Question

Question 4 [Total 12 marks] The weekly demand for a certain commodity is classified as being high (E1), moderate (E2) or low (E3). Assume that the transitions among these states behave as a Markov chain with the following one-ste transition matrix 0.4 0.5 0.11 0.2 0.5 0.3 0.2 0.4 0.4 a) Draw the transition diagram. [1.5 marks] [7 marks] [3.5 marks] b) In the long run, what fraction of the time will the demand be in each of the states? Ans: [0.25 0.472 0.278] c) Determine the chances for the commodity to be having low demand two weeks after experiencing high demand. Ans: 0.23

Answer 1