QUANTATIVE TECHNIQUES IN BUSINESS

Operation Research and basic Probability

Quantitative Technique (Operation Research)
- it is one tool in helping businesses and businessmen to make better decisions.
- it is used to determine the best policy to follo ith respect to product mi!"
inventory fluctuations" and shipments of good to various markets from arehouses.
#asic $robability %oncepts
Probability is the likelihood of the occurrence of any particular form of an event.
&!ample'
(f a coin is tossed once" one of to events ill occur - the coin ill turn up either
head or tail.
( )
( )
)
*
)
*
=
=
T P
H P
+$robability of an event occurring is beteen , and *.
(f an
event
occurs f
times out
of n, the
relative
frequency
of its
n
f
occurrence is .
(f the event
fails to occur
h times out of
n" the relative
frequency of
its occurrence
is .
-ince the sum
of these to
events equals
the total
events" f + h
= n and .
Addition o!
Probabilities
The
probability
that one or the
other of to
mutually
e!clusive
events ill
occur is the
sum of the
probabilities.
E"a#ple$
n
h
* = +
n
h
n
f
The probability of having a ) in a single toss of a die is *./. The probability of
having a / in a single toss of a die is also *./. 0hat is the probability of having either of a
) or /1
The Additi%e R&le
(f events 2 and # are mutually e!clusive" the probability of having 2 and # is
$ (2 or #) 3 $(2) 4 $(#)
(f events 2 and # are non mutually e!clusive" the probability of having either 2 or #
is
$ (2 or #) 3 $(2) 4 $(#) - $(2 and #)
'&ltiplication o! Probabilities
Independent e%ents
The probability that to independent events ill both occur is the product of the
probabilities of the separate events.
- to events are independent if the outcome of one does not influence the other.
R&le
(f event 2 and event # are dependent events" then
$(2 and #) 3 $(2)$(#)
(ependents E%ents
The probabilities of dependent events states that the probabilities of occurrence or
non occurrence of an event affects the probabilities of occurrence or non occurrence of
other events.
R&le
(f event 2 and event # are dependent events" then
$(2 and #) 3 $(2)$(#.2)
E"pected Val&e
(f p is the probability that a person ill receive a sum of money -" the e!pected value
is defined as p-.
THE BINO'IA) (ISTRIBUTION
$roblem in hich the probability of occurrence of an event remains constant or may
be assumed to remain constant may b solve by the use of the binomial theorem.
The probability of r out of n events occurring is
n n n n n n
q q p
n n n
q p
n n
q np p q p + +


+

+ + = +

...
5 ) *
) ) )( * (
) *
) * (
) (
5 5 ) ) *
THE NOR'A) (ISTRIBUTION
0hen p*+,-" the binomial distribution is symmetrical" but hen p is greater or less
than one half" the distribution is skeed.
Nor#al (istrib&tion
r n r
q p
r n r
n
n r P

=
)6 ( 6
6
) " (