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Lecture 3: A Survey of
Probability Concepts

Outline
Define probability
Describe the classical, empirical, and subjective approaches
to probability

Understand

the terms: experiment,

permutations, and combinations

event,

outcome,

Define the terms: conditional probability and joint probability

Calculate probabilities applying the rules of addition and the
rules of multiplication

Use a tree diagram to organize and compute probabilities

Calculate a probability using Bayes theorem

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Probability: Definition

A value between zero and one,

inclusive, describing the relative
possibilit (chance or likelihood)
possibility
an event will occur.

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Three Key Words

A probability is a measure of the likelihood that an

event in the future will happen

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An experiment is the observation of some activity or the

act of taking some measurement
An outcome is the particular result of an experiment.
An event is the collection of one or more outcomes of an
experiment.

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Mutually Exclusive Events

Events are Mutually
Exclusive if the
occurrence of any one
event means that none
of the others can occur
at the same time.

Mutually exclusive:
Rolling a 2 precludes
rolling a 1, 3, 4, 5, 6 on
the same roll.

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Events are Independent if the

occurrence of one event does
not affect the occurrence of
another.

The sum of all collectively exhaustive and mutually

exclusive events is 1.0 (or 100%)
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There are three definitions of probability: classical,

empirical, and subjective.

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Events are Collectively Exhaustive if at

least one of the events must occur
when an experiment is conducted.

Independence: Rolling a 2
on the first throw does not
influence the probability of a
3 on the next throw. It is still
a one in 6 chance.

Assigning Probabilities

The Classical
definition
applies when
there are n
equally likely
outcomes.

Collectively Exhaustive Events

The Empirical
probability is
based on relative
frequency.

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Subjective
probability is
b
based
d on
whatever
information is
available.

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Classical Probability
The classical method of computing probabilities requires
equally likely outcomes.
An experiment is said to have equally likely outcomes
when each simple event has the same probability of
occurring.

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Example 1

Empirical Probability

Consider an experiment of rolling a six-sided die. What

is the probability of the event an even number of spots
appear face up?
The possible outcomes are:
The empirical
Th
i i l approach
h to
t probability
b bilit is
i based
b
d on what
h t is
i called
ll d
the law of large numbers. The key to establishing probabilities
empirically is that more observations will provide a more accurate
estimate of the probability.

There are three favorable outcomes (a two, a four,

and a six) in the collection of six equally likely possible
outcomes.
Probability of an even number = 3/6 = 0.5
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Probabilit y of
Number of times event occured in past
event happening
Total number of observatio ns
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On February 1, 2003, the Space Shuttle Columbia

exploded. This was the second disaster in 113 space
missions for NASA. On the basis of this information,
what is the probability that a future mission is
successfully completed?

Numberof successful flights

Probability of a successful flight
111 Total numberof flights

0.98
113

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Example 3

Example 2

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Throughout her
teaching career
Professor Jones
has awarded 186
As out of 1,200
students What
students.
is the probability
that a student in
her section this
semester will
receive an A?
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This is an example of the

empirical definition of
probability.
To find the probability a
selected student earned an A:

P( A)

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186
0.155
1200
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Subjective Probability

Illustrations of Subjective
Probability
Estimating the probability the Bangladesh
Cricket Team will win the World Cup 2015.

If there is little or no past experience or information on

which
hi h to
t base
b
a probability,
b bilit it may be
b arrived
i d att
subjectively.

Estimating the probability mortgage rates

for home loans will top 8 percent.
Estimating the likelihood you
married before the age of 30.

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Summary of Types of Probability

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will

be

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Basic Rules of Probability

Rules of Addition

Special Rule of Addition - If two

events A and B are mutually
exclusive, the probability of one or the
other events occurring equals the
sum of their probabilities.
P(A or B) = P(A) + P(B)

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)

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Example 4

Example 4 (contd)

New England Commuter Airways recently supplied the following

information on their commuter flights from Boston to New York:

Arrival

Frequency

Early

100

On Time

800

Late

75

Canceled

25

Total

1000

What is the probability that a flight is either early or late?

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Example 5

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Both
100

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If B is the event that a

flight arrives late, then
P(B) = 75/1000 = .075.

The probability that a flight is either early or

late is:
P(A or B) = P(A) + P(B) = .10 + .075 =.175.
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Example 5 (contd)

In a sample of 500 students, 320 said they had

a stereo, 175 said they had a TV, and 100 said
they had both. 5 said they had neither.

Stereo
320

If A is the event that

a flight arrives
early, then P(A) =
100/1000 = .10.

TV
175

If a student is selected at
random,
what
is
the
probability that the student
has only a stereo or TV?
What is the probability that
the student has both a
stereo
t
and
d TV?
P(S or TV) = P(S) + P(TV) - P(S and TV)
= 320/500 + 175/500 100/500
= 0.79.
P(S and TV) = 100/500
= 0.20

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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.

The Complement Rule (contd)

A Venn

Diagram illustrating the complement

rule would appear as:

If P(A) is the probability of event A and P(A)

is the complement of A,
P(A) + P(A) = 1 or P(A) = 1 - P(A)

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Example 6

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Example 6 (contd)

Recall example 4. Use the

complement rule to find the
probability of an early (A) or a late
(B) flight

D
0.025

C
0.8

(C or D) = (A or B)

If C is the event that a

flight arrives on time,
then P(C) = 800/1000 = .8.
If D is the event that a
flight is canceled,
then
P(D) = 25/1000 = .025.
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P(A or B)

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= 1 - P(C or D)
= 1 - [.8 +.025]
=.175

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Joint Probability

Special Rule of Multiplication

A Joint Probability measures the

likelihood that two or more events will
happen concurrently.

The Special

Multiplication requires that two

events A and B are independent.

An example would
be the event that a
student has both
a stereo and TV in
his or her dorm
room.

Two events A and B are independent if the

occurrence of one has no effect on the probability of
the occurrence of the other.

This

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Rule of

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Example 7
IBM
GE

5-year stock prices

40
35
30
25
20
15
10
5
0
1

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P(A and B) = P(A)P(B)

What is the probability

that at least one of
these stocks increase
in value in the next
year? This means that
either one can
increase or both.

P(at least one)

= P(IBM but not GE)
+ P(GE but not IBM)
+ P(IBM and GE)

Year

P(IBM and GE) = (.5)(.7) = 0.35

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Example 7 (contd)

45

Stto ck p rice $

Chris owns two stocks,

IBM and General Electric
(GE). The probability that
IBM stock will increase in
value next year is 0.5 and
the probability that GE
stock will
ill increase in
value next year is 0.7.
Assume the two stocks
are independent. What is
the probability that both
stocks will increase in
value next year?

rule is written:

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(0.5)(1 - 0.7)
+ (0.7)(1 - 0.5)
+ (0.7)(0.5)
= 0.85
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Conditional Probability
A Conditional Probability is the
probability of a particular event occurring,
given that another event has occurred.

The probability of
event A occurring
given that the event
B has occurred is
written P(A|B).
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General Multiplication Rule

Rule of
Multiplication
i used
is
d tto fi
find
d th
the
joint probability that
two events will
occur.

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P(A and B) = P(A)P(B/A)

or
P(A and B) = P(B)P(A/B)

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Example 8

General Multiplication Rule

The joint probability,
P(A and B), is given by
the following formula:

It states that for two

events A and B, the
joint probability that
both events will
happen
pp is found by
y
multiplying the
probability that event
A will happen by the
conditional
probability of B given
that A has occurred.

The General

The Dean of the School of Business at Owens

University collected the following information
about undergraduate students in her college:
Major
Accounting

Male
170

Female
110

Total
280

Finance

120

100

220

Marketing

160

70

230

Management

150

120

270

Total

600

400

1000

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Example 8 (contd)

Tree Diagrams

If a student is selected at random, what

is the probability that the student is a
female (F) accounting major (A)?
P(A and F) = 110/1000.
Given that the student is a
female,
what
is
the
probability that she is an
accounting major?

A graph that is helpful in organizing

calculations that involve several stages.

Each segment in the tree is one stage of

problem.

P(A|F) = P(A and F)/P(F)

= [110/1000]/[400/1000] = 0.275
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A Tree Diagram is useful for portraying conditional

and joint probabilities. It is particularly useful for
analyzing business decisions involving several
stages.

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The branches of a tree diagram are

weighted by probabilities.
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Example 9

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Example 10

In a bag containing 7 red chips and 5 blue chips you

select 2 chips one after the other without replacement.
Construct a tree diagram showing this information.

Loyalty of Executives and Length of Service with Company shown in

the table below. What is the probability of randomly selecting an
executive who is loyal to the company and who has more than 10
years of service.
Length of Service

6/11
7/12

5/12

R1

5/11
7/11

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1-5
yea s
years

6-10
yea s
years

B2

B3

More
tthan
a 10
0
years
B4

Would
remain, A1

10

30

75

120

Would not
remain, A

25

15

10

30

80

35

45

15

105

200

R2
Loyalty

B2
R2

B1
4/11

Less
tthan
a 1
year
B1

B2
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Total

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Bayes Theorem

Example 10 (Contd)

Bayes Theorem is a method for

revising a probability given
additional information.
It is
i computed
t d using
i th
the
following formula:

P( A1 | B)
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Example 11

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Example 11 (contd)
The following table summarizes the Duff
production experience.

Duff Cola Company recently

received several complaints
that their bottles are underfilled. A complaint was
received today but the
production manager is unable
to identify which of the two
Springfield plants (A or B)
filled this bottle. What is the
probability that the under-filled
bottle came from plant A?

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P( A1)P(B / A1)
P( A1)P(B / A1) P( A2 )P(B / A2 )

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% off totall
production
55

45

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% of
underfilled
d fill d
bottle
3.0
4.0

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Example 11 (contd)
P ( A ) P (U / A )
P(A /U )
P ( A ) P (U / A ) P ( B ) P (U / B )
. 55 (. 03 )

. 4783
. 55 ((. 03 ) . 45 ((. 04 )

Some Principles of Counting

The Multiplication
Formula indicates that if
there are m ways of doing
one thing and n ways of
doing another thing, there
are m x n ways of doing
b th
both.

Example

The likelihood the bottle was filled

in Plant A is reduced from 0.55 to
0.4783.
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Some Principles of Counting

(contd)
A Permutation is any arrangement of r
objects selected from n possible objects.
Note: The order of arrangement is important in
permutations.
n

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n!
( n r )!

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12:

Dr. Delong has

10 shirts and 8
y
ties. How many
shirt and tie
outfits does he
have?

(10)(8) = 80
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Some Principles of Counting

(contd)
A

Combination
is the number of
ways to choose r
objects from a
group of n
objects without
regard to order.
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nCr

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n!
r!(n r )!

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Example 13
There are 12 players
on the Carolina Forest
High School
basketball team.
Coach Thompson
must pick five players
among the twelve on
the team to comprise
the starting lineup.
How many different
groups are possible?
(Order does not
matter.)
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Example 13 (contd)

12!
12C 5
792
5! (12 5)!

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Practice Problems

Suppose that in
addition to
selecting the
group, he must
also rank each
of the players
in that starting
lineup
according to
their ability
(order matters).
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12

P5

12!
95 ,040
(12 5)!

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Assignment-3

Problems 3, 5 (Page 146) (Page 148)

Problems 23, 25(Page 159)(Page 162)

Problem 9 (Page 147) (Page 149)

Problems 27, 29 (Page160)(Page 162)

Problems 13, 21(Page 152)(Page 154)

Problem 35 (Page 165)(Page 167)

Problems 41, 45 (Page170)(Page 172)

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