REPUBLIC OF THE PHILIPPINES

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

STO. TOMAS BRANCH
College of Engineering

Group No: 11
Leader: Zulueta, Melvrick T.
Members:
1. De Castro, John Neil S.
2. Magsino, Joshua N.
3. Talag, Jhon Francis S.

FINALS
ADVANCED ENGINEERING MATHEMATICS
FOR INDUSTRIAL ENGINEERING

Library Research:
Topic in Industrial Engineering Field with application of Advanced Engineering
Mathematics

Content:

Title Page – title of your library research, names of researchers and date of completion
Introduction – first part of research paper, it is where you provide the content in terms of
content of your research project
Sample Problem – shows a detailed solution of application of advanced engineering
mathematics in industrial engineering
Conclusion – analyzation and interpretation of data
References

Note: Border 1 in each side, Arial 12 Font Style

 REPUBLIC OF THE PHILIPPINES
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
STO. TOMAS BRANCH
College of Engineering

Markov Chain & Analyses as a Correlated Application of Advanced Mathematics

A Library Research
In Partial Fulfillment in the subject Advanced Mathematics for Industrial Engineering,
INEN 30083

Submitted to:

Engr. Billy Ray M. Oldan, MSEE

Submitted by:

De Castro, John Neil S.

Magsino, Joshua N.
Talag, Jhon Francis S.
Zulueta, Melvrick T.

July 2021
 REPUBLIC OF THE PHILIPPINES
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
STO. TOMAS BRANCH
College of Engineering

Introduction

Baudoin (2010) defined that, a Markov Chain is a mathematical system that goes
through transitions from one state to another based on probabilistic criteria. The defining
feature of a Markov chain is that the possible future states are fixed, regardless of how
the process got at its current state. In other words, the chance of transitioning to any
given condition is purely determined by the current state and the amount of time that
has passed.

Baudoin (2010) indicated that, anything can be used in the state space, or the
collection of all potential states: letters, numbers, weather conditions, baseball scores,
or stock performance. Finite state machines can be used to model Markov chains, and
random walks are a good example of their utility in mathematics. They are commonly
used in economics, game theory, queueing (communication) theory, genetics, and
finance and can be found in a variety of statistical and information-theoretical situations.

Likewise, Baudoin (2010) stated that, in stochastic processes, Markov chains are a
useful mathematical tool. The fundamental concept is the Markov Property, which states
that some stochastic process forecasts can be simplified by considering the future as
independent of the past, given the process' current state. This is used to make
predictions about a stochastic process's future state easier.

As eloquently stated by Maltby et al., (2016), while any size of state space can be
discussed, the initial theory and most implementations focus on scenarios with a finite
(or countably infinite) number of states. Many applications of Markov chains necessitate
knowledge of popular matrix methods.

Hayes (2013) stated that, Andrei Markov, a Russian mathematician, developed a

new field of probability theory by applying mathematics to poetry one hundred years
ago. Markov spent hours searching through patterns of vowels and consonants while
delving into the text of Alexander Pushkin's tale in verse Eugene Onegin. In an address
to the Imperial Academy of Sciences in St. Petersburg on January 23, 1913, he detailed
his findings. His research did not change the way people thought about or appreciated
Pushkin's poetry, but the technique he devised—now known as a Markov chain—
extended probability theory in a new direction.

Moreover, the methodology of Markov extended beyond coin flipping and dice rolling
circumstances (where each event is independent of the others) to chains of linked
events (where what happens next depends on the current state of the system). In
today's world, Markov chains can be found everywhere.
 REPUBLIC OF THE PHILIPPINES
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
STO. TOMAS BRANCH
College of Engineering
Furthermore, Hayes (2013) explained that, Methods similar to those utilized by
Markov in his research on Pushkin are used to discover genes in DNA and power
algorithms for voice recognition and web search. The Markov chain is a physics concept
that replicates the collective behavior of systems with numerous interacting particles,
such as electrons in a solid.

The chains are used in statistics to draw a representative sample from a vast
number of options. In recent decades, Markov chains have been a hot topic of research,
with researchers trying to figure out why some of them function so well and others don't.

The history of Markov chains has mostly slipped from recollection since they have
become ubiquitous tools. It's a story worth telling again and again. It combines
mathematics with literature in an interesting way, as well as a little politics and even
theology. A deep dispute between two powerful characters adds to the drama. And the
story develops against the backdrop of the dramatic events that shaped Russian society
in the early twentieth century.

The study of Myers, Wikström, and Wallin (2019) mentioned that, Markov chains are
one of the most important stochastic processes. They are stochastic processes in which
the current state description fully contains all information that could influence the
process's future evolution. Markov chains can be used to forecast traffic flows,
communications networks, genetic issues, and queues. Using Markov chains, it would
be quite simple to create a physical model for these chaotic systems. Modeling the
back-and-forth of Internet communications traffic is a prime example of what Markov
chains can do. Markov chains are frequently used to describe not only the traffic, which
is inherently unpredictable, but also how the network will perform despite its complexity.

Myers, Wikström, and Wallin (2019) added that, Markov chains are used in a broad
variety of academic fields, ranging from biology to economics. When predicting the
value of an asset, Markov chains can be used to model the randomness. The price is
set by a random factor which can be determined by a Markov chain. The Markov chain
in physics simulates the collective behavior of systems composed of many interacting
particles, such as electrons in a solid. In statistics, chains are used to select a
representative sample from a large set of possibilities.

Voskoglou (2016) stated that, Markov chains provide perfect circumstances for the
investigation and mathematical modeling of specific problems involving random
variables. Markov presented the fundamental principles of the related theory on coding
literary materials in 1907. Since then, the Markov chain theory has been developed by
several prominent mathematicians, including Kolmogorov, Feller, and others. However,
it was not until the 1960s that the significance of this theory to the Natural, Social, and
most other Applied Sciences was realized.
 REPUBLIC OF THE PHILIPPINES
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
STO. TOMAS BRANCH
College of Engineering
Zanakis (1980) affirmed in their study that, Markov chains have been proposed for
modeling labor supply since the early 1960s, mostly in military, governmental, and
public organizations. A real-world industrial application is shown. Managers, as well as
practitioners and students of operational research, will find this useful. The approach,
use, and validation of the Markov model, as well as certain limits and expansions, are
described.

Kelley (1969) revealed that, The Markov process is a popular method in migration
research, and it is used in conjunction with an economic model of migration in which
interregional pay disparities serve as equilibrating variables. According to the economic
model, regional departure and entrance rates are unlikely to remain steady as the
population is redistributed. As a result, both theory and empirical data from interstate
migration show that Markov migration predictions typically underestimate the population
changes necessary before stochastic equilibrium is attained.

Kenton (2021) stated that, one of the uses of Markov Chain Analysis is that it can be
used as a method to forecast the value of a certain variable whose predicted value can
be claimed under its specific conditions to be consider. Markov analysis is useful for
financial speculators, especially momentum investors. It is simple are and its out-of-
sample forecasting is accurate. It can also be used to predict the proportion of a
company’s accounts receivable (AR) that will become bad debts. Markov analysis used
to forecast future brand loyalty of current customers and the outcome of these
consumer decisions on a company’s market share. Some stock price and option price
forecasting methods incorporate Markov analysis, too.

In addition, Kenton (2021) clearly mentioned that, Markov chain has several practical
applications in the business world. It is often employed to predict the number of
defective pieces that will come off an assembly line, given the operating status of the
machines on the line. In engineering, it is quite clear that knowing the probability that a
machine will break down does not explain why it broke down. More importantly, a
machine does not really break down based on a probability that is a function of whether
or not it broke down today. In reality, a machine might break down because its gears
need to be lubricated more frequently.

Moreover, Kenton (2021) proved that, Markov chain has come to be used as a
marketing research tool for examining and forecasting the frequency with which
customers will remain loyal to one brand or switch to others. It is generally assumed that
customers do not shift from one brand to another at random, but instead will choose to
buy brands in the future that reflect their choices in the past for it may often use for
predicting behaviors and decisions within large groups of people. Knowing the possible
trends and meeting customers’ satisfaction should be guaranteed, and it is through the
use of Markov Chain.
 REPUBLIC OF THE PHILIPPINES
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
STO. TOMAS BRANCH
College of Engineering

Sample Problem

1. Production and Manufacturing

Throughout 1980 up to 2017, 8300 million metric tons (Mt) of plastic were
manufactured, 2600 Mt were utilized (both primary and secondary), 600 Mt were
recycled, 4900 Mt were wasted, and 800 Mt were burned. Let us now define 1 as
production, 2 as use, 3 as recycling, 4 as disposal, and 5 as incineration. As a result,
the state space is S = {1, 2, 3, 4, 5}.
As a result, the state space is S = {1, 2, 3, 4, 5}. There are three transitory states
numbered {1, 2, 3} and two absorbing states numbered {4, 5}. The transition matrix P is
constructed using the information provided. The matrix P can alternatively be
represented as a transition diagram, as seen in Fig. 1.

0 1 0 ⋮ 0 0

( )
0 0.29 0.07 ⋮ 0.55 0.09
P= 0 1 0 ⋮ 0 0
⋯ ⋯ ⋯ ⋮ ⋯ ⋯
0 0 0 ⋮ 1 0
0 0 0 ⋮ 0 1

Table 1. The average quantity of plastic visiting each lifecycle stage, given the initial condition of 407 Mt plastic manufactured
in 2017.

Lifecycle Stage Average Quantity (Mt)

Production 407.00
Use 635.49
Recycling 42.84
Disposal 349.88
Incineration 57.12

Table 2. Market sectors using plastic and their mean usage periods in 2017.

Market Sector 2017 Primary Production Mean Lifetime

(%) (years)
Packaging 35.87 0.5
Transportation 6.63 13
Building and Construction 15.97 35
Electrical/Electronic 4.42 8
Consumer & Institutional 10.32 3
Products
Industrial Machinery 0.74 20
Textiles 14.50 5
 REPUBLIC OF THE PHILIPPINES
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
STO. TOMAS BRANCH
College of Engineering
Other 11.55 5

Table 3. Plastic's average duration of stay at the use stage according to the market sector.

Market Sector Average duration of stay at the use stage

(years)
Packaging 0.78
Transportation 20.30
Building and Construction 54.65
Electrical/Electronic 12.49
Consumer & Institutional 4.68
Products
Industrial Machinery 31.23
Textiles 7.81
Other 7.81

The first row of (I – Q) -1 represents the estimated number of visits made by the plastic
beginning with the manufacturing stage. The manufacturing stage is visited once on
average, the usage stage is visited 1.56 times, and the recycling stage is visited 0.11
times. Because the plastic is recycled and reused, the number of visits during the usage
stage is more than one. The second row shows that if the plastic is now in the use
stage, it will visit the recycling stage 0.11 times. If the plastic is currently in the recycling
stage, it will be reused 1.56 times in the third row. The reused plastic will be recycled
again, resulting in an average of 1.11 visits to the recycling stage.

1 1.56 0.11
−1

(
( I −Q) = 0 1.56 0.11
0 1.56 1.11 )
The energy consumption of polyethylene (PET) during its lifespan is examined to
demonstrate the applicability of the equation indicated below.

v=WEt +UE a= p0 ( I −Q )−1 ( Et + ℜa )

Let Et and Ea be column vectors that represent the environmental effect per unit while
the products are in their transitory and absorbing phases, respectively. Then comes the
projected overall environmental effect of items during their whole lifespan, designated
as v.

In 2017, the total amount of PET produced was 33E+03 kg. PET manufacturing takes 3
MJ/kg of energy, PET recycling requires 7.97 MJ/kg of energy, and PET combustion
recovers 27 MJ/kg of energy. Considering that PET use and disposal do not use or
 REPUBLIC OF THE PHILIPPINES
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
STO. TOMAS BRANCH
College of Engineering
recover energy, what is the average total energy consumption for PET manufacturing,
usage, and end-of-life in 2017?

Solution

By using:
I ij =element ( i , j ) of ( I −Q)−1 × d j

Using the information in Table 2, the average duration of stay of plastic in each market
sector during the use phase may be calculated. The duration of plastic's presence in the
packaging market sector throughout the use stage is 0.5 element (1,2) of (I – Q) -1 = 0.78
years. The complete results are shown in Table 3. Using the preceding data and the
primary production percentages from 2017, the overall average duration of stay of
plastic at the usage stage is 35.87 percent 0.78 + 6.63 percent 20.30 +... + 11.55
percent 7.81 = 13.65 years.

then the average total energy consumption for the production, use, and end-of-life of
PET in 2017 was,
1 1.56 0.11 3 0 0
( )( ) (
v ( production, use , disposal ,incineration )=( 33E+03,0,0 ) 0 1.56 0.11 0 +
0 1.56 1.11 7.97
0.55 0.09
0 0 )( ))
0 =1632.63
−27

2. Marketing and Business Management

Suppose the convenience stores wanted to know the probability that a customer
would buy with them in month 3 given that the customer buys with them this month. This
analysis can be performed for each convenience store using decision trees, as shown
below:
 REPUBLIC OF THE PHILIPPINES
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
STO. TOMAS BRANCH
College of Engineering

a.) What would be the probability on the third month that a customer will buy on 7-
Eleven? How about Ministop?
b.) On what month will the probability would go on Steady-State Markov Chain?
c.) Graph the Steady-State Markov Chain from the first month up to the month the
probability of two convenience stores become stable?
d.) If there were 3,000 customers in Brgy. Halang who purchases things and stuff,
then in the long run of operation day-to-night, what would be the expected
number of people who buys on 7-Eleven? What about on Ministop?
e.) Now suppose that 7-Eleven has decided it is getting less than a reasonable
share of the market and would like to increase its market share. See the given
transition matrix below:

T= [ 0.70
0.20
0.30
]
0.80
In other words, the improved system has resulted in smaller probability (0.30)
that customers who buys initially at 7-Eleven will switch to Ministop the next month.

Solution

a.) If a customer is presently buying things at 7-Eleven (Month 1), the following
probabilities exist.
Np (1) = 1.0; buying at 7-Eleven
 REPUBLIC OF THE PHILIPPINES
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
STO. TOMAS BRANCH
College of Engineering
Mp (1) = 0.0; buying at Ministop

The matrix defines the starting conditions of the system, given that the customer buys at
7-Eleven, as in decision tree in Figure 1. In other words, a customer us originally buying
at 7-Eleven in the first month.
0.60 0.40
[
Month 2: [ N p ( 2 ) M p (2) ]= [ 1.0 0.0 ]
0.20 0.80]=[ 0.60 0.40 ]

0.60 0.40 =[ 0.44 0.56 ]

Month 3: [ N p ( 3 ) M p (3) ]=[ 0.60 0.40 ] [
0.20 0.80 ]
b.) The month that the probability will go steady:
0.60 0.40
[
Month 4: [ N p ( 4 ) M p ( 4) ]= [ 0.44 0.56 ]
0.20 0.80 ]
=[ 0.38 0.62 ]

The state probabilities for several subsequent months are as follows:

Month 5: [ N p ( 5 ) M p (5) ] =[ 0.35 0.65 ]
Month 6: [ N p ( 6 ) M p (6) ]=[ 0.34 0.66 ]
Month 7: [ N p ( 7 ) M p ( 7) ]=[ 0.34 0.66 ]
Month 8: [ N p ( 8 ) M p (8) ]=[ 0.33 0.67 ]
Month 9: [ N p ( 9 ) M p (9) ]=[ 0.33 0.67 ]
At Month 8, the state probability interchanges and becomes steady.

c.) Graph:
 REPUBLIC OF THE PHILIPPINES
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
STO. TOMAS BRANCH
College of Engineering

(Np i) and (Mp i)

1
0.9
0.8
0.7 0.65 0.66 0.66 0.67 0.67
0.6 0.6 0.62
0.6 0.56
Probability

0.5 0.44
0.4 0.4 0.38
0.4 0.35 0.34 0.34 0.33 0.33
0.3
0.2
0.1
0
1 2 3 4 5 6 7 8 9
Months (i)

7-Eleven Ministop

Interpretation:
Mp (i) / Ministop exhibit the same characteristics as it approaches a value of 0.67 from
0.40. This is a potentially valuable result. In other words, the convenience store owner
can conclude that after a certain number of months in the future, there is a 0.33
probability that a customer will buy at 7-Eleven (N p i) if the customer initially buys in 7-
Eleven.

d.) Expected number of people:

7-Eleven: Np (3,000) = 0.33 (3,000)

7-Eleven = 990 customers
Ministop: Mp (3,000) = 0.67 (3,000)
Ministop = 2,010 customers

e.) Follow-up answer to d:

[ N p ( 2 ) M p (2)]=[ N p ( 2 ) M p (2)] [ 0.70
0.20
0.30
0.80 ]
Np = 0.7Np + 0.2Mp
Mp = 0.3Np + 0.8Mp

Using the first equation and the fact that Mp = 1.0 – Np, we have;
 REPUBLIC OF THE PHILIPPINES
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
STO. TOMAS BRANCH
College of Engineering

Np = 0.7Np + 0.2 (1.0 – Np) = 0.7Np + 0.2 – 0.2 Np

0.5 Np =0.2
Np = 0.2/0.5
Np = 0.4

And thus;

Mp = 1 – Np = 1 – 0.4 = 0.6

This means that out of the 3,000 customers, 7-Eleven will not get 1,200 customers (i.e.,
0.40 x 3,000) in any given month in the long run. Thus, improvement in the system will
result in an increase of 210 customers per month (if the new transition probabilities
remain constant for a long period of time in the future). In the specified situation, 7-
Eleven must evaluate the trade-off between the cost of the improved system and the
increase in profit from the additional 210 customers. For example, if the improved
service costs P1,000 per month, then the extra 210 customers must generate an
increase profit greater than P1,000 to justify the decision to improve the
abovementioned system.

3. Finance and Economics

The accounts receivable for the ABC Kabalikat Company is denoted by the
transition matrix given below:

Where:
p = paid debt
b= bad debt/unpaid debt
1 and 2 = referring to months/longevity

a.) What is the probability that the debt will eventually get paid and the probability
that the accounts received by the insurance company will result in a bad debt?
 REPUBLIC OF THE PHILIPPINES
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
STO. TOMAS BRANCH
College of Engineering
b.) Supposed the ABC Kabalikat Company has accounts receivable of P4000 in the
first month and P6000 in the second month. Determine the portion in which these
funds will be collected and what portion will result in bad debt.

Solution

a.) The probability that the debt will become bad and paid:

Notice that once a debt was paid, then the probability of moving to state 1, 2, or b is
zero. If the debt is month old, there is a 0.70 probability that it will be paid in the next
month and a 0.30 probability that it will go to month 2 unpaid. If the debt is in month 2,
there is a 0.50 probability that it will be paid and a 0.50 probability that it will become a
bad debt in the next time period. Finally, if the debt is bad, there is a zero probability
that it will return to any previous state.

Dividing the transition matrix into submatrices:

Where:
 REPUBLIC OF THE PHILIPPINES
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
STO. TOMAS BRANCH
College of Engineering

Given the fundamental matrix:

F=( I −Q)−1

The fundamental matrix indicates the expected number of times the system will be in
any of the non-absorbing states before the absorption occurs (i.e., before the debt
becomes bad or is paid). Thus, according to F, if the customer is in state 1 (one month
late in paying the debt), the expected number of times the customer would be two
months late would be 0.30 before the debt is paid or becomes bad.

The F x R matrix reflects the probability that the debt will eventually be absorbed given
any starting state. For the first month, there is a 0.85 probability that the debt will be
paid and 0.15 probability that it will lead to a bad debt. In the second month, there is
both 0.50 probability that it will eventually paid or lead to a bad debt.

b.) Determination of Accounts Receivable (AR):

 REPUBLIC OF THE PHILIPPINES
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
STO. TOMAS BRANCH
College of Engineering
Thus, of the total P10,000 owed, the ABC Kabalikat Company can expect to receive
P6,400 and P3,600 will become bad debts.

4. Time and Methods Study

The specific machine repair model has a computer system that may malfunction and
a single technician who fixes it when it does fail. The machine can be in one among five
states:
Idle Busy Waiting Broken In Repair
Idle 0.05 0.93 0 0.02 0
Busy 0.10 0.43 0.43 0.04 0
Waiting 0 0.60 0.35 0.05 0
Broken 0 0 0 0.80 0.20
In Repair 0.75 0 0 0 0.25

a.) Given the transition matrix, what is the fraction of time that the system is broken?
b.) How about what is the fraction of time that the model is in both in repair and
broken?

Solution

a.) Construct the transition matrix:

0.05 0.93 0 0.02 0

(
0.10 0.43 0.43 0.04
P= 0
0
0.75
0.60 0.35 0.05
0
0
0
0
0.80 0.20
0
0
0

0.25
)
0.0797 0.4284 0.2834 0.1645 0.0439

(
0.0797
P20= 0.0797
0.0797
0.0797
0.4284
0.4284
0.4284
0.4284
0.2834
0.2834
0.2834
0.2834
0.1645
0.1645
0.1645
0.1645
0.0439
0.0439
0.0439
0.0439
)
[ V , d ] =eig( P' )
 REPUBLIC OF THE PHILIPPINES
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
STO. TOMAS BRANCH
College of Engineering
−0.2724 0 0 0 0

d=
( 0
0
0
0
1.0000
0
0
0
0
0.1098
0
0
0
0
0.3157
0
0
0
0
0.7270
)
v ( :, 2 )=[−0.1458 ,−0.7832 ,−0.5181,−0.3007 ,−0.0802]

∑ v (: ,2 ) =[−1.8280]
v (: ,2 )
π=
∑ v ( :, 2 )
For each entry, divide the entries of 2nd vector by the sum of the acquired 2nd
vector which is equal to -1.8280. whereas;
0.0797

( )
0.4282
π= 0.2834
0.1645
0.0439

−0.95 0.93 0 0.02 0

P−J 5= 0
0(
0.10 −0.57 0.43

0.75
0
0
0
0
0.40
0.60 −0.65 0.05
0
0
−0.20 0.20
0 −0.75
)
−0.95 0.93 0 0.02 1

P 1= 0
(
0.10 −0.57 0.43

0
0.75
0
0
0
0
0.40 1
0.60 −0.65 0.05 1
−0.20 1
0 1
)
[0 0 0 0 1]
π=
P1
 REPUBLIC OF THE PHILIPPINES
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
STO. TOMAS BRANCH
College of Engineering

0.0797

( )
0.4282
π= 0.2834
0.1645
0.0439

a.) The fraction of time that the model is broken is 0.1645 or 16.45% of the time.
b.) The fraction of time that the model is in both in repair and broken is 0.2084 in
probability or 20.84% of the time.

Conclusion

1. Production and Manufacturing

Aside from estimating the expected overall environmental effect of goods, a Markov
chain model can predict the number of visits made by products to a lifetime stage, the
estimated number of products that visits a lifecycle stage, and the products' mean
duration of stay in a lifecycle stage. A Markov chain can also offer absorption
probabilities. The probabilities can be used to anticipate the quantity of goods that will
be discarded or burned.

Furthermore, the Markov chain model estimates the average environmental effect
based on the amount of environmental damage per unit mass. This can help to reduce
errors in calculating average environmental impacts. Because the products of an
 REPUBLIC OF THE PHILIPPINES
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
STO. TOMAS BRANCH
College of Engineering
industrial sector are the aggregate of the products of all industries in that sector, the use
of monetary units may result in inaccuracies in physical flows within the sectors of the
economy. In probability theory and operations research, the Markov chain is a well-
known concept. It has been used in a variety of fields, including physics, chemistry,
computer science, queuing theory, economics, gaming, and sports.

The Markov chain is used to simulate a product's lifespan. The model is combined
with data on product lifespan and the findings of an LCA study. The number of visits and
duration of stay of a product in a certain lifetime stage, the number of items visiting a
specific lifecycle stage, the likelihood of a product being discarded and burned, and the
estimated overall environmental effect of the product are predicted based on this. The
model is based on the assumption that the product has a stable transition probability.

According to the findings, plastic will visit the manufacture, usage, and recycling phases
once, 1.56, and 0.11 times, respectively. The average period of stay of plastic in the
usage stage (across all market sectors) is 13.65 years. The estimated result implies that
the quantity of plastic visited use and recycling phases is 635.49 Mt and 42.84 Mt,
respectively, out of 407 Mt plastic generated in 2017. The computed value indicates that
the overall energy consumption level (for the manufacturing, usage, discard, and
incineration stages) was 0.05 MJ/kg in 2017.

2. Marketing and Business Management

a.) 7-Eleven become dominant and considered the starting state, the state
probabilities computed become constants after a several periods/durations.
However, notice that the eventual state probabilities (i.e., 0.33 and 0.67)
achieved when Ministop is the starting state are exactly the same as the previous
state probabilities achieved when 7-Eleven was the starting state. In other words,
the probability of ending up in a particular state in the future is not dependent on
the starting state. Thus, in third month, it clearly observed that it is the start
wherein the interchange of probabilities will happen to increase to Ministop
gaining almost 0.72 state probability = 72% while 7-Eleven is 0.28 state
probability = 28%.

b.) At Month 8, the state probability interchanges and becomes steady. In a Markov
process after a number of periods have passed, the probabilities will approach
steady state. The steady-state probabilities are average probabilities that the
system will be in a certain state after a large number of transition periods.

c.) Mp (i) / Ministop exhibit the same characteristics as it approaches a value of 0.67
from 0.40. This is a potentially valuable result. In other words, the convenience
store owner can conclude that after a certain number of months in the future,
there is a 0.33 probability that a customer will buy at 7-Eleven (N p i) if the
customer initially buys in 7-Eleven. The Breakeven point is in the third month
 REPUBLIC OF THE PHILIPPINES
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
STO. TOMAS BRANCH
College of Engineering
wherein the interchange of state probabilities started to change and as it
progresses in periods, the probabilities become constant and steady.

d.) If there would be 3,000 customers then in 7-Eleven: N p (3,000) = 0.33 (3,000) =
there are about 990 customers while in Ministop: M p (3,000) = 0.67 (3,000) =
there are about 2,010 customers.

e.) This means that out of the 3,000 customers, 7-Eleven will not get 1,200
customers (i.e., 0.40 x 3,000) in any given month in the long run. Thus,
improvement in the system will result in an increase of 210 customers per month
(if the new transition probabilities remain constant for a long period of time in the
future). In the specified situation, 7-Eleven must evaluate the trade-off between
the cost of the improved system and the increase in profit from the additional 210
customers. For example, if the improved service costs P1,000 per month, then
the extra 210 customers must generate an increase profit greater than P1,000 to
justify the decision to improve the abovementioned system.

3. Finance and Economics

a.) The F x R matrix reflects the probability that the debt will eventually be absorbed
given any starting state. For the first month, there is a 0.85 probability that the
debt will be paid and 0.15 probability that it will lead to a bad debt. In the second
month, there is both 0.50 probability that it will eventually paid or lead to a bad
debt.

b.) Thus, of the total P10,000 owed, the ABC Kabalikat Company can expect to
receive P6,400 and P3,600 will become bad debts.

4. Time and Methods Study

a.) The fraction of time that the model is broken is 0.1645 or 16.45% of the time.
b.) With the steady state probabilities, the fraction of time that the system is
broken is the probability that the model is in either/both of the states broken or
in repair, or 20.84% of the time. Increasing the proportion of time that the
system is not broken by either enhancing its reliability (lowering the likelihood
that the model transitions from idle, busy, or waiting to broken) or decreasing
the time it takes the repairman to start working on the system when it is
broken. Assume we choose the latter method. Reducing the probability that
the model makes the transition back to state broken given that it is in state
broken from 0.8 to 0.2, we find that π=
 REPUBLIC OF THE PHILIPPINES
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
STO. TOMAS BRANCH
College of Engineering
(0.0910,0.4887,0.3233,0.0469,0.0500)T, and the machine is broken only
9.69% of the time.

References

Baudoin, F. (2010). Stochastic Processes. International Encyclopedia of Education

(Third Edition),, 451-452. Retrieved from
https://www.sciencedirect.com/science/article/pii/B9780080448947013695

Hayes, B. (2013). First Links in the Markov Chain. American Scientist, 92. Retrieved
from https://www.americanscientist.org/article/first-links-in-the-markov-chain

Maltby, H., et al. (2016, June). Markov Chains. Brilliant Math and Science. Retrieved
from Brilliant.org: https://brilliant.org/wiki/markov-chains/
 REPUBLIC OF THE PHILIPPINES
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
STO. TOMAS BRANCH
College of Engineering

Myers, D. S., Wikström, P., & Wallin, L. (2019). An Introduction to Markov Chains and
their applications within finance. Chalmers. Retrieved from
http://www.math.chalmers.se/Stat/Grundutb/CTH/mve220/1617/redingprojects16-
17/IntroMarkovChainsandApplications.pdf

Voskoglou, M. G., (2016). Applications of finite Markov chain models to Management.

https://arxiv.org/ftp/arxiv/papers/1601/1601.01304.pdf

Zanakis, S. H., (1980). A Markov Chain to Manpower Supply Planning.

https://www.jstor.org/stable/2581821

Kelley, A. C., (1969). Markov Process and Economic Analysis.

https://www.jstor.org/stable/1913537

Kenton, W., (2021, February). Markov Analysis. Tools for Fundamental Analysis.
https://www.investopedia.com/terms/m/markov-analysis.asp