Topic: Probability (Reference Business Statistics by Naval Vajpai)

Example 1: ABRC, a leading market research firm in India, wants to collect information about
households with computers and internet access in urban Mumbai. After conducting an intensive
survey, it was revealed that 60% of the households have computers with internet access; 70% of the
households have two or more computer sets. Suppose 50% of the households have computers with
internet connection and two or more computers. A household with computer is randomly selected:

1. What is the probability that the house hold has computers with internet access or two or
more computers?
2. What is the probability that the household has computer with internet access or two or
more computers, but not both?
3. What is the probability that the household has neither computers with internet access nor
two or more computers?

Solution: Let E1 be the event of 60% households having computers with internet access.
Let E2 be the event that 70% of the households have two or more computers and (E 1 and
E2) be the event that 50% of the households have computers with internet access and two or more
computers.

From the question P (E1) = 0.6 P (E2) = 0.7 P (E1 and E2) = 0.5

1. Let the probability that the household has computers with internet access or two or more
computers be P (E1 or E2). From the addition rule of probability we have-
P (E1 or E2) = P (E1) + P (E2) – P (E1 and E2) after replacing the values
P (E1 or E2) = 0.6 + 0.7 – 0.5 = 0.8
Therefore the probability that a household has computers with internet access or two or
more computers is o.8.
2. Probability that the household has computer with internet access or two or more
computers, but not both = P(probability that a household has computers with internet
access or two or more computers) – P (probability that a household has computers with
internet access and two or more computers) = (0.8 – 0.5) = 0.3
3. We know that Probability that the household has computer with internet access or two or
more computers + Probability that the household has neither computer with internet access
or nor two or more computers = 1
Therefore, Probability that the household has neither computers with internet access nor
two or more computers = 1 – Probability that the household has computers with internet
access or two or more computers i.  1- 0.8 = 0.2

Example 2: A company is interested in understanding the consumer behaviour of the capital of

the newly formed state Chhattisgarh that is Raipur. For this purpose, the company has selected a
sample of 300 consumers and asked a simple question “Do you enjoy shopping?’ Out of 300
respondents 200 were males and 100 were females. Out of 200 males, 120 responded “Yes” and out
of 100 females, 70 responded “Yes”. A respondent is selected randomly. Construct a probability
matrix and ascertain the probability that:

1. The respondent is a male

2. Enjoys shopping
3. Is a female and enjoys shopping
 4. Is a male and does not enjoy shopping
5. Is a female and enjoys shopping
6. Is a male or does not enjoy shopping
7. Is a male or female

Solution: For the above example, the probability matrix can be constructed as shown in the table
below:

Enjoy Shopping Male Female Total

Yes 120 70 190
No 80 30 110
Total 200 100 300
1. Probability that consumer is male  P(Male) = 200/300 =2/3
2. Probability of enjoying shopping  P(Enjoys shopping) = 190/300 = 19/30
3. Probability that consumer is a female and enjoys shopping  70/300 = 7/30
4. Probability that consumer is a male and does not enjoy shopping = 80/300 = 4/15
5. Probability that consumer is a female or enjoys shopping = P(the consumer is female)+
P(Enjoys shopping) – P(Female and enjoys shopping) = 100/300 + 190/300 – 70/300 =
220/300 = 11/15
6. Probability that the consumer is a male or does not enjoy shopping = P(Consumer is a male)
+ P(does not enjoy shopping) – P (male and does not enjoy shopping) 
200/100 + 110/300 - 80/300 = 230/300 = 23/30
7. Probability that the consumer is a male or female = 300/300 =1.

Example 3: A firm has conducted a survey and found that 50% of the households have a water
purifier and 70% have a vacuum cleaner. In all 30% of the households have both a water purifier and
a vacuum cleaner. If a household is randomly selected, then:

a. What is the probability that the household has got either a water purifier or a vacuum
cleaner?
b. What is the probability that the household has got neither a water purifier nor a vacuum
cleaner?

Example 4: A firm has employed 300 workers. Out of these 300 workers, 180 workers are males
and 120 workers are females. The firm wants to assess the job satisfaction levels of these
employees. For these purpose, the company researchers asked a simple question “ Are you satisfied
with the present status of your job?”. Out of 180 males, 110 responded “Yes” and out of 120
females, 90 responded “yes”. A respondent is selected at random. Construct a probability matrix and
ascertain the probability that:

a. The respondent is male

b. Is satisfied with the job
c. Is a female and satisfied with the job
d. Is a male and not satisfied with the job
e. Is a female or satisfied with the job
f. Is a male or satisfied with the job
g. Is a male or female.

Example 5: A firm has employed 400 workers. Out of these 400 workers, 100 are engineers, 120
are graduates, and 180 are matriculates. A worker is randomly selected from this group:
 a. What is the probability that the randomly selected worker is an engineer or a graduate?
b. What is the probability that the randomly selected worker is an engineer or a matriculate?

Example 6: A company accepted a lot of 70 picture tubes of a colour television. Out of the 70
picture tubes, 10 are defective.

a. If two picture tubes are drawn at random, one at a time without replacement, what is the
probability that both the picture tubes are defective?
b. If two picture tubes are drawn at random, one at a time with replacement, what is the
probability that both the picture tubes are defective?

Solution:
a. If two picture tubes are drawn at random, one at a time without replacement, then the
required probability will be : (probability that the first tube is drawn and it is defective) *
(Without replacing the second picture tube is drawn and it is defective)  10/70 * 9/69 =
0.019
b. If two picture tubes are drawn at random, one at a time with replacement, then the required
probability will be : (Probability that the first picture tube is drawn and it is defective) *
(Replacing the first, the second picture tube is drawn and it is defective) = 10/70 * 10/70 =
0.204

Example 7: ABC is a leading consumer electronics firm in India. It has a variety of products such as
colour televisions, washing machines, mixers, fax machines, photo copiers etc. The company is in the
process of launching a new brand of washing machine and a new brand of fax machines. It
conducted a survey to analyse the actual situation in the market and found that 20% of all Indian
households have washing machines and 60% have a fax machine. Suppose 80% of Indian households
having a washing machine also have a fax machine. If an Indian household is selected randomly:

a. What is the probability that a household has a washing machine and a fax machine?
b. What is the probability that a household has a washing machine or a fax machine?
c. What is the probability that a household has neither washing machine nor a fax machine?
Solution:
Let E1 be the event of a household having a washing machine and E2 be the event of a household
having a fax machine. (E2/E1) is the event that a household that has a washing machine also has a
fax machine.
P(E1) = 0.20 P(E2) = 0.60 P(E2/E1) = 0.80
a. Probability that a household has a washing machine and a fax machine is
P(E1 ∩ E2) = P(E1)*P(E2/E1) = 0.20 * 0.80 = 0.16
b. Probability that a household has a washing machine or a fax machine is
P (E1 ꓴ E2) = P(E1) + P(E2) - P(E1 ∩ E2) = 0.20 + 0.60 – 0.16 = 0.64
c. We know that Probability that a household has either a washing machine or a fax machine +
Probability that a household has neither a washing machine nor a fax machine = 1
Therefore, Probability that household has neither a washing machine nor has a fax machine
= 1 – probability that a household has either a washing machine or a fax machine)  1-0.64
= 0.36

Example 8: A firm employed 300 workers. Out of these 300 workers, 120 have work experience
and 180 are fresh graduates. If a worker is selected at random:
a. What is the probability of selecting an experienced worker?
 b. What is the probability of not selecting an experienced worker?
c. What is the probability of selecting a fresh graduate?
d. What is the probability of not selecting a fresh graduate?
Solution:
a. Probability of selecting an experienced worker = Number of experienced workers/total
number of workers  120/300 = 0.4
b. Probability of not selecting an experienced worker = (1 – probability of selecting an
experienced worker )  1 – 0.4 = 0.6
c. Probability of selecting a fresh graduate = Number of fresh graduates/Total number of
workers  180/300 = 0.60
d. Probability of not selecting a fresh graduate = (1 – probability of selecting a fresh graduate)
 1 – 0.6 = 0.4

Example 9: A firm faces some problems in terms of obtaining good quality raw materials. The
quality control department of the firm rejected 20 lots out of 60 lots supplied. The firm is due to
receive the next lot very soon. What is the probability that this new lot will be rejected by the firm?
Suppose this lot (61st lot) is rejected, then what is the probability that the next lot (62 nd lot) will also
be rejected?
Solution: From relative frequency approach, the probability of rejecting next lot is P(E) = ne /np
Where ne = 20 and np = 60. Hence the required probability of rejecting the next lot is 20/60 = 0.33.
So the probability of rejecting a new batch is 0.33. Suppose this batch is rejected, then the
probability of rejecting the next batch (62 nd) is 21/61 = 0.34

Example 10: Domestic kitchen appliances, popularly known as the brown goods market, is
growing very fast in India especially after liberalization. Apart from organized market, the informal
(unorganized) market also has a major share in the total market structure. Electric fans are also an
important constituent of brown goods. The unorganized market has an important role in the electric
fans market. The type of product, that is ceiling fan, wall/table fan, and pedestal fan, also decides
the share of the market. Following table exhibits the domestic appliances market share in India, the
electric fan market structure in India and the product wise electric fans market share in India
Domestic appliances market Electric fans market structure Product wise electric fans
structure in India in India market share in India
Segment Market share Segment Market share Product Type Market share
% % %
Organized 40 Organized 45 Ceiling 65
Informal 60 Informal 55 Wall/Table 33
Pedestal 2
** Source: WWW.Indiastat.com accessed in October 2008
1. A customer who purchased an electric appliance is randomly selected. What is the
probability that the customer purchased the product from the informal market?
2. A customer who purchased an electric fan is selected. What is the probability that the
customer purchased the product from organized market?
3. A customer who purchased an electric fan is randomly selected. What is the probability that
the customer purchased a wall/Table fan?
Solution: Marginal probability is given by P(E) = ne/N
1. P (E) = 60/100 = 0.6
2. P (E) = 45/100 = 0.45
3. P (E) = 33/100 0.33
Example 11: A white goods firm wants to launch a new brand of television and refrigerator. This
firm conducted a survey and found that 60% of the households have a television, 65% a refrigerator
and 35% both a television and a refrigerator. If a household is randomly selected;
1. What is the probability that the household has either a television or a refrigerator?
2. What is the probability that the household has neither a television nor a refrigerator?
Solution: Let E1 be the event that 60% of the households have a television, and E2 be the event
that 65% have a refrigerator. Let (E1 and E2) be the event that 35% of the households have both a
television and a refrigerator.
From the question, P(E1) = 60/100 = 0.6 P(E2) = 65/100 = 0.65 P(E1 and E2) = 35/100 = 0.35
1. Probability that the household has either a television or a refrigerator is P (E1 or E2) and
from the addition rule of probability this is
P (E1 or E2) = P (E1) + P (E2) – P (E1 and E2)  0.6 + 0.65 – 0.35 = 0.90
2. Therefore, the probability that the household has neither a television nor a refrigerator = 1 –
0.90 = 0.1