Introduction To Probability: Slide - 1

Chapter 4
Introduction To
Probability
A LWAY S L E A R N I N G Copyright © 2018 Pearson Education, Ltd. Slide - 1

Learning Outcomes
Outcome 1. Identify situations for which each of the three approaches to
assessing probabilities applies.
Outcome 2. Be able to apply the Addition Rule.
Outcome 3. Know how to use the Multiplication Rule.
Outcome 4. Know how to use Bayes’ Theorem for applications involving
conditional probabilities.

4.1 The Basics of Probability
• Probability
– The chance that a particular event will occur
– The probability value will be in the range 0 to 1.
• Experiment
– A process that produces a single outcome
whose result cannot be predicted with certainty
• Sample Space
– The collection of all outcomes that can result
from a selection, decision, or experiment
The Basics of Probability –
Examples
• Probability
Chance of a new business succeeding
P(Succeed) = 0.25
• Experiment
Activities associated with starting a new business
• Sample Space
(Business Succeeds, Business Fails)

Examples
• Probability
Chance of a new hire quitting within 1st month on the job
P(Quit) = 0.10
• Experiment
Employee is hired and begins work
• Sample Space
(Employee quits, Employ does not quit)

Examples
• Probability
Likelihood of an oil well containing oil
P(Oil) = 0.60
• Experiment
Drill an oil well
• Sample Space
(Strike Oil, Do Not Strike Oil)

Examples
• Probability
Chance of producing 3 or more defects in one hour
P(x > 3) = 0.20
• Experiment
Produce products for one hour and inspect for defects
• Sample Space
(x = 0, 1, 2, 3, or more)

Defining the Sample Space
• Step 1: Define the experiment.
– For example, the sale. The item of interest is the product sold.
• Step 2: Define the outcomes for one trial of

the experiment.
– Outcomes: e1 - Hamburger, e2 – Cheeseburger, e3 – Bacon Burger
• Step 3: Define the sample space (SS).

– For single sale: SS = {e1, e2, e3}
– If experiment includes two sales, there will be nine outcomes:
SS = {o1, o2, o3, o4, o5, o6, o7, o8, o9}
o1={e1, e1}, o2={e1, e2}, o3={e1, e3}, o4={e2, e1}, . . . , o9={e3, e3}

Sample Space - Tree Diagrams
• A useful way to define the sample space
• Step 1: Define the experiment.
– Three students were asked if they like statistics
• Step 2: Define the outcomes.
– Possible outcomes are: ‘No’ and ‘Yes.’
• Step 3: Define the sample space for three trials
using a tree diagram.
– For a single trial:

Sample Space - Tree Diagram

Types of Events
• Mutually Exclusive Events
– Two events are mutually exclusive if the occurrence of
one event precludes the occurrence of the other event.
• Independent Events
– Two events are independent if the occurrence of one
event in no way influences the probability of the
occurrence of the other event.
• Dependent Events
– Two events are dependent if the occurrence of one
event impacts the probability of the other event
occurring.

Types of Events - Example
• Mutually Exclusive Events
Two events are mutually exclusive if the occurrence of
one event precludes the occurrence of the other event
Event A – Oil well produces oil
Event B – Oil well does not produce oil
If Event A occurs, then Event B can not also occur –

mutually exclusive events

• Independent Events
– Two events are independent if the occurrence of one
event in no way influences the probability of the
occurrence of the other event.
Event A – Business is started by a person in North Carolina
Event B – Business is started by a person in Oregon
Whether or not the business in Oregon (Event B) is

successful is in no way influenced by whether the North
Carolina business (Event A) is successful. – Events are
Independent
• Dependent Events
– Two events are dependent if the occurrence of one
event impacts the probability of the other event
occurring.
A Company has 10 employees – 3 male and 7 female. Two
employees are selected at random to attend a conference.
Event A – First person selected is female.

Event B – Second person selected is male.
Events A and B are dependent because the chance of a

male selected second depends on whether a male or female
is selected first.
Assigning Probability
Methods of
Assigning Probability
Classical Relative Subjective

Probability Frequency Probability
Assessment Assessment Assessment
P(Ei) = Probability of event Ei occurring

Classical Probability Assessment
• The method is based on the ratio of the
number of ways an outcome or event of
interest can occur to the number of ways any
outcome or event can occur when the
individual outcomes are equally likely.

Classical Probability Assessment -
Example
• Company with 10 employees – 7 female and
3 male. Assess the probability of a female
employee being selected at random to travel
to a convention.
Event E  female
7
P( E )   0.70
10
Classical Probability Assessment -
Example
• New car dealer has 5 GM, 6 Ford, 3 Toyota,
8 Nissan, and 2 BMW cars. If one car is
selected to be placed on sale, what is the
probability that it is a Nissan?
Event E  Nissan
8
P( E )   0.33
24
Relative Frequency Probability
Assessment
• The method defines probability as the
number of times an event occurs divided
by the total number of times an experiment
is performed in a large number of trials.
Ei - The event of interest

N - Number of trials

Assessment - Example
• A local pub has tracked beer purchases.
Of the past 500 purchases, 120 have been
for “light” beers. What is the probability
that the next beer ordered will be “light”?
120
P(light )   0.24
500
Assessment - Example
• A basketball player has taken 90 free
throws during games and made 68. What
is the probability that the next free throw
will be made?
68
P(make)   0.76
90
Subjective Probability Assessment
• The method defines probability of an event
as reflecting a decision maker’s state of
mind regarding the chances that the
particular event will occur.
• Represents a person’s belief that an event
will occur.

• A manager is asked to assess the
chances that a shipment from a new
supplier will arrive on time.
Taking into account such factors as:

– Supplier’s reputation
– Weather conditions
– Size of the order
– Etc.
She might assess the probability as:
P ( o n tim e )  0 .7 5
• A jury member in a civil case must assess
the probability that the defendant is at fault
in the case.
Taking into account such factors as:
– Defendant’s testimony
– Plaintiff’s testimony
– Physical evidence
– Etc.
The juror might assess the probability as:
P ( a t fa u lt )  0 .3 0
4.2 The Rules of Probability
Probability Rules
Possible Values Addition Rule for Conditional

Any Two Events Probability for
Independent Events
Summation of
Possible Values Multiplication Rule
Addition Rule for
Mutually Exclusive for Any Two Events
Events
Addition Rule for Multiplication Rule
Individual Outcomes for Independent
Events
Conditional
Probability for Any
Complement Rule Two Events Bayes’ Theorem

Possible Values and Summation Rules
Probability Rule 1 Probability Rule 2
Probability of event occurring Sum of the probabilities of all

is always between 0 and 1. possible outcomes is 1.

For any event Ei
0 ≤ P(Ei) ≤ 1 for all i
0 = no chance of occurring k - Number of outcomes in the

1 = 100% chance of occurring sample
ei - ith outcome

Probability Rules 1 and 2 - Example
A sales manager has placed three products on display in a

store. The following shows the probabilities associated
with the number of these products that sell in the first 30
minutes on display.
Rule 1: For any event Ei

0 ≤ P(Ei) ≤ 1 for all i
 P( x )  1.00
i 1
i
Rule 2: Sum of
probabilities is 1.00.

Rule 3: Addition Rule for Individual
Outcomes
The probability of an event Ei is equal to the sum

of the probabilities of the individual outcomes
forming Ei .
For example, if Ei = {e1, e2, e3} then

P(Ei) = P(e1) + P(e2) + P(e3).

Addition Rule for Individual Outcomes -
Examples
Roll a 6 sided die. What is the probability that the value will
be an odd number? E = (1,3,5)
P(E) = 1/6 + 1/6 + 1/6 =
A3/6=1/2
sales manager has placed three products on display in a store. The
following shows the probabilities associated with the number of these
products that sell in the first 30 minutes on display. What is the
probability that 2 or more products will sell?
E = (2,3)
P(E) = 0.4 + 0.1 = 0.5

Addition Rule for Individual Outcomes -
Example
Real Estate Investment
x = Return P(x)
-$100,000 0.10
$0 0.20
+$20,000 0.50
+$500,000 0.20
What is the probability of making at least $20,000?
E = [$20,000, $500,000] P(E) =0.50 + 0.20

P(E) = 0.70
Complement Rule
• The complement of an event E is the collection of
all possible outcomes not contained in event E.
The probability of the complement of event

E is 1 minus the probability of event E.
P(E) = 1 - P(E)
• This rule is corollary to Probability Rules 1 and 2.

Complement Rule - Example
An inspector checks 7 products to see if they are
defective. The possible number of defects and their
probabilities are given. What is the probability of 1
or more defects?
P( x  1)  P( x  1)  P( x  2)  P( x  3)  .....  P( x  7)
P( x  1)  0.12  0.23  0.27  0.20  0.10  0.04  0.01
P( x  1)  0.97
Using the Complement Rule

P ( x  1)  1  P( x  0)
P ( x  1)  1  0.03
P ( x  1)  0.97
Rule 4: Addition Rule for Any Two
Events – Keyword “or” Means Addition
P(E1 or E2) = P(E1) + P(E2) - P(E1 and E2)

Addition Rule for Any Two Events -
Example
Drawing Cards from a Deck of 52 Cards
P(Red or Ace) = P(Red) + P(Ace) - P(Red and Ace)

P(Red or Ace) = 26/52 + 4/52 - 2/52 = 28/52= 7/13
Color Don’t count

Type Total the two red
Red Black aces twice!
Ace 2 2 4
Non-Ace 24 24 48
Total 26 26 52

Rule 5: Addition Rule for Mutually
Exclusive Events – No Overlap
P(E1 or E2) = P(E1) + P(E2)
Both events cannot occur at the same time: P(E1 and E2) = 0

Addition Rule for Mutually Exclusive
Events – Example
A retail clothing store has three styles of work boots.
They currently have 6 pairs of style A, 12 pairs of style
B and 2 pairs of style C. If a store clerk randomly
picks one pair to put on display, what is the probability
that boot is style A or style C?
6 Because if one style boot is selected,
P ( A)   0.30
20 another style cannot also be selected,
12 the events are mutually exclusive.
P( B)   0.60
20
2 P( A or C )  P( A)  P(C )
P (C )   0.10
20 P( A or C )  P( A)  P(C )  0.30  0.10  0.40

Rule 6: Conditional Probability for Any
Two Events
• Conditional Probability
– The probability that an event will occur given
that some other event has already happened
Probability Rule 6
Given that

Conditional Probability Example

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

Conditional Probability Example
A company has 500 employs. Of these 300 hold
college degrees. Suppose two employees are to be
randomly selected to receive a front row parking space.
What is the probability that the second person
selected has a college degree, given that the first
person selected also has a college degree?
Event C1 – First Person has College Degree
Event C2 – Second Person selected has a College Degree
If C1 has occurred, 299 College Degree employees remain

out of 499. 299
P(C 2 C1)   0.599
499
Rule 7: Conditional Probability for
Independent Events
Probability Rule 7
For independent events E1, E2
P(E1|E2) = P(E1) P(E2) > 0

P(E2|E1) = P(E2) P(E1) > 0
The conditional probability of one event occurring,

given a second independent event has already occurred,
is simply the probability of the first event occurring.

Conditional Probability for Independent
Events - Example
The time an employee is with the company is independent
of the employee’s gender.
P ( Male 1  3 Years)  P ( Male)  0.25
Check for Independence:

10
P( Male and 1  3 Years) 10
P( Male 1  3 Years )   200   0.25  P( Male)
P(1  3 Years) 40 40
200
Rule 8: Multiplication Rule for Any Two
Events
• If we do not know the joint relative
frequencies, the multiplication rule for two
events can be used.
Probability Rule 8
For two events E1 and E2
P(E1 and E2) = P(E1) P(E2|E1)

Multiplication Rule for Any Two Events-
Example
A small boutique hotel has 20 rooms. Five of the
rooms are suites with a living room and bedroom while
the other 15 are traditional hotel rooms. What is the
probability that first two rooms booked during the
week of October 13-19 are both suites if the bookings
are assumed to be random?
Event: S = Suite T = Traditional
5 4
P( S1 and S2 )  P( S1 ) P (S 2 S1 )    0.053
20 19

Multiplication Rule – Tree Diagram
Example
Vehicles use one of two types of fuel; gasoline or
diesel. The types of vehicles are; trucks, cars, and
SUVs. Assume that the following events and
probabilities are given.
E1=Gasoline P ( E1 )  0.80
E2=Diesel Determine the probabilities
P ( E2 )  0.20
E3=Truck for each of the following:
P ( E3 E1 )  0.20
E4=Car P ( E1 and E3 )  ?
E5=SUV P ( E4 E1 )  0.50 P ( E1 and E4 )  ?
P ( E5 E1 )  0.30 P ( E1 and E5 )  ?
P ( E3 E2 )  0.60 P ( E2 and E3 )  ?
P ( E4 E2 )  0.10 P ( E2 and E4 )  ?
P ( E2 and E5 )  ?
P ( E5 E2 )  0.30
Multiplication Rule – Tree Diagram
Example
E1=Gasoline
E2=Diesel 2
E3=Truck ) = 0. P(E1 and E3) = 0.8 x 0.2 = 0.16
E
(E 3| 1
E4=Car ru c k: P
T
Car: P(E4|E1) = 0.5
E5=SUV P(E1 and E4) = 0.8 x 0.5 = 0.40
Gasoline SUV
P(E1) = 0.8 : P(E
5 |E )
1 =
P(E1 and E5) = 0.8 x 0.3 = 0.24
0.3
) = 0.6
Diesel |E 2
u ck : P(E 3 P(E2 and E3) = 0.2 x 0.6 = 0.12
P(E2) = 0.2 Tr
Car: P(E4|E2) = 0.1
P(E2 and E4) = 0.2 x 0.1 = 0.02
SUV
: P (E
5 |E ) P(E2 and E5) = 0.2 x 0.3 = 0.06
2 = 0
.3

Rule 9: Multiplication Rule for
Independent Events
• The joint probability of two independent
events is simply the product of the
probabilities of the two events.
Probability Rule 9
For independent events E1, E2
P(E1 and E2) = P(E1) P(E2)

Multiplication Rule for Independent
Events - Example
A small mid-western city has three major airlines that
serve the airport. Suppose that 60% of the
passengers fly United Airlines, 30% fly Delta, and
10% fly Southwest. Further, suppose that 70% of the
fliers are flying for pleasure and 30% fly for business.
Assuming type of trip and the airline used are
independent, what is the probability that a flier uses
United and is a business traveler?
P(United and Business)  P(United)P(Business)  (0.60)(0.30)  0.18

Bayes’ Theorem
• A special application of conditional
probability
• A way to formally incorporate the new
information
• Probability assessment for events of
interest may be based on relative
frequency or subjectivity

Bayes’ Theorem Equation


Bayes’ Theorem - Example
A regional bank has two branches (B1 and B2) in an urban
area. Eighty percent of the total customers of the bank
use branch B1. Studies show that 40% of branch B1
customers are female and 70% of the branch B2
customers are female. Suppose a female customer is
interviewed, what is the probability that she uses Branch
B2?
P( B 2) P( F B 2)
P ( B1)  0.80 P( B 2 F ) 
P ( B 2) P ( F B 2)  P( B1) P ( F B1)
P ( B 2)  0.20
(0.20)(0.70)
P ( F B1)  0.40 P( B 2 F )   0.3043
(0.20)(0.70)  (0.80)(0.40)
P ( F B 2)  0.70

Bayes’ Theorem Tabular Approach
• Step 1: Define the events.
• Step 2: Determine the prior probability for events.
• Step 3: Define an event that if it occurs could alter
the prior probabilities
• Step 4: Calculate the joint probabilities.
• Step 5: Determine the conditional probabilities.
• Step 6: Determine the revised probabilities.
Event Prior Conditional Joint Revised
Probabilities Probabilities Probabilities Probabilities
E1 P(E1) P(B | E1) P(E1) P(B | E1) P(E1 | B)
E2 P(E2) P(B | E2) P(E2) P(B | E2) P(E2 |B)

Bayes’ Theorem Example
A drilling company has estimated a 40% chance of striking
oil for their new well. A detailed test has been scheduled
for more information. Historically, 60% of successful wells
have had a positive test report, and 20% of unsuccessful
wells have had a positive test.
Given that this well has had a positive test, what is the
probability that the well will be successful?

Bayes’ Theorem Example
• Let S = successful well and U = unsuccessful well
• P(S) = 0.4 , P(U) = 0.6 (prior probabilities)
• Define a Positive test event as P
• Conditional probabilities: P(S|P) = 0.6 P(U|P) = 0.2
• Revised probabilities given a positive test result.

S 0.4 0.6 0.4 x 0.6 = 0.24 0.24/0.36 = 0.67
U 0.6 0.2 0.6 x 0.2 = 0.12 0.12/0.36 = 0.33
Sum = 0.36
Solution: Given the positive test, the revised probability of a
successful well has risen to 0.67 from the original estimate of 0.4.
Sarah, a woman in her mid-40’s, is going to have a
mammogram to test for breast cancer. Suppose it is known
that 1.4% of all women in this age group have breast cancer.
Suppose also that there is a .75 chance that a mammogram
will give a positive result given that the woman actually does
have cancer. But mammograms can also give false positives
since 10% of mammograms will give a positive test given that
the woman does not have cancer.
Suppose Sarah has just had a mammogram that came

back positive for breast cancer. What do you think the
probability is that she has breast cancer?

P (C )  0.014
P(C ) P( P C )
P ( P C )  0.75 P(C P ) 
P(C ) P( P C )  P( NC ) P ( P NC )
P ( P NC )  0.10
0.14 x 0.75= 0.105/0.204 =
C 0.014 0.75
0.105 0.515
0.986 x 0.10 = 0.099/0.204 =
NC 0.986 0.10
0.099 0.485
Sum = 0.204
The probability of cancer give a positive mammogram
test = 0.515.
The Birthday Problem
Look around you in class – do you think any two people

have the same birthday? What do you think the
probability is that there will be at least one match?
Assume that there are 365 days in a year (no leap

year) and that there is an equal probability that a
student’s birthday will fall on any one of these 365
days. Also assume that the same birthday means the
same month and day, but not the same year.

The Birthday Problem
P(1 or more matches)  1  P(0 matches)

Let n = number of students in the class
365364363.....(365  n  1)
P (1 or more matches) = 1-
365n
Students Probability of No Match Probability of One or More Matches

20 0.5886 1 - 0.5886 = 0.4114
30 0.2937 1 - 0.2937 = 0.7063
40 0.1088 1 - 0.1088 = 0.8912

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Chapter 4

A LWAY S L E A R N I N G Copyright © 2018 Pearson Education, Ltd. Slide - 1

Outcome 1. Identify situations for which each of the three approaches to

assessing probabilities applies.

Outcome 2. Be able to apply the Addition Rule.

Outcome 3. Know how to use the Multiplication Rule.

Outcome 4. Know how to use Bayes’ Theorem for applications involving

A LWAY S L E A R N I N G Copyright © 2018 Pearson Education, Ltd. Slide - 2

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• Step 2: Define the outcomes for one trial of

• Step 3: Define the sample space (SS).

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Event A – Oil well produces oil

Event B – Oil well does not produce oil

If Event A occurs, then Event B can not also occur –

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Event B – Business is started by a person in Oregon

Whether or not the business in Oregon (Event B) is

Event A – First person selected is female.

Events A and B are dependent because the chance of a

Classical Relative Subjective

P(Ei) = Probability of event Ei occurring

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Ei - The event of interest

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Taking into account such factors as:

Possible Values Addition Rule for Conditional

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Probability Rule 1 Probability Rule 2

Probability of event occurring Sum of the probabilities of all

0 = no chance of occurring k - Number of outcomes in the

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A sales manager has placed three products on display in a

Rule 1: For any event Ei

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The probability of an event Ei is equal to the sum

For example, if Ei = {e1, e2, e3} then

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What is the probability of making at least $20,000?

E = [$20,000, $500,000] P(E) =0.50 + 0.20

The probability of the complement of event

• This rule is corollary to Probability Rules 1 and 2.

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Using the Complement Rule

P(E1 or E2) = P(E1) + P(E2) - P(E1 and E2)

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P(Red or Ace) = P(Red) + P(Ace) - P(Red and Ace)

Color Don’t count

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P(E1 or E2) = P(E1) + P(E2)

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