Probability

Probability
Probability is the likelihood of something occurring
Probability is used in all types of areas in real life including weather forecasting, sports betting,
investing, and more.

The following examples share how probability is used in real-life situations on a regular basis.
• Probability is used by weather forecasters to assess how likely it is that there will be rain,
snow, clouds, etc. on a given day in a certain area.
• Probability is heavily used by sports betting companies to determine the odds they should
set for certain teams to win certain games.
• Political forecasters use probability to predict the chances that certain candidates will win
various elections
• Many retail companies use probability to predict the chances that they’ll sell a certain
amount of goods in a given day, week, or month.
• Health insurance companies often use probability to determine how likely it is that certain
individuals will spend a certain amount on healthcare each year.
• Grocery stores often use probability to determine how many workers they should schedule
to work on a given day.
Basic Probability
Concepts
• What is Probability?
• Probability allows us to measure effectively the risks in
selecting one alternative over the others. In general, it is a
number that describes the chance that something will happen

• It is a value between zero (0) and one (1), inclusive, describing

the relative possibility (chance or likelihood) an event will occur

Chap 4-3
Basic Probability
Concepts
• What is Probability?

• It is expressed either as a percent or as a decimal. The likelihood

that any particular event will happen may assume values between
0 and 1. A value close to 0 indicates the event is unlikely to occur,
whereas a value close to 1 indicates that the event is quite likely to
occur

Chap 4-4
Elementary Events
• Events that cannot be decomposed or broken down into other events
are called elementary events. Elementary events are denoted by
lowercase letters (e.g., e1, e2, e3, . . .).
• Suppose the experiment is to roll a die. The elementary events for this
experiment are to roll a 1 or roll a 2 or roll a 3, and so on.
• Rolling an even number is an event, but it is not an elementary event
because the even number can be broken down further into events 2,
4, and 6
Complementary Events
The complement of event A is denoted A , pronounced “not A.” All the
elementary events of an experiment not in A comprise its complement

• Suppose 32% of the employees of a company have a college degree. If an employee is

randomly selected from the company, the probability that the person does not have a
college degree is 1 - .32 = .68.

• Suppose 42% of all parts produced in a plant are molded by machine A and 31% are
molded by machine B. If a part is randomly selected, the probability that it was
molded by neither machine A nor machine B is 1 - .73 = .27.
Unions and Intersections
Mutually Exclusive Events

A manufactured part is either defective or okay: The part cannot be both okay and defective at the same
time because “okay” and “defective” are mutually exclusive categories.

The probability of two mutually exclusive events occurring at the same time is zero.
Example of a Classical or Priori
Probability
Find the probability of selecting a face card (Jack, Queen,
or King) from a standard deck of 52 cards.

X number of face cards

Probability of Face Card  
T total number of cards

X 12 face cards 3
 
T 52 total cards 13

Chap 4-18
Relative Frequency of
Occurrence/Empirical Probability
• The relative frequency of occurrence method of assigning
probabilities is based on cumulated historical data. With this method,
the probability of an event occurring is equal to the number of times
the event has occurred in the past divided by the total number of
opportunities for the event to have occurred.
Relative Frequency of Occurrence
Data gathered from company record books show that the supplier sent the company 90 batches in the past,
and inspectors rejected 10 of them.

By the method of relative frequency of occurrence, the probability of the

inspectors rejecting the next batch is 10/ 90, or .11.

If the next batch is rejected, the relative frequency of occurrence probability for the subsequent shipment
would change to 11 /91 > = .12.
Example of Empirical probability
Find the probability of selecting a male taking statistics
from the population described in the following table:

Taking Stats Not Taking Total

Stats
Male 84 145 229
Female 76 134 210
Total 160 279 439

number of males taking stats 84

Probability of male taking stats   0.191
total number of people 439

Chap 4-24
Example of Empirical probability
Ex. - A person who sells the newspaper wants to find out the
chance that on any day he will be able to sell more than 100
copies. From his diary where he has recorded the daily sales
of the last year , he finds out the following data.

SALES NO. OF DAYS RELATIVE

FREQUENCY FREQUENCY

85 73 73/365
95 146 146/365
105 60 60/365
110 86 86/365 Chap 4-25
Example of Empirical probability
SALES NO. OF DAYS RELATIVE
FREQUENCY FREQUENCY

85 73 73/365
95 146 146/365
105 60 60/365
110 86 86/365

•Thus the no. of days when his sales were more than 100 = 60 + 86 = 146

•Days. Hence reqd. probability = 146 / 365 = 0.4

Subjective Probability
• The subjective method of assigning probability is based on the
feelings or insights of the person determining the probability.
• Subjective probability comes from the person’s intuition or
reasoning.
• The subjective method often is based on the accumulation of
knowledge, understanding, and experience stored and processed in
the human mind.
• Subjective probability can potentially yield accurate probabilities.
• Subjective probability can be used to capitalize on the background of
experienced workers and managers in decision making
Subjective Probability
• Suppose a director of transportation for an oil company is asked the
probability of getting a shipment of oil out of Saudi Arabia to the United
States within three weeks. A director who has scheduled many such
shipments, has a knowledge of Saudi politics, and has an awareness of
current climatological and economic conditions may be able to give an
accurate probability that the shipment can be made on time.
• An experienced airline mechanic can usually assign a meaningful
probability that a particular plane will have a certain type of mechanical
difficulty.
• Physicians sometimes assign subjective probabilities to the life
expectancy of people who have cancer
Events
Each possible outcome of a variable is an event.

• Simple event
• An event described by a single characteristic
• e.g., A red card from a deck of cards
• Joint event
• An event described by two or more characteristics
• e.g., An ace that is also red from a deck of cards
• Complement of an event A (denoted A’)
• All events that are not part of event A
• e.g., All cards that are not diamonds
• P(A) = 1 – P(A’)

Chap 4-33
Mutually Exclusive Events
• Mutually exclusive events
• Events that cannot occur simultaneously

Example: A computer chip will be defective or not

defective and can not be defective and not
defective at the same time

Chap 4-34
 Collectively Exhaustive Events
• Collectively exhaustive events
• One of the events must occur
• The set of events covers the entire sample space

For example:

In a die-tossing experiment every outcome will be either an even number

or an odd number. Thus the set is collectively exhaustive.

Chap 4-35
 Sample Space
The Sample Space is the collection of all
possible events
e.g. All 6 faces of a die:

e.g. All 52 cards of a bridge deck:

S ={Head, Tail}
S = { 1, 2, 3, 4, 5, 6 }
S = { Defective, Non Defective}
Chap 4-36
 Sample Space
Experiment All Possible Outcomes (
Sample Space)
1 Toss a coin Head, Tail

2 Select a part for inspection Defective, Non Defective

3 Conduct a Sales Call Purchase, No purchase

4 Roll a Die 1, 2, 3, 4, 5, 6

5 Play a Football Game Win, Lose, Tie

6 Choose one Ace Card Diamond, Heart, Spade, Club

( on the table 4 Ace cards
are kept) Chap 4-37
Visualizing Events
• Contingency Tables
Ace Not Ace Total

Black 2 24 26
Red 2 24 26

Total 4 48 52
• Decision Trees Sample
A ce 2 Space
Sample
Car d
Space
Bla c k 24
Full Deck Not an Ace
of 52 Cards Ace
R ed C 2
ar d
N o t an 24
A ce Chap 4-38
Visualizing Events
 Venn Diagram
 Venn diagrams, developed by English logician J. Venn, are useful for
portraying events and their relationship to one another. They are
constructed by enclosing a space, usually in a form of a rectangle,
which represents the possible events. Two mutually exclusive events
such as A and B can then be portrayed (as in the following diagram by
enclosing regions that do not overlap i.e. that have no common area).

Event
A
Event
B
Chap 4-39
Visualizing Events
• Venn Diagrams
• Let A = aces
• Let B = red cards A ∩ B = ace and red

B
A U B = ace or red

Chap 4-40
Definitions
Simple vs. Joint Probability
• Simple Probability refers to the probability of a
simple event.
• ex. P(King)
• ex. P(Spade)

• Joint Probability refers to the probability of an

occurrence of two or more events (joint event).
• ex. P(King and Spade)

Chap 4-41
Computing Joint and Marginal Probabilities
• The probability of a joint event, A and B:
number of outcomes satisfying A and B
P( A and B) 
total number of elementary outcomes

• Computing a marginal (or simple) probability:

P(A) P(A and B1 )  P(A and B 2 )    P(A and Bk )

• Where B1, B2, …, Bk are k mutually exclusive and collectively exhaustive events
Joint Probability
Example
P(Red and Ace)
number of cards that are red and ace 2
 
total number of cards 52

Color
Type Red Black Total
Ace 2 2 4
Non-Ace 24 24 48
Total 26 26 52
Chap 4-43
Marginal Probability
Example
P(Ace)
2 2 4
P( Ace and Re d)  P( Ace and Black)   
52 52 52

Color
Type Red Black Total
Ace 2 2 4
Non-Ace 24 24 48
Total 26 26 52
Chap 4-44
General Addition Rule
General Addition Rule:

P(A or B) = P(A) + P(B) - P(A and B)

If A and B are mutually exclusive, then

P(A and B) = 0, so the rule can be simplified:

P(A or B) = P(A) + P(B)

For mutually exclusive events A and B
 Addition Rules

General Addition Rule:

P(A or B) = P(A) + P(B) - P(A and B)

If A and B are mutually exclusive, then
P(A and B) = 0, so the rule can be simplified:
P(A or B) = P(A) + P(B)
For mutually exclusive events A and B
Chap 4-46
 General Addition Rule
Example
P(Red or Ace) = P(Red) +P(Ace) - P(Red and Ace)

= 26/52 + 4/52 - 2/52 = 28/52

Don’t count
the two red
Color aces twice!
Type Red Black Total
Ace 2 2 4
Non-Ace 24 24 48
Total 26 26 52

Chap 4-47
Marginal probability: the probability of an event occurring (p(A)), it may
be thought of as an unconditional probability. It is not conditioned on
another event.

Example 1: the probability that a card drawn is red (p(red) = 0.5).

Another example: the probability that a card drawn is a 4
(p(four)=1/13).
Joint Probability
• P(E1 E2) is read as the probability of E1 and E2
• Joint probability: p(A and B).
• The probability of event A and event B occurring.
• It is the probability of the intersection of two or more events.
• The probability of the intersection of A and B may be written p(A ∩ B).
Example: the probability that a card is a four and red =p(four and red) =
2/52=1/26. (There are two red fours in a deck of 52, the 4 of hearts and the
4 of diamonds).
 Computing Conditional
Probabilities
• A conditional probability is the probability of one event, given
that another event has occurred:
The conditional
P(A and B)
P(A | B)  probability of A given
that B has occurred
P(B)

P(A and B) The conditional

P(B | A)  probability of B given
P(A) that A has occurred

Where P(A and B) = joint probability of A and B

P(A) = marginal or simple probability of A
P(B) = marginal or simple probability of B
Chap 4-50
Conditional Probability
Example
 Of the cars on a used car lot, 70% have air
conditioning (AC) and 40% have a CD player
(CD). 20% of the cars have both.

• What is the probability that a car has a CD player,

given that it has AC ?

i.e., we want to find P(CD | AC)

Chap 4-51
 Conditional Probability
Example (continued)
 Of the cars on a used car lot, 70% have air conditioning
(AC) and 40% have a CD player (CD).
20% of the cars have both.
CD No CD Total
AC
No AC
Total 1.0

P(CD and AC)

P(CD | AC)   
P(AC)
Chap 4-52
 Conditional Probability
Example (continued)
 Of the cars on a used car lot, 70% have air conditioning
(AC) and 40% have a CD player (CD).
20% of the cars have both.
CD No CD Total
AC 0.2 0.5 0.7
No AC 0.2 0.1 0.3
Total 0.4 0.6 1.0

P(CD and AC) 0.2

P(CD | AC)   0.2857
P(AC) 0.7
Chap 4-53
 Conditional Probability
Example (continued)
 Given AC, we only consider the top row (70% of the cars). Of these,
20% have a CD player. 20% of 70% is about 28.57%.

CD No CD Total
AC 0.2 0.5 0.7
No AC 0.2 0.1 0.3
Total 0.4 0.6 1.0

P(CD and AC) 0.2

P(CD | AC)   0.2857
P(AC) 0.7
Chap 4-54
 Independence
• Two events are independent if and only if:

P(A | B) P(A)
• Events A and B are independent when the probability of one event is not
affected by the fact that the other event has occurred

Chap 4-55
Multiplication Rules
• Multiplication rule for two events A and B:

P(A and B) P(A | B)P(B)

Note: If A and B are independent, then P(A | B) P(A)

and the multiplication rule simplifies to

P(A and B) P(A)P(B)

Chap 4-56
In a book fair attended by 300 people, 130 bought fiction books (F). Seventy people chose non-fiction books
(N), while 100 visitors selected books from both genres. If a randomly chosen buyer bought a fiction book,
what is the probability of the same person buying a non-fiction book too?
•Probability of people choosing fiction books, i.e., P(F) = 130/300
= 0.43
•Probability of people choosing fiction and non-fiction books, i.e., P(N∩F) = 100/300
= 0.33
Probability of a random person with fiction books also choosing non-fiction, i.e.,
•Probability of a random person with fiction books also choosing non-fiction, i.e., P(N|F) =
P(F∩N)/P(F)
= 0.33/0.43
= 0.767 = 0.8 (approx.)
Therefore, the probability of a random buyer choosing non-fiction books given they have
already purchased a fiction book is 80%.
Two computers a and b are to be marketed. a salesman who is assigned the job of finding customers for
them has 60% and 40% chances, respectively, of succeeding in case of computer a and
b. the two computers can be sold independently. given that he was able to sell at least least one computer,
what is the probability that computer a has been sold?
Examples
Ex. - A market research firm is interested in surveying certain
attitudes in a small community. There are 125 households
broken down accordingly to income, ownership of
telephone & ownership of TV.

Income </=
INCOME < OR8000
= RS. 8000 Income
INCOME > OR >/ =8000
= RS. 8000

TELEPHONE NO TELEPHONE NO
SUBSCRIBER PHONE SUBSCRIBER PHONE

OWN TV SET 27 20 18 10

NO TV SET 18 10 12 10
Examples
1. What is a probability of obtaining a TV owner in drawing
at random ?
2. If household has income over Rs. 8000 & is a telephone
subscriber, what is a probability that he has a TV?
3. What is the conditional probability of drawing a household
that owns a TV given that household is a telephone
subscriber ?

62
Examples
Income </= 8000 Income >/= 8000 Total
Own Telephone No Phone Own Telephone No Phone

Own TV 27 20 18 10 75
No TV 18 10 12 10 50
Total 45 30 30 20 125

Ans.1 - 75 / 125 = 0.6, Ans. 2 - 18 / 30 = 0.6, Ans. 3 – 45 / 75 = 0.6

63
 PROBABILITY –
Assignment
• In the survey of MBA students, the following data was gathered
wrt the reason for choosing a particular college.
Reason for Choosing a particular College

Quality Cost / Convenience Other

Full Time 421 393 76

Enrolment
Status
Part 400 593 46
Time

1. Develop a joint probability table for this data

2. Use Marginal Probability to comment on most important
reasons 64
 PROBABILITY –
Assignment
3.If student chooses full time course, what is probability
that ‘Quality’ is the first reason for choosing a college?
4.If student chooses part time course, what is probability
that ‘Quality’ is the first reason for choosing a college?
5. If A = Event that Student is full time, B = Event that
Quality is first reason for applying. Are the events A &
B are Statistically Independent? Justify your answer.

65