Consider the following social mobility problem. Studies indicate that people in a society can be classified as belonging to the upper class (state 1), middle class (state 2), and lower class (state 3). Membership in any class is inherited in the following probabilistic manner. Given that a person is raised in an upper-class family, he will have an upper-class family with probability 0.45, a middle-class family with probability 0.48, and a lower-class family with probability 0.07. Given that a person is raised in a middle-class family, he will have an upper-class family with probability 0.05, a middle-class family with probability 0.70, and a lower-class family with probability 0.25. Finally, given that a person is raised in a lower-class family, he will have an upper-class family with probability 0.01, a middle-class family with probability 0.50, and a lower-class family with probability 0.49. Determine the following:
a. The state-transition diagram of the process
b. The transition probability matrix of the process
c. The limiting-state probabilities. Interpret what they mean to the layperson.