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Mostly it is based on convention, when one wants to define the quantity for example. An intuitive way to look at it is
counts the number of ways to arrange
distinct objects in a line, and there is only one way to arrange nothing.
In a combinatorial sense, refers to the number of ways of permuting
objects. There is exactly one way to permute 0 objects, that is doing nothing, so
.
There are plenty of resources that already answer this question. Also see:
Link
http://wiki.answers.com/Q/Why_is_zero_factorial_equal_to_one
http://en.wikipedia.org/wiki/Factorial#Definition
Wouldn't this also mean that 1!=0!, why is this true?
One definition of the factorial that is more general than the usual
$$ N! = N\cdot(N-1) \dots 1 $$
is via the gamma function, where
$$ \Gamma(N) = (N-1)! = \int_0^{\infty} x^{N-1}e^{-x} dx $$
This definition is not limited to positive integers, and in fact can be taken as the definition of the factorial for non-integers. With this definition, you can quite clearly see that
$$ 0! = \Gamma(1) = \int_0^{\infty} e^{-x} dx = 1 $$
If you are starting from the "usual" definition of the factorial, in my opinion it is best to take the statement $0! = 1$ as a part of the definition of the factorial function, as anything else would require proofs using the factorial to include special cases for $0!$ and $1!$. It's a definition that is consistent and makes our lives easier.
There is exactly one permutation of a set of zero elements.
Yes, precisely there is a unique function $\emptyset \to \emptyset$ (with empty graph), which happens to be a bijection ($\operatorname{id}_\emptyset$). Note, that $n!$ is the number of bijections $\{1,\dots, n\}\to \{1,\dots,n\}$.
For positive numbers the factorial function $n!$ is defined as the product of all positive integers less or equal to $n$. To define $0!$ we need to "extend" the definition. Another way to define it is to notice that:
$$(n-1)! = \frac{n!}{n}$$
Pluging $n=1$ we get: $0! = \frac{1!}{1} = 1$