Chapter Seven

Elementary Probability
7.1. Introduction
• Probability as a general concept can be defined
as the chance of an event occurring.
• Probability theory gives us methods of dealing
with uncertainty.
• As nothing is accurately predictable, uncertainty
is common feature of every decision making
process.
• In general, probability is the chance of an
outcome of an experiment. It is the measure of
how likely an outcome is to occur.
 7.2 Definition and basic concepts
• An Experiment – is the process that leads to the
occurrence of one or more possible observations.
• Any process of observation or measurement or any process
which generates well defined outcome.
Eg. Tossing a coin
Rolling two dice once
Drawing a card from a deck
Sample Space – is a complete listing of all elementary
events of an experiment. (Set of all possible outcomes of
a probability experiment )
• Eg. The sample space for the experiment of tossing a coin
is (H,T).
• if two coins are tossed once, the sample space is (H1, H2)
(H1, T2) (T2 H2) (T1 T2).
• The sample space for the roll of a single die is
(1,2,3,4,5,6). If two dice are rolled once, the
possible outcomes (sample space) are:-

• Sample points:- are elements of sample space.

• Example:2 is one sample point of rolling a die.
• Outcome :The result of a single trial of a random
experiment
• An Event – is the collection of one or more
outcomes of an experiment. (It is a subset of sample
space)
• Events are mutually exclusive if the occurrence of
any one event means that none of the others can
occur at the same time…….
…….That is if two events cannot occur at the
same time, they are mutually exclusive.
• Events are independent if the occurrence of one
event does not affect the occurrence of another.
• Events are collectively exhaustive if at least one of
the events must occur when an experiment is
conducted.
Example:
• A fair die is rolled once.
•The experiment is rolling a die.
• The possible outcomes are the numbers 1,2,,4,5,
and 6.
•If an event is the occurrence of an even number,
we should collect the outcome, 2,4 and 6.
•Probability is a measure of the chance or
likelihood that a particular event will happen in
the future. It can only assume between 0 and 1.
Equally Likely Events: Events which have the same
chance of occurring.
Complement of an Event: the complement of an
event A means non-occurrence of A and is denoted
by A , or A , or A contains those points of the sample
' c

space which don’t belong to A.

• Mutually Exclusive Events: Two events which cannot
happen at the same time.
• Independent Events: Two events are independent if the
occurrence of one does not affect the probability of the other
occurring.
• Dependent Events: Two events are dependent if the first
event affects the outcome or occurrence of the second
event in a way the probability is changed.
axiom of probability( postulates)
Postulate 1. The probability of an event is non negative
real number i.e., P (A) ≥ 0, for any subset A of S.
Postulate 2. The probability of a sample space is equal
to one i.e, P(S) = 1
Postulate 3. If A1, A2, A3, …., is a finite or infinite
sequence of mutually exclusive events of S, then
P(A1 U A2 U A3 U…..) = P (A1) + P(A2) + P(A3) + …. =
   
P  Ai    P A 
i
 i 1  i 1
 7.3. Basic Rules of Probability
• If two events A and B are mutually exclusive, the
special rule of addition states that the probability of
A or B occurring equals the sum of their respective
probabilities: P (A or B) = P(A) + P(B)
• Definition: Two events of a single experiment are
said to be mutually exclusive if they cannot occur
simultaneously as a result of the experiment.
• This is equivalent to saying that mutually exclusive
events must have disjoint event sets.
• The complement rule
The complement rule is used to determine the probability
of an event occurring by subtracting the probability of
the event not occurring from 1.
• If P(A) is the probability of event A and P(~A) is the
complement of A, then P(A)+P(~A)=1 or P(A)= 1- P(~A).
1) Two events X and Y are mutually exclusive. Suppose P(X)
=0.05 and P (Y) =0.02. What is the probability that either
X or Y will occur (0.07). What is the probability that
neither X nor Y will happen? (0.93)
2. The probabilities of events A and B are 0.20 and 0.30
respectively. The probability that both A and B occur is
0.15. What is the probability of either A or B will occur?
(0.35)
3. A student is taking two courses,
microeconomics and statistics. The probability that
the student will pass the microeconomics course is
0.60 and the probability of passing the statistics
course is 0.70. The probability of passing both is
0.50. What is the probability of passing at least in
one course? (0.80)
The General rule of addition
• If A and B are two events that are not mutually
exclusive, then P(A or B) is given by the following
formula: P(A or B) = P(A) + P(B) - P(A and B)
• Example: In a sample of 500 students, 320 said they had a
radio, 175 said they had a TV, and 100 said they had both:
i) If a student is selected at random, what is the probability
that the student has only a radio, only a TV, and both a
radio and TV?
Solution: P(S) = 320/500 = .64.
P(T) = 175/500 = .35.
P(S and T) = 100/500 = .20.
ii) If a student is selected at random, what is the probability
that the student has either a radio or a TV in his or her
room?
• Solution: P(S or T) = P(S) + P(T) - P(S and
T)= .64 +.35 - .20 = .79.
 Special rule of multiplication
The special rule of multiplication requires that two events A
and B are independent.
•Two events A and B are independent, if the occurrence of
one has no effect on the probability of the occurrence of the
other.
•If the occurrence of one event has no effect on the
probability of the occurrence of any other event, then the
events are called independent events. Example: Suppose
two coins are tossed, the outcomes of one coin (head or
tail) is unaffected by the outcome of the other coin (i.e.
head or tail). That is, the outcome of the second event does
not depend on the outcomes of the first event.
This rule is written: P(A and B) = P(A)P(B)
 7.4. Conditional Probability
• A conditional probability is the probability of a
particular event occurring, given that another event
has occurred.
• The probability of the event A given that the event
B has occurred is written P(A|B).
• General rule of multiplication
• The general rule of multiplication is used to find the
joint probability that two events will occur.
• It states that for two events A and B, the joint
probability that both events will happen is found by
multiplying the probability that event A will happen
by the conditional probability of B given that A has
occurred.
The joint probability, P(A and B) is given by
the following formula:
•P(A and B) = P(A)P(B/A) or
• P(A and B) = P(B)P(A/B)
•Where P (B/A) = probability of B given that event A
has occurred Conditional probability
•( A / B) = P( A and B) , P(B)  0
P(B)
•Example: The Dean of the School of Business at a
University collected the following information
about undergraduate students in her college:
 7.5. Counting Procedures
• Permutation is any arrangement of r objects
selected from n possible objects.
• The formula to count the total number n!
of
P 
different permutation is n r
( n  r )!

where n!= n(n -1)(n - 2)........2 *1

By definition 0! (read as zero factorial)=1
• NB. The arrangements abc and bac are different
permutations.
• Example: If you have three guests (Abebe, Bekele,
Chala) invited to come to your house, a. In how many
ways can they sit on the chair available in your house?
Therefore, there are 6 different arrangements for the three guests.
b) If you want to arrange a seat for two guests out
of three, in how many ways can you arrange them?
Combination: is the number of ways to choose r
objects from a group of n objects.  n   n!
r ( n  r )!*r!
Note: A combination of n different objects taking m
at a time is a selection of m out of the n objects
with no attention is given to the order of arrangement.
Example: Given the letters A, B, C, and D list the
permutation and combination for selecting two
letters.
Permutation
AB BA CA DA AB
CombinationBC

AC BC CB DB AC BD
AD BD CD DC AD DC
Example: In how many different ways can an association
of 50 members choose a president, vice president and
secretary if no one can be chosen for two of it at a time and
every one can be chosen for any one of it.
50! 50!
Solution: n = 50 , m = 3 then P  
50  3! 47!
50 3  50  49  48  117,600

Example: In how many different ways can an association of

50 members select a committee of 3 members
50! 50  49  48
Solution: n = 50, m = 3 c 50 , 3    19,600
3! 50  3! 6
Note: For non-negative integers n and k with k  n, we have the
following properties c (n , n) = c (n , 0) = 1
c (n , 1) = c ( n , n-1)
c (n , k) = c ( n , n-k)
c (n , k) = p (n , k)
k!
 7.6. Probability Distributions and Random Variables
Probability Distribution: It is a listing of all the
outcomes of an experiment and the probability of each
of these outcomes either tabular or graphically.
Random Variables: A random variable is a numerical
value determined by the outcome of an experiment.
Types of Probability Distributions
A discrete probability distribution can assume only
certain outcomes.
A continuous probability distribution can assume
an infinite number of values within a given range.
Examples of a discrete distribution are:
 The number of students in a class.
 The number of children in a family.
The number of car s entering a carwash in a hour
Examples of a continuous distribution include:
 The distance students travel to class.
 The time it takes an executive to drive to work.
 Features of a Discrete Distribution
The main features of a discrete probability distribution are:
 The sum of the probabilities of the various outcomes is 1.
 The probability of a particular outcome is between 0 and 1.
 The outcomes are mutually exclusive.
• Example: Consider a random experiment in which a coin
is tossed three times. Let x be the number of heads. Let
H represent the outcome of a head and T the outcome
of a tail.
The possible outcomes for such an experiment will be:
TTT, TTH, THT, THH, HTT, HTH, HHT, HHH.
Thus the possible values of x (number of heads) are 0,1,2,3.
•
•The outcome of zero heads occurred once.
•The outcome of one head occurred three times.
•The outcome of two heads occurred three times.
• The outcome of three heads occurred once.
From the definition of a random variable, x as
defined in this experiment is a random variable.
The probability distribution is given as
• The Mean of a Discrete Probability Distribution
The mean:
 reports the central location of the data.
 is the long-run average value of the random
variable.
 is also referred to as its expected value, E(X), in a
probability distribution.
 is a weighted average.
The mean is computed by the formula:
where represents the mean and P(x) is the
probability of the various outcomes x.
The Variance of a Discrete Probability Distribution
•The variance measures the amount of spread (variation) of a
distribution.
•The variance of a discrete distribution is denoted by the
Greek letter (sigma squared).
•The standard deviation is the square root of Sigma Squared.
• The variance of a discrete probability distribution is
computed from the formula:
• The table listed below show random variables
and their probabilities. However only one of
these is actually a probability distribution:
• According to recent information published in the capital
magazine 36 percent of the households in the Ethiopia
have one TV set, 47 percent have 2 sets, 15 percent have
3 sets, and 2 percent have 4 sets.
 The binomial distribution
• The binomial distribution has the following characteristics:
• An outcome of an experiment is classified into one of two
mutually exclusive categories, such as a success or failure.
• The data collected are the results of counts.
• The probability of success stays the same for each trial.
• The trials are independent
Mean & Variance of the Binomial Distribution
• The mean is found by: mean = np
• The variance is found by: variance = np (1- p )
To construct a binomial distribution, let
n be the number of trials
x be the number of observed successes
p be the probability of success on each trial
The formula for the binomial probability distribution is:
 The Normal Probability Distribution
• Characteristics of a Normal Probability Distribution
 The normal curve is bell-shaped and has a single peak
at the exact center of the distribution.
 The arithmetic mean, median, and mode of the distribution
are equal and located at the peak.
 Thus half the area under the curve is above the mean and
half is below it.
 The normal probability distribution is symmetrical about its
mean.
 The normal probability distribution is asymptotic.
 That is the curve gets closer and closer to the X-axis but
never actually touches it.
 It is a continuous probability distribution.
 Theoretically, curve extends to infinity
 The Standard Normal Probability Distribution
• The standard normal distribution is a normal distribution
with a mean of 0 and a standard deviation of 1. It is also
called the z distribution.
• A z-value is the distance between a selected value,
designated X, and the population mean divided by the
population standard deviation.
• The formula is given by
• Example: The bi-monthly starting salaries of recent MBA
graduates follow the normal distribution with a mean of Birr
2,000 and a standard deviation of Birr 200. What is the z-
value for a salary of Birr 2,200?
• A z-value of 1 indicates that the value of $2,200 is one
standard deviation above the mean of $2,000.
• A z- value of –1.50 indicates that $1,700 is 1.5 standard
deviations below the mean of $2000.
• Example: The daily water usage per person in New
Providence, New Jersey is normally distributed with a mean
of 20 gallons and a standard deviation of 5 gallons. About
68 percent of those living in New Providence will use how
many gallons of water? About 68% of the daily water
usage will lie between 15 and 25 gallons.
1. What is the probability that a person from New Providence
selected at random will use between 20 and 24 gallons per
day?
2. What percent of the population use between 18 and 26
gallons per day?
• The area under a normal curve between a z-value of 0
and a z-value of 0.80 is 0.2881.

• We conclude that 28.81 percent of the residents use

between 20 and 24 gallons of water per day.
• The area associated with a z-value of –0.40 is .1554.
• The area associated with a z-value of 1.20 is .3849.
• Adding these areas, the result is .5403.
• We conclude that 54.03 percent of the residents use
between 18 and 26 gallons of water per day.