MODULE 1 QUANTITATIVE TECHNIQUES

Meaning and Definition:

 Quantitative techniques may be defined as those techniques which provide the decision
makes a systematic and powerful means of analysis, based on quantitative data.
 It is a scientific method employed for problem solving and decision making by the
management.
Classification of Quantitative Techniques:
1. Mathematical Quantitative Techniques
2. Statistical Quantitative Techniques
3. Programming Quantitative Techniques

I. Mathematical quantitative techniques

1. Permutations and Combinations:
Permutation means arrangement of objects in a definite order.

Combination means selection or grouping objects without considering their order.

2. Set Theory:
Set theory is a modern mathematical device which solves various types of critical problems.
3. Matrix Algebra:
It is a mathematical device of finding out the results of different types of algebraic
operations on the basis of the relevant matrices.
4. Determinants:
This device is used for finding out values of different variables connected with a number of
simultaneous equations.
5. Differentiation:
It is a mathematical process of finding out changes in the dependent variable with reference
to a small change in the independent variable.
6. Integration:
Integration is the reverse process of differentiation.
7. Differential Equation:
It is a mathematical equation which involves the differential coefficients of the dependent
variables.
II. Statistical Quantitative Techniques:
Statistical techniques are those techniques which are used in conducting the statistical
enquiry concerning to certain Phenomenon.
1. Collection of data:
There are different methods for collecting primary and secondary data.
2. Measures of Central tendency, dispersion, skewness and Kurtosis:
 Measures of Central tendency is a method used for finding he average of a series
 Measures of dispersion used for finding out the variability in a series.
 Measures of Skewness measures asymmetry of a distribution
 Measures of Kurtosis measures the flatness of peakedness in a distribution.
3. Correlation and Regression Analysis:
 Correlation is used to study the degree of relationship among two or more
variables.
 Regression technique is used to estimate the value of one variable for a given
value of another.
4. Index Numbers:
Index numbers measure the fluctuations in various Phenomena like price, production
etc. over a period of time, They are described as economic barometres.
5. Time series Analysis:
Analysis of time series helps us to know the effect of factors which are responsible for
changes:
6. Interpolation and Extrapolation:
 Interpolation is the statistical technique of estimating under certain
assumptions, the missing figures which may fall within the range of given
figures.
 Extrapolation provides estimated figures outside the range of given data.
7. Statistical Quality Control:
Statistical quality control is used for ensuring the quality of items manufactured.
8. Ratio Analysis:
Ratio analysis is used for analyzing financial statements of any business or industrial
concerns which help to take appropriate decisions.
9. Probability Theory:
Theory of probability provides numerical values of the likely hood of the occurrence of
events.
10. Testing of Hypothesis:
Testing of hypothesis is a tool to judge the reliability of inferences drawn on the basis
of sample studies.
III. Programming Techniques
Programming techniques are also called operations research techniques.
1. Linear Programming:
Linear programming technique is used in finding a solution for optimizing a given
objective under certain constraints.
2. Queuing Theory:
Queuing theory deals with mathematical study of queues. It aims at minimizing cost of
both servicing and waiting.
3. Game Theory:
Game theory is used to determine the optimum strategy in a competitive situation.
4. Decision Theory:
This is concerned with making sound decisions under conditions of certainty, risk and
uncertainty.
5. Inventory Theory:
Inventory theory helps for optimizing the inventory levels. It focuses on minimizing cost
associated with holding of inventories.
6. Network programming:
It is a technique of planning, scheduling, controlling, monitoring and coordinating large
and complex projects comprising of a number of activities and events.
It includes CPM, PERT etc.
7. Simulation:
It is a technique of testing a model which resembles real life situations .
8. Replacement Theory:
 It is concerned with the problems of replacement of machines, etc due to their
deteriorating efficiency or breakdown.
 It helps to determine the most economic replacement policy.
9. Non Linear Programming:
It is a programming technique which involves finding an optimum solution to a problem
in which some or all variables are non-linear.
10. Quadratic Programming:
Quadratic programming technique is designed to solve certain problems, the objective
function of which takes the form of a quadratic equation.
11. Branch and Bound Technique :
This is designed to solve the combinational problems of decision making where there is
large number of feasible solutions.
12. Search theory:
Search theory concerns with research problems.
13. Dynamic programming:
 Dynamic programming is applied to solve certain problems by dividing the total
problems into a number of subsidiary problems.
14. Integer programming:
It is a technique to solve linear programming problems in which the solution values are
expressed in whole numbers.
15. Parametric programming:
It is a technique designed to solve a problem consisting of more than one objective
function with varying degrees of priorities.
16. Markov process:
It is a technique in which various states of a problem are defined and the steady state
probabilities of going to each of the states from a given state are calculated.

Functions of Quantitative Techniques:

1. To facilitate the decision-making process

2. To provide tools for scientific research
3. To help in choosing an optimal strategy
4. To enable in proper deployment of resources
5. To help in minimizing costs
6. To help in minimizing the total processing time required for performing a set of jobs

USES OF QUANTITATE TECHNIQUES BUSINESS AND INDUSTRY

1. Quantitative techniques of linear programming is used for optimal allocation of scarce

resources in the problem of determining product mix .

2. Inventory control techniques are useful in dividing when and how much items are to be
purchase so as to maintain a balance between the cost of holding and cost of ordering the
inventory

3. Quantitative techniques of CPM, and PERT helps in determining the earliest and the latest
times for the events and activities of a project. This helps the management in proper deployment
of resources.

4. Decision tree analysis and simulation technique help the management in taking the best
possible course of action under the conditions of risks and uncertainty.

5. Queuing theory is used to minimize the cost of waiting and servicing of the customers in
queues.
 6. Replacement theory helps the management in determining the most economic replacement
policy regarding replacement of equipment.

Limitations of Quantitative Techniques:

1. Quantitative techniques involves mathematical models, equations and other mathematical

expressions.

2. Quantitative techniques are based on number of assumptions. Therefore, due care must be
ensured while using quantitative techniques, otherwise it will lead to wrong conclusions.

3. Quantitative techniques are very expensive.

4. Quantitative techniques do not take into consideration intangible facts like skill, attitude etc.

5. Quantitative techniques are only tools for analysis and decision-making. They are not
decisions itself.
 QUANTITATIVE TECHNIQUES FOR BUSINESS

MODULE 2
4 th
semester Bcom cooperation

CORRELEATION ANALYSIS

Introduction:
 In practice, we may come across with lot of situations which need statistical analysis of
either one or more variables. The data concerned with one variable only is called univariate
data. For Example: Price, income, demand, production, weight, height marks etc are
concerned with one variable only. The analysis of such data is called univariate analysis.

 The data concerned with two variables are called bivariate data. For example: rainfall and
agriculture; income and consumption; price and demand; height and weight etc. The
analysis of these two sets of data is called bivariate analysis.

 The date concerned with three or more variables are called multivariate date. For example:
agricultural production is influenced by rainfall, quality of soil, fertilizer etc.

Definition:
Two or more variables are said to be correlated if the change in one variable results in a
corresponding change in the other variable.

According to Simpson and Kafka, ―Correlation analysis deals with the association between two or
more variables‖.

Lun chou defines, ―Correlation analysis attempts to determine the degree of relationship between
variables‖.

Boddington states that ―Whenever some definite connection exists between two or more groups or
classes of series of data, there is said to be correlation.‖

Correlation Coefficient:
Correlation analysis is actually an attempt to find a numerical value to express the extent
of relationship exists between two or more variables. The numerical measurement showing the
degree of correlation between two or more variables is called correlation coefficient. Correlation
coefficient ranges between -1 and +1.
SIGNIFICANCE OF CORRELATION ANALYSIS
Correlation analysis is of immense use in practical life because of the following reasons:
1. Correlation analysis helps us to find a single figure to measure the degree of relationship
exists between the variables.

2. Correlation analysis helps to understand the economic behavior

3. Correlation analysis enables the business executives to estimate cost, price and other
variables.

4. Correlation analysis can be used as a basis for the study of regression. Once we know that
two variables are closely related, we can estimate the value of one variable if the value of
other is known.

5. Correlation analysis helps to reduce the range of uncertainty associated with decision making.
The prediction based on correlation analysis is always near to reality.

6. It helps to know whether the correlation is significant or not. This is possible by comparing
the correlation co-efficient with 6PE. It ‗r‘ is more than 6 PE, the correlation is significant.
Classification of Correlation
Correlation can be classified in different ways. The following are the most important classifications

1. Positive and Negative correlation

2. Simple, partial and multiple correlation

3. Linear and Non-linear correlation

Positive and Negative Correlation
Positive Correlation
When the variables are varying in the same direction, it is called positive correlation. In
other words, if an increase in the value of one variable is accompanied by an increase in the value
of other variable or if a decrease in the value of one variable is accompanied by a decree se in the
value of other variable, it is called positive correlation.

Eg: 1) A: 10 20 30 40 50
B: 80 100 150 170 200

When the variables are moving in opposite direction, it is called negative correlation. In
other words, if an increase in the value of one variable is accompanied by a decrease in the value
of other variable or if a decrease in the value of one variable is accompanied by an increase in the
value of other variable, it is called negative correlation.
Simple, Partial and Multiple correlation
Simple Correlation
In a correlation analysis, if only two variables are studied it is called simple correlation.
Eg. the study of the relationship between price & demand, of a product or price and supply of a
product is a problem of simple correlation.

Multiple correlation
In a correlation analysis, if three or more variables are studied simultaneously, it is called
multiple correlations. For example, when we study the relationship between the yield of rice with
both rainfall and fertilizer together, it is a problem of multiple correlation.

Partial correlation
In a correlation analysis, we recognize more than two variable, but consider one dependent
variable and one independent variable and keeping the other Independent variables as constant.
For example yield of rice is influenced b the amount of rainfall and the amount of fertilizer used.
But if we study the correlation between yield of rice and the amount of rainfall by keeping the
amount of fertilizers used as constant, it is a problem of partial correlation.

Linear and Non-linear correlation

Linear Correlation
In a correlation analysis, if the ratio of change between the two sets of variables is same, then it
is called linear correlation.
For example when 10% increase in one variable is accompanied by 10% increase in the other
variable, it is the problem of linear correlation.
X: 10 15 30 60

Y: 50 75 150 300
Here the ratio of change between X and Y is the same. When we plot the data in graph paper, all
the plotted points would fall on a straight line.

Non-linear correlation
In a correlation analysis if the amount of change in one variable does not bring the same ratio of
change in the other variable, it is called nonlinear correlation.

X: 2 4 6 10 15

Y: 8 10 18 22 26

Here the change in the value of X does not being the same proportionate change in the value of Y
Degrees of correlation:

Correlation exists in various degrees

1. Perfect positive correlation

If an increase in the value of one variable is followed by the same proportion of increase
in other related variable or if a decrease in the value of one variable is followed by the same
proportion of decrease in other related variable, it is perfect positive correlation. eg: if 10% rise in
price of a commodity results in 10% rise in its supply, the correlation is perfectly positive.
Similarly, if 5% full in price results in 5% fall in supply, the correlation is perfectly positive.

2. Perfect Negative correlation

If an increase in the value of one variable is followed by the same proportion of decrease
in other related variable or if a decrease in the value of one variable is followed by the same
proportion of increase in other related variably it is Perfect Negative Correlation. For example if
10% rise in price results in 10% fall in its demand the correlation is perfectly negative. Similarly
if 5% fall in price results in 5% increase in demand, the correlation is perfectly negative.

3. Limited Degree of Positive correlation:

When an increase in the value of one variable is followed by a non-proportional increase

in other related variable, or when a decrease in the value of one variable is followed by a non-
proportional decrease in other related variable, it is called limited degree of positive correlation.
For example, if 10% rise in price of a commodity results in 5% rise in its supply, it is
limited degree of positive correlation. Similarly if 10% fall in price of a commodity results in 5%
fall in its supply, it is limited degree of positive correlation.

4. Limited degree of Negative correlation

When an increase in the value of one variable is followed by a non-proportional decrease

in other related variable, or when a decrease in the value of one variable is followed by a non-
proportional increase in other related variable, it is called limited degree of negative correlation.
For example, if 10% rise in price results in 5% fall in its demand, it is limited degree of
negative correlation. Similarly, if 5% fall in price results in 10% increase in demand, it is limited
degree of negative correlation.
5. Zero Correlation (Zero Degree correlation)

If there is no correlation between variables it is called zero correlation. In other words, if

the values of one variable cannot be associated with the values of the other variable, it is zero
correlation.
Methods of measuring correlation

Correlation between 2 variables can be measured by graphic methods and algebraic methods.

I Graphic Methods

1) Scatter Diagram

2) Correlation graph

II Algebraic methods (Mathematical methods or statistical methods or Co-efficient of correlation

methods):

1) Karl Pearson‘s Co-efficient of correlation

2) Spear man‘s Rank correlation method

3) Concurrent deviation method

Scatter Diagram

This is the simplest method for ascertaining the correlation between variables. Under this
method all the values of the two variable are plotted in a chart in the form of dots. Therefore, it is
also known as dot chart. By observing the scatter of the various dots, we can form an idea that
whether the variables are related or not.
A scatter diagram indicates the direction of correlation and tells us how closely the two
variables under study are related. The greater the scatter of the dots, the lower is the relationship

X X

X X

X X

X X

X X

X X

X X

X X

0 X 0 X
Perfect Positive Correlation Perfect Negative Correlation
Y X X
X X
X X
X X
X X
X X
X X
X X
X X
X X
X X
X X
X X
X X
X
X X

0 X
0 X

High Degree of Positive Correlation High Degree of Negative Correlation

Y X
X X
X X X X
X X X
X X X X
X X X X
X X X X
X X X X
X X X X
X X X X
X X X X
X X X X
X X X
X X X X
X X X
X X
X X X

0 X 0 X

Low Degree of Positive Correlation Low Degree of Negative Correlation

X X X X X

X X X X X

X X X X X

X X X X X

X X X X X X

0 X
No Correlation (r = 0)

16
Merits of Scatter Diagram method
1. It is a simple method of studying correlation between variables.

2. It is a non-mathematical method of studying correlation between the variables. It does not

require any mathematical calculations.

3. It is very easy to understand. It gives an idea about the correlation between variables even
to a layman.

4. It is not influenced by the size of extreme items.

5. Making a scatter diagram is, usually, the first step in investigating the relationship
between two variables.

Demerits of Scatter diagram method

1. It gives only a rough idea about the correlation between variables.

2. The numerical measurement of correlation co-efficient cannot be calculated under

this method.

3. It is not possible to establish the exact degree of relationship between the variables.

Correlation graph Method

Under correlation graph method the individual values of the two variables are plotted on a
graph paper. Then dots relating to these variables are joined separately so as to get two curves.
By examining the direction and closeness of the two curves, we can infer whether the variables
are related or not. If both the curves are moving in the same direction( either upward or
downward) correlation is said to be positive. If the curves are moving in the opposite directions,
correlation is said to be negative.

Merits of Correlation Graph Method

1. This is a simple method of studying relationship between the variable
2. This does not require mathematical calculations.
3. This method is very easy to understand

17
Demerits of correlation graph method:

1. A numerical value of correlation cannot be calculated.

2. It is only a pictorial presentation of the relationship between variables.
3. It is not possible to establish the exact degree of relationship between the variables.
Karl Pearson’s Co-efficient of Correlation
Karl Pearson‘s Coefficient of Correlation is the most popular method among the algebraic
methods for measuring correlation. This method was developed by Prof. Karl Pearson in 1896. It
is also called product moment correlation coefficient.

X(s–s¯)(y–ȳ)
r=
ƒX(x–x̄)2 X(y–ȳ)

Interpretation of Co-efficient of Correlation

Pearson‘s Co-efficient of correlation always lies between +1 and -1. The following general rules
will help to interpret the Co-efficient of correlation:
1. When r - +1, It means there is perfect positive relationship between variables.

2. When r = -1, it means there is perfect negative relationship between variables.

3. When r = 0, it means there is no relationship between the variables.

4. When ‗r‘ is closer to +1, it means there is high degree of positive correlation between
variables.

5. When ‗r‘ is closer to – 1, it means there is high degree of negative correlation between
variables.

6. When ‗r‘ is closer to ‗O‘, it means there is less relationship between variables.

Properties of Pearson’s Co-efficient of Correlation

1. If there is correlation between variables, the Co-efficient of correlation lies between

+1 and -1.
2. If there is no correlation, the coefficient of correlation is denoted by zero (ie r=0)
3. It measures the degree and direction of change
4. If simply measures the correlation and does not help to predict cansation.
5. It is the geometric mean of two regressions co-efficient.

i.e r =Jbsy · byx

18
Probable Error and Coefficient of Correlation
Probable error (PE) of the Co-efficient of correlation is a statistical device which measures
the reliability and dependability of the value of co-efficient of correlation.

1—r2
‫ ׵‬PE = 0.6745 ×
√

If the value of coefficient of correlation (r) is less than the PE, then there is no evidence of
correlation.
If the value of ‗r‘ is more than 6 times of PE, the correlation is certain and significant.
By adding and submitting PE from coefficient of correlation, we can find out the upper
and lower limits within which the population coefficient of correlation may be expected to lie.
Uses of PE:

1) PE is used to determine the limits within which the population coefficient of

correlation may be expected to lie.
2) It can be used to test whether the value of correlation coefficient of a sample is
significant with that of the population
If r = 0.6 and N = 64, find out the PE and SE of the correlation coefficient. Also determine
the limits of population correlation coefficient.
Merits of Pearson’s Coefficient of Correlation:-

1. This is the most widely used algebraic method to measure coefficient of correlation.

2. It gives a numerical value to express the relationship between variables

3. It gives both direction and degree of relationship between variables

4. It can be used for further algebraic treatment such as coefficient of determination

coefficient of non-determination etc.

5. It gives a single figure to explain the accurate degree of correlation between two
variables

Demerits of Pearson’s Coefficient of correlation

1. It is very difficult to compute the value of coefficient of correlation.

2. It is very difficult to understand

19
Spearman’s Rank Correlation Method
Pearson‘s coefficient of correlation method is applicable when variables are measured in
quantitative form. But there were many cases where measurement is not possible because of the
qualitative nature of the variable. For example, we cannot measure the beauty, morality,
intelligence, honesty etc in quantitative terms. However it is possible to rank these qualitative
characteristics in some order.
(R) = 1- 6XD2
N3—N

Merits of Rank Correlation method

1. Rank correlation coefficient is only an approximate measure as the actual values are
not used for calculations

2. It is very simple to understand the method.

3. It can be applied to any type of data, ie quantitative and qualitative

4. It is the only way of studying correlation between qualitative data such as honesty, beauty
etc.

5. As the sum of rank differences of the two qualitative data is always equal to zero,
this method facilitates a cross check on the calculation.
Demerits of Rank Correlation method
1. Rank correlation coefficient is only an approximate measure as the actual values are not
used for calculations.
2. It is not convenient when number of pairs (ie. N) is large
3. Further algebraic treatment is not possible.
4. Combined correlation coefficient of different series cannot be obtained as in the case of
mean and standard deviation. In case of mean and standard deviation, it is possible to
compute combine arithmetic mean standard deviation.
Concurrent Deviation Method:
Concurrent deviation method is a very simple method of measuring correlation. Under this
method, we consider only the directions of deviations. The magnitudes of the values are
completely ignored. Therefore, this method is useful when we are interested in studying
correlation between two variables in a casual manner and not interested in degree (or precision).

Under this method, the nature of correlation is known from the direction of deviation in
the values of variables. If deviations of 2 variables are concurrent, then they move in the same
direction, otherwise in the opposite direction.
20
 The formula for computing the coefficient of concurrent deviation is: -
± (2c–N)
r = J±
N

Where N = No. of pairs of symbol

C = No. of concurrent deviations (ie, No. of + signs in ‗dx dy‘ column)
Steps:
1. Every value of ‗X‘ series is compared with its proceeding value. Increase is shown by
‗+‘ symbol and decrease is shown by ‗-‗
2. The above step is repeated for ‗Y‘ series and we get ‗dy‘
3. Multiply ‗dx‘ by ‗dy‘ and the product is shown in the next column. The column
heading is ‗dxdy‘.
4. Take the total number of ‗+‘ signs in ‗dxdy‘ column. ‗+‘ signs in ‗dxdy‘ column
denotes the concurrent deviations, and it is indicated by ‗C‘.
5. Apply the formula:

2c–N
r = ±J± ( )
N

If 2cΣ N, then r = +ve and if 2c € N, then r = —ve.

21
 REGRESSION ANALYSIS
Introduction:-
Correlation analysis analyses whether two variables are correlated or not. After having
established the fact that two variables are closely related, we may be interested in estimating the
value of one variable, given the value of another. Hence, regression analysis means to analyses
the average relationship between two variables and thereby provides a mechanism for estimation
or predication or forecasting.

The term ‗Regression‖ was firstly used by Sir Francis Galton in 1877. The dictionary
meaning of the term ‗regression‖ is ―stepping back‖ to the average.

Definition:

―Regression is the measure of the average relationship between two or more variables in
terms of the original units of the date‖.

―Regression analysis is an attempt to establish the nature of the relationship between

variables-that is to study the functional relationship between the variables and thereby provides a
mechanism for prediction or forecasting‖.
Types of Regression:-
There are two types of regression. They are linear regression and multiple regressions.
Linear Regression:
It is a type of regression which uses one independent variable to explain and/or predict the
dependent variable.
Multiple Regression:
It is a type of regression which uses two or more independent variable to explain and/or
predict the dependent variable.
Regression Lines:

Regression line is a graphic technique to show the functional relationship between the two
variables X and Y. It is a line which shows the average relationship between two variables X and Y.
If there is perfect positive correlation between 2 variables, then the two regression lines
are winding each other and to give one line. There would be two regression lines when there is no
perfect correlation between two variables. The nearer the two regression lines to each other, the
higher is the degree of correlation and the farther the regression lines from each other, the lesser is
the degree of correlation.

22
Properties of Regression lines:-
1. The two regression lines cut each other at the point of average of X and average of Y ( i.e
X̄ and Ȳ)

2. When r = 1, the two regression lines coincide each other and give one line.

3. When r = 0, the two regression lines are mutually perpendicular.

Regression Equations (Estimating Equations)
Regression equations are algebraic expressions of the regression lines. Since there are two
regression lines, therefore two regression equations. They are :-
1. Regression Equation of X on Y:- This is used to describe the variations in the values
of X for given changes in Y.
2. Regression Equation of Y on X :- This is used to describe the variations in the value of
Y for given changes in X.
Regression Equation of Y on X:-
Y = a + bx
The normal equations to compute ‗a‘ and ‗b‘ are: -
Σy = Na + bΣx
Σxy = aΣx +bΣx 2
Regression Equation of X on Y:-
X = a + by

The normal equations to compute ‗a‘ and ‗b‘ are:-

Σx = Na + nΣy

Σxy = aΣy +bΣy2

Properties of Regression Coefficient:

1. There are two regression coefficients. They are b xy and byx

2. Both the regression coefficients must have the same signs. If one is +ve, the other
will also be a +ve value.

3. Thegeometricmean of regressioncoefficientswill be thecoefficient of

correlation. r =ƒ bsy. bys.

4. If x x̃ and ỹ are the same, then the regression coefficient and correlation coefficient
will be the same.

23
 Computation of Regression Co-efficient
Regression co-efficient can be calculated in 3 different ways:

1. Actual mean method

 Regression coefficient x on y ( bxy) ∑ sy

=
∑y2

 Regression coefficient y on x (b yx) = ∑ sy

∑ s2

Correlation Regression

It studies degree of relationship It studies the nature of relationship between variables

between variables
It is not used for prediction purposes It is basically used for prediction purposes

It is basically used as a tool for It is basically used as a tool for studying cause
determining the degree of relationship and effect relationship

There may be nonsense correlation There is no such nonsense regression

between two variables

There is no question of dependent and There must be dependent and independent variables
independent variables

24
 QUANTITATIVE TECHNIQUES FOR BUSINESS

MODULE 3
4th semester Bcom cooperation
Set theory

Set

Set theory is the mathematical theory of well-determined collections, called sets

Null set

In mathematical sets, the null set, also called the empty set, is the set that does not contain anything

Subset of a set.

In mathematics, a set A is a subset of a set B if all elements of A are also elements of B; B is then a
superset of A.

Disjoint sets
In mathematics, two sets are said to be disjoint sets if they have no element in common.

Representation sets by venn diagram

A Venn diagram is an illustration that uses circles to show the relationships among things or finite
groups of things

Permutation
A permutation of a set is, loosely speaking, an arrangement of its members into a sequence or linear
order, or if the set is already ordered, a rearrangement of its elements.

Combination
A combination is a mathematical technique that determines the number of possible arrangements in
a collection of items where the order of the selection does not matter
Example 2: Consider a set having 5 elements a, b, c, d, e. In how many ways 3 elements can be
selected (without repetition) out of the total number of elements.
Solution: Given X = {a, b, c, d, e}
3 are to be selected.
Therefore, P53=5! (5−3)!
= 60
Example 3: It is required to seat 5 men and 4 women in a row so that the women occupy the
even places. How many such arrangements are possible?
Solution: We are given that there are 5 men and 4 women.
I.e. there are 9 positions.
The even positions are: 2nd, 4th, 6th and the 8th places
These four places can be occupied by 4 women in P(4, 4) ways = 4!
= 4. 3. 2. 1
= 24 ways
The remaining 5 positions can be occupied by 5 men in P (5, 5) = 5!
= 5.4.3.2.1
= 120 ways
Therefore, by the Fundamental Counting Principle,
Total number of ways of seating arrangements = 24 x 120
= 2880

Question: Two fair coins are tossed simultaneously. What is the probability of getting only one
head?
Solution:
When 2 coins are tossed, the possible outcomes can be {HH, TT, HT, and TH}.
Thus, the total number of possible outcomes = 4
Getting only one head includes {HT, TH} outcomes.
So number of desired outcomes = 2
Therefore, probability of getting only one head
=Number off avoidable outcomes Total number of possible outcomes
=24=12
1. The king, queen and jack of clubs are removed from a deck of 52 playing cards and then
shuffled. A card is drawn from the remaining cards. Find the probability of getting:

(i) A heart

(ii) A queen

(iii) A club

(IV) ‘9’ of red color

Solution:

Total number of card in a deck = 52

Card removed king, queen and jack of clubs

Therefore, remaining cards = 52 - 3=49

Therefore, number of favorable outcomes = 49

(I) a heart

Number of hearts in a deck of 52 cards= 13

Therefore, the probability of getting ‘a heart’

Number of favorable outcomes

P (A) =
Total number of possible outcome

= 13/49

(ii) A queen

Number of queen = 3

[Since club’s queen is already removed]

Therefore, the probability of getting ‘a queen t’

Number of favorable outcomes

P (B) =
Total number of possible outcome

= 3/49
(iii) a club

Number of clubs in a deck in a deck of 52 cards = 13

According to the question, the king, queen and jack of clubs are removed from a deck of 52 playing
cards In this case, total number of clubs = 13 - 3 = 10

Therefore, the probability of getting ‘a club’

Number of favorable outcomes

P(C) =
Total number of possible outcome

= 10/49

(IV) ‘9’ of red color

Cards of hearts and diamonds are red cards

The card 9 in each suit, hearts and diamonds = 1

Therefore, total number of ‘9’ of red color = 2

Therefore, the probability of getting ‘9’ of red color

Number of favorable outcomes

P (D) =
Total number of possible outcome

= 2/49
 QUANTITATIVE TECHNIQUES FOR BUSINESS

MODULE 4
4th semester Bcom cooperation
Theoretical Distribution

PROBABILITY DISTRIBUTION

A probability distribution is a statistical function that describes all the possible values and
likelihoods that a random variable can take within a given range

BINOMIAL DISTRIBUTION

The binomial distribution is a probability distribution that summarizes the likelihood that a value
will take one of two independent values under a given set of parameters or assumptions.

PROPERTIES:

1. Binomial distribution is applicable when the trials are independent and each trial has just two
outcomes success and failure.

2. It is applied in coin tossing experiments, sampling inspection plan, genetic experiments and so
on.

3. Binomial distribution is known as bi-parametric distribution as it is characterized by two

parameters n and p.

This means that if the values of n and p are known, then the distribution is known completely.
Example

A set of three similar coins are tossed 100 times with the following results

Fit a binomial distribution and estimate the expected frequencies.

Solution
POISSON DISTRIBUTION

Poisson distribution is a probability distribution that can be used to show how many times an event
is likely to occur within a specified period of time

Example:

The following mistakes per page were observed in a book

Fit a Poisson distribution and estimate the expected frequencies.

Solution
NORMAL DISTRIBUTION

Normal distribution, also known as the Gaussian distribution, is a probability distribution that is
symmetric about the mean, showing that data near the mean are more frequent in occurrence than
data far from the mean.

Properties

 The mean, mode and median are all equal.

 The curve is symmetric at the center (i.e. around the mean, μ).
 Exactly half of the values are to the left of center and exactly half the values are to the right.
 The total area under the curve is 1.

Example:

Find expected frequencies for the following data, if its calculated mean and standard deviation are
79.945 and 5.545.
 QUANTITATIVE TECHNIQUES FOR BUSINESS

MODULE 5
4th semester Bcom cooperation
Quantitative approach to decision making

MODELING

Models are representation of reality. A model may be defined as an idealized representation of a

real life system

PROPERTIES OF A GOOD MODEL

1. Simple
2. It should contain very few variable
3. A model should not take much time in its construction

ADVANTAGES OF A MODEL
1. It describes problems more concisely
2. It indicates limitation and scope of the problem
3. It facilitates dealing with the problem
4. Analyze the problem

TYPES OF MODEL
1. Iconic models
2. Analogue models
3. Symbolic models

PROGRAMMING MODELS

1. Allocation models
2. Sequencing models
3. Queuing models
4. Inventory models
5. Decision models
6. Network models
7. Simulation models
8. Search models
9. Replacement models

DECISION THEORY

It is a process of choosing an alternative course pof action when a number of alternatives exist

PROCESS
1. Perceiving the need for decision making
2. Determining the objectives
3. Collection of relevant information
4. Evaluating alternative course of action
 5. Choosing the best alternative

COMPONENTS OF A DECISION PROBLEM

1. Decision maker
2. Number alternatives
3. Different states of nature
4. Outcome of the decision

TYPES OF DECISION MAKING SITUATION

1. Decision making under certainty
2. Decision making under uncertainty
Maximax criterion
Minimax criterion
Maximin criterion
Laplace criterion
3. Decision making under risk

PAYOFF TABLE
A profit table can be a useful way to represent and analyze a scenario where there is a range of possible
outcomes and a variety of possible responses. A payoff table simply illustrates all possible profits/losses and
as such is often used in decision making under uncertainty

DECISION TREE

A decision tree is a decision support tool that uses a tree-like model of decisions and their possible
consequences, including chance event outcomes, resource costs, and utility. It is one way to display an
algorithm that only contains conditional control statements