A Very Brief Introduction to Probability

■ Experiments and Assigning Probabilities

■ Events and Their Probability

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 Probability of an event

■ Probability is a numerical measure of the

likelihood that an event will occur.

2
 Probability of an event

Getting Heads in a coin tossing, Getting even number in

a die throwing, Getting two defectives in a sample of
10 items from a large lot containing 5% defectives,
Delay of a flight, Opening a bank account within two
days, Rain in Ahmedabad on a specific day in June

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 The First Law of Probability

■ Probability values are always assigned on a

scale from 0 to 1.
■ A probability near 0 indicates an event is
virtually certain not to occur.
■ A probability near 1 indicates an event is
almost certain to occur.
■ A probability of 0.5 indicates the occurrence of
the event is just as likely as it is unlikely.

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 Probability as a Numerical Measure
of the Likelihood of Occurrence

Increasing Likelihood of Occurrence

0 . 1
Probabilit 5
y:
The occurrence of the
event is
just as likely as it is
unlikely.

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 Assigning Probabilities

■ Classical Method
Assigning probabilities based on the
assumption of equally likely outcomes.
■ Relative Frequency Method
Assigning probabilities based on
experimentation or historical data.
■ Subjective Method
Assigning probabilities based on the
assignor’s judgment.

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 Classical Method

If an experiment has n possible outcomes, this

method
would assign a probability of 1/n to each
outcome.
■ Example

Experiment: Rolling a die

Sample Space: S = {1, 2, 3, 4, 5, 6}
Probabilities: Each sample point has a 1/6
chance
of occurring.

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 Example: Delay in Flights

■ Relative Frequency Method

Jet Airways have 10 flights originating from
Ahmedabad daily. The following is the
frequency distribution of number of delayed
flights observed over last 60 days
Number of Number
Delayed Flights of Days
4 4
5 6
6 18
7 10
8 9
9 7
10 6

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 Subjective Method

■ Assigning probability to future events : it might be

inappropriate to assign probabilities based solely on
historical data. We need to use our experience and
intuition as well.
■ Ultimately a probability value should express our degree
of belief that the experimental outcome will occur.
■ The best probability estimates often are obtained by
combining the estimates from the classical or relative
frequency approach with the subjective estimates.

A movie will be a hit, The new product on introduction

will capture a good market

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 Brief Introduction to Discrete Probability
Distributions
■ Random Variables
■ Discrete Probability Distributions
■ Mean Value and Variance
■ Binomial Probability Distribution

.40

.30

.20

.10

0 1 2 3 4

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 Random Variables

■ A random variable is a numerical description of

the outcome of an experiment.

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 Example: JSL Appliances

■ Random variable with a finite number of values

Let x = number of TV sets sold at the store in one day
where x can take at most 5 values (0, 1, 2, 3, 4)
■ Random variable with no fixed upper limit on the number
of values
Let x = number of customers arriving at a mall on a given
day
where x can take on the values 0, 1, 2, . . .
We can count the customers arriving, but there is no fixed
upper limit on the number that might arrive.

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 Example: JSL Appliances

■ Using past data on TV sales (below left), a

tabular representation of the probability
distribution for TV sales (below right) was
developed.

Number
Units Sold of Days x P(x)
0 80 0 .40
1 50 1 .25
2 40 2 .20
3 10 3 .05
4 20 4 .10
Total 200 1.00
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 Example: JSL Appliances

■ Graphical Representation of the Probability

Distribution

.50
Probability

.40

.30
.20
.10

0 1 2 3 4
Values of Random Variable x (TV sales)

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 Example: JSL Appliances

■ Expected Value or Mean of a Discrete Random

Variable
x P(x) xP(x)
0 .40 .00
1 .25 .25
2 .20 .40
3 .05 .15
4 .10 .40
Total = Mean(x) = 1.20
The expected number of TV sets sold in a day is 1.2

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 Example: JSL Appliances

■ Variance and Standard Deviation

of a Discrete Random Variable
x x-µ (x - µ )2 P(x) (x - µ )2P(x)
0 -1.2 1.44 .40 .576
1 -0.2 0.04 .25 .010
2 0.8 0.64 .20 .128
3 1.8 3.24 .05 .162
4 2.8 7.84 .10 .784
1.660 = σ 2

The variance of daily sales is 1.66 TV sets squared.

The standard deviation of sales is 1.2884 TV sets.

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 Example: Attrition Problem

■ Binomial Probability Distribution

Navin is concerned about low retention rate of
mgt trainees in his organization. On the basis of past
experience, he has seen a turnover of 10% mgt trainees
annually. Thus, for any trainee chosen at random, he
estimates a probability of 0.1 that the person will not be
with the company next year.
He has chosen 5 trainees at random for a very special
training of whom 3 would be required next year. If it
becomes less 3 he will be in a problem. what is the
probability that he won’t have a problem next year?

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 Binomial Probability Distribution

■ Binomial Probability Function

P ( x ) = ( n choose x ) p x (1 − p ) ( n − x )

where:
P(x) = the probability of x successes in n
trials
n = the number of trials
p = the probability of success on any one
trial

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 Example: Attrition Problem

■ Using the Binomial Probability Function

f ( x ) = ( n choose x) p x (1 − p ) ( n − x )

f (0) = (5 choose 0) (0.1) 0 (0.9)5

= (1)(1)(0.59)

= 0.59

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 Example: Attrition Problem

f (1) = (5 choose1) (0.1)1 (0.9) 4 =0.32805

f (2) = (5 choose2) (0.1) 2 (0.9)3=0.0729

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 Binomial Probability Distribution

■ Expected Value
Mean(x) = µ = np
■ Variance
Var(x) = σ 2
= np(1 - p)
■ Standard Deviation
SD( x ) = σ = np (1 − p )

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 Example: Attrition Problem

■ Binomial Probability Distribution

• Expected Value
Mean(x) = µ = 5(.1) = .5 employees out
of 5
• Variance
Var(x) = σ 2 = 5(.1)(.9) = .45
• Standard Deviation
SD ( x ) =σ = 5(. 1)(. 9) =.67 employees

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 Poisson Distribution

Number of events occurring over a given time interval

or a given space follows Poisson distribution.

Ex: Number of e-mails received on a day

Number of telephone calls received on a day
Number of bacteria in 100 cc of water
Number of customers arriving at a railway booking
counter in an hour
Number of cars entering a parking lot in an hour
Number of cars passing through a crossing between
10 pm to 11 pm on a week day

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 Poisson Distribution

P ( x ) = exp( −µ) µ x / x!, x = 0,1,..., ∞

μ : Mean of the Poisson distribution > 0

Variance of the Poisson distribution = μ

0! = 1, 2! = 1 X 2 = 2, 3! = 1 X 2 X 3 = 6,
4! = ? 5! = ?, 6! = ?

exp(-1) = (2.7182)-1 = 0.3679

exp (2) = (2.7182)2 = 7.3890

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 Poisson Distribution

As an approximation to binomial distribution:

If n is large and p is small then

f ( x) = (n choose x) p x (1 − p ) ( n−x ) ≈ exp( −np )( np ) x / x!

Suppose from a large lot a random sample of 20 items
are chosen for inspection. It is known that the lot
contains 1% defective items. What is the probability that
there will be more than 2 defectives in the sample?

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