In: Finance
A cab drives down a pedestrian and leaves the scene. There are two taxi companies in the city: green taxis and blue taxis.
85% of taxis are green, 15% are blue.
A witness has identified the taxi as blue. It is assumed that witnesses are able to identify the correct taxi color in 80% of the cases and mistake 20% of the cases.
What is the likelihood that the taxi involved was blue? What mistakes are common to do in this type of problem? commentary.
We know that 85% of taxis are green, 15% are blue in the city
A witness has identified the taxi as blue.
It is assumed that witnesses are able to identify the correct taxi color in 80% of the cases and mistake 20% of the cases
Therefore the chances of four possible situations
Therefore the likelihood that the taxi involved was blue
= Chances of Blue taxi and correctly identified as Blue / (Chances of Blue taxi and correctly identified as Blue + chance a Green taxi and mistaken as Blue)
= 12 %/( 12% + 17%)
= 12% / 29%
= 41.38%
The common mistakes in this type of problem-
As the majority (85%) of taxis are green in the city therefore the chances of green taxi is more.