Question

A market research company conducts surveys to forecast short-run economic outlook. Based on past performance, 94% of its surveys that forecasted economic conditions as “Favorable” were correct (that is, P(Survey result is Favorable | Economy is Favorable) = 0.94), while 90% of its surveys that forecasted economic conditions as “Unfavorable” were correct. If a pre-survey, subjective probability for “Favorable” economy is 0.65, what is the probability that the economy is “Favorable” if the company's survey forecasts “Favorable” economy?

a) 0.611

b) 0.646

c) 0.946

d) 1.000

Answer 1