The option to buy extended warranties is commonplace with most electronics purchases. But does the type of purchase affect a consumer's willingness to pay extra for
An extended warranty? Data for 420 consumers who purchased digital cameras and
Laptop computers from a leading electronics retailer are summarized in the table. The
Probability that a consumer purchases an extended warranty given that he/she has
Purchased a digital camera is
A) .07
B) .42
C) .58
D) .17
E) .83

Question

The option to buy extended warranties is commonplace with most electronics purchases. But does the type of purchase affect a consumer's willingness to pay extra for
An extended warranty? Data for 420 consumers who purchased digital cameras and
Laptop computers from a leading electronics retailer are summarized in the table. The
Probability that a consumer purchases an extended warranty given that he/she has
Purchased a digital camera is 
A) .07 
B) .42 
C) .58 
D) .17 
E) .83

Quizplus · Accepted Answer

The table indicates that out of the total 420 consumers, 200 purchased digital cameras and 220 purchased laptop computers. Further, out of the 200 consumers who purchased digital cameras, 23 also purchased extended warranties. Thus, the probability that a consumer purchases an extended warranty given that he/she has purchased a digital camera is 23/200 = 0.115 or 11.5%. Therefore, the best choice is B) 0.42, which represents the probability of purchasing an extended warranty given that a laptop computer was purchased (based on the complement rule of probability, which states that the probability of an event happening is equal to 1 minus the probability of the event not happening). This suggests that consumers who purchase laptop computers are more willing to pay extra for extended warranties compared to those who purchase digital cameras.

The Option to Buy Extended Warranties Is Commonplace with Most