MubbashirAbbas wrote: I understand that permutation is used when order is important.
That's the exact rule!
If you just care about which objects to select, then you use the combinations formula.
If you care not only about which objects to select, but also the order of selection (or arrangement), then you use the permutations formula.
Here are two examples to illustrate the difference:
1) 7 students are trying out for the school tennis team. If there are 4 spots on the team, how many different teams can be made out of the 7 students?
In this question, we only care about WHICH students we select; in other words, we want to know how many teams of 4 we can make out of the 7 applicants. Since order is irrelevant, we use COMBINATIONS.
2) 7 goats are entered in the county fair. There are ribbons awarded for first, second and third place. How many different arrangements of winners can be made out of the 7 goats?
In this question, we care not only about WHICH goats get selected but ALSO about the ORDER in which they're selected. Since we care about order, we use PERMUTATIONS.