience.

1. Determine the probability that a randomly selected job applicant has either the degree
or relevant work experience.
2. What is the probability that the applicant has neither the degree nor work experience?

6.46 A salesman is found to complete a sale with 10 per cent of potential customers contacted.
If the salesman randomly selects two potential customers and calls on them, then (a) what is
the probability that both the calls will result in sales? and (b) what is the probability that the
two calls will result in exactly one sale?
6.47 Suppose 80 per cent of the material received from a vendor is of exceptional quality, while
only 50 per cent of the material received from vendor B is of exceptional quality. However, the
manufacturing capacity of vendor

A is limited, and for this reason only 40 per cent of the material purchased comes from vender
A. The other 60 per cent comes from vendor B. An incoming shipment of material is inspected
and it is found to be of exceptional quality. What is the probability that it came from vender A.

6.48 The municipal corporation routinely conducts two independent inspections of each
restaurant, with the restaurant passing only if both inspectors pass it. Inspector A is very
experienced, and hence, passes only 2 per cent of restaurants that actually do have rules
violations. Inspector B is less experienced and passes 7 per cent restaurants with violations.
What is the probability that:

1. A reports favourable, given that B has found a violation?

2. B reports favourable with a violation, given that inspector A passes it?
3. A restaurant with a violation is cleared by the corporation.

6.49 If a hurricane forms in the Indian Ocean, there is a 76 per cent chance that it will strike
the western coast of India. From data gathered over the past 50 years, it has been determined
that the probability of a hurricane's occurring in this area in any given year is 0.85. What is the
probability that a hurricane will occur in the eastern Indian Ocean and strike India this year?

6.50 A departmental store has been the target of many shoplifters during the past month, but
owing to increased security precautions, 250 shoplifters have been caught. Each shoplifter's
sex is noted, also noted is whether he/ she was a first-time or repeat offender. The data are
summarized in the table below:

Sex First-Time Offender Repeat Offender

Male 60 70
Female 44 76

Assuming that an apprehended shoplifter is chosen at random, find:

1. The probability that the shoplifter is male.

2. The probability that the shoplifter is a first-time offender, given that the shoplifter is
male.
3. The probability that the shoplifter is female, given that the shoplifter is a repeat
offender.
4. The probability that the shoplifter is female, given that the shoplifter is a first time
offender.

6.51 A doctor has decided to prescribe two new drugs to 200 heart patients in the following
manner: 50 get drug A, 50 get drug B, and 100 get both. Drug A reduces the probability of a
heart attack by 35 per cent drug, B reduces the probability by 20 per cent, and the two drugs,
when taken together, work independently. The 200 patients were chosen so that each has an 80
per cent chance of having a heart attack. If a randomly selected patient has a heart attack, what
is the probability that the patient was given both drugs?

6.52 The Deputy Commissioner of Police is trying to decide whether to schedule additional
patrol units in two sensitive areas, A and B, in his district. He knows that on any given day
during the past year, the probabilities of major crimes and minor crimes being committed in
area A were 0.478 and 0.602, respectively, and that the corresponding probabilities in area B
were 0.350 and 0.523. Assume that major and minor crimes occur independently of each other
and likewise that crimes in the two areas are independent of each other.

1. What is the probability that no crime of either type will be committed in the area A on
a given day?
2. What is the probability that a crime of either type will be committed in the area B on a
given day?
3. What is the probability that no crime of either type will be committed in either areas on
a given day?

6.53 The press-room supervisor for a daily newspaper is asked to find ways to print the paper
closer to distribution time, thus giving the editorial staff more leeway for last-minute changes.
He has the option of running the presses at ‘normal’ speed or at 110 per cent of normal— ‘fast’
speed. He estimates that these will run at the higher speed 60 per cent of the time. The roll of
paper (the newsprint ‘web’) is twice as likely to tear at the higher speed which would mean
stopping the presses temporarily

1. If the web on a randomly-selected printing run has a probability of 0.112 of tearing,

what is the probability that the web will not tear at normal speed?
2. If the probability of tearing at fast speed is 0.20, what is the probability that a randomly-
selected torn web occurred at normal speed?

[Delhi Univ., MBA, 1999]

6.54 The result of conducting an examination in two papers, A and B, for 20 candidates were
recorded as under: 8 passed in paper A, 7 passed in paper B, 8 failed in both papers. If out of
these candidates one is selected at random, find the probability that the candidate (a) passed in
both A and B, (b) failed only in A, and (c) failed in A or B.

6.55 When two dice are thrown n number of times, the probability of getting at least one double
six is greater than 99 per cent. What is the least numerical value of n.

[CA, Nov., 1998]

6.56 It is known from past experience that a football team will play 40 per cent of its matches
on artificial turf this season. It is also known that a football player's chances of incurring a knee
injury are 50 per cent higher if he is playing an artificial turf instead of grass. Further, if a
player's probability of knee injury on artificial turf is 0.42, what is the probability that (a) a
randomly selected player incurs a knee injury, and (b) a randomly selected player with a knee
injury, incurred the injury playing on grass?
6.57 In a locality of 5000 people, 1200 are above 30 years of age and 3000 are females. Out of
1200 who were above 30 years of age, 200 are females. A person is chosen at random and you
are told that the person is female. What is the probability that she is above 30 years of age?

[IGNOU, 1997; Delhi Univ., MBA, 1998, 2001]

6.58 Suppose 5 men out of 100 and 25 women out of 1000 are colour blind. A colour blind
person is chosen at random. What is the probability of his being male (assuming that male and
females are equal in proportion).

6.59 An organization dealing with consumer products wants to introduce a new product in the
market. Based on its past experience, it has a 65 per cent chance of being successful and 35 per
cent of not being successful. In order to help the organization to make a decision on the new
product, that is, whether to introduce or not, it decides to get additional information on
consumer attitude towards the product. For this purpose, the organization decides on a survey.
In the past when a product of this type was successful, surveys yielded favourable indication
85 per cent of the time, whereas unsuccessful products received favourable survey indications
30 per cent of the time. Determine the posterior probability of the product being successful
given the survey information.

[IGNOU, 1999]

6.60 Police Head Quarter classified crime by age (in years) of the criminal and whether the
crime is violent or nonviolent. A total of 150 crimes were reported in the last month as shown
in the table below:

1. What is the probability of selecting a case to analyze and finding the crime was
committee by someone less than 40 years old.
2. What is the probability of selecting a case that involved a violent crime or an offender
less than 20 years old?
3. If two crimes are selected for review, then what is the probability that both are violent
crimes?

6.61 With each purchase of a large pizza at a Pizza shop, the customer receives a coupon that
can be scratched to see if a prize will be awarded. The odds of winning a free soft drink are 1
in 10, and the odds of winning a free large pizza are 1 in 50. You plan to eat lunch tomorrow
at the shop. What is the probability.
 1. The you will win either a large pizza or a soft drink?
2. That you will not win a prize?
3. That you will not win a prize on three consecutive visits to the Pizza shop?
4. That you will win at least one prize on one of your next three visits to the Pizza shop?

6.62 The boxes of men's shirts were received from the factor. Box 1 contained 25 sport shirts
and 15 dress shirts. Box 2 contained 30sport shirts and 10 dress shirts. One of the boxes was
selected at random, and a shirt was chosen at random from that box to be inspected. The shirt
was a sport shirt. Given this information, what is the probability that the sport shirt came from
box 1?

6.63 There are four people being considered for the position of chief executive officer of an
Enterprises. Three of the applications are over 60 years of age. Two are female, of which only
one is over 60. All four applications are either over 60 years of age or female. What is the
probability that a candidate is over 60 and female?

6.64 A pharmaceutical company through an advertisement in a magazine, estimates that 1

percent of the subscribers will buy products. They also estimate that 05 percent of
nonsubscribers will buy the product and that there is one chance in 20 that a person is a
subscriber.

1. Find the probability that a randomly selected person will buy the products.
2. If a person buys the products what is the probability he subscribes to the magazine?
3. If a person does not buy the products what is the probability he subscribes to magazine?

Case Studies

Case 6.1: Tiger Air Express‫٭‬

Tiger Air Express Company was founded in 1987, primarily to provide charter air services.
Soon after, it incorporated tour business and taxi business into its domain and during its first
two years of operations, its sales grew by 168 per cent.

Because of its rapid growth, it experienced some difficulties in providing the necessary
resources and building proper infrastructure for this growth. These difficulties were due to
underestimated requirement of capital for vehicles, maintenance, office facilities, and staff. The
Gulf War which resulted in steep increase in fuel costs added more burden on the financially-
strapped organization.

The management was having difficulty in exactly evaluating the financial and operational
situation of the company. A well-known accounting firm was hired to develop and install an
accounting system that would accurately reflect the Company's financial situation at any given
time. As a result of the report, the taxi division was eliminated and the resources were diverted
towards the freight and tour divisions of the company, specially the air-freight capabilities.

In order to expand on the air-freight business, further studies were conducted in order to
understand the market better. Some insights into the air-freight market were gained through a
survey of 44 air freight shippers conducted by an outside agency in 1992. There are two types
of services available for forwarding air freight. First, there are integrated carriers. These are the
companies which have their own planes. An example is Federal Express. These carriers offer
customers pickup and delivery by truck along with airplane shipping. Second, there are freight
forwarders. These are the carriers that handle pickup and delivery but use the regular scheduled
airlines for air shipment.

A summary of the responses to some of the questions asked in the survey, as noted above, are
explained below:

1. 30 per cent of the survey respondents stated that their air-freight expenditures had
increased in the past year. 60 per cent indicated no change in these expenditures and 10
per cent reported a drop in expenses.
2. 50 per cent of the survey respondents used integrated carriers for shipping. However,
for small packages, this percentage increased to 75 per cent. Only 19 per cent used
freight forwarders. 62 per cent of those who used freight forwarders did so because of
their ability to handle international air freight more efficiently and reliably. (iii) 39 per
cent of the respondents indicated that they were using more 2–3 days deliveries which
was cheaper than one day delivery, than they did 2 years ago.
3. When the survey asked the customers as to what they looked for in a carrier the
responses were as follows:

•On-time delivery : 59 per cent

•Customer responsiveness : 47 per cent
•Geographic coverage : 9 per cent
•Single source control : 7 per cent
•Tracing capabilities : 7 per cent

Questions for Discussion

1. Based on your knowledge of probability theory, what strategy should Tiger Air Express
adopt in determining their emphasis on the air freight business, based on the data given?
2. Some of the percentages reported in the survey can be converted into conditional
probabilities. Conditional probabilities contain information about the responses in
certain categories. Can you describe some of these categories? How would these
categories help the management of Tiger Air Express? Explain.
3. If you were a consultant to Tiger Air Express, what recommendations would you give
to the management so that they can meet the competition with other companies,
offerings based on the type of shippers and shipments that are most probably in demand.