Introduction to Probability

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Learning Outcomes

Outcome 1. Understand the three approaches to assessing probabilities.

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.

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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.
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Sample Space Examples
• Example 1: All 6 faces of a die:

• Example 2: All 52 cards of a deck of cards:

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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}

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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:

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Tree Diagram

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Event of Interest
• A collection of experimental outcomes
• Step 1: Define the experiment
– Two randomly chosen audits
• Step 2: List the outcomes associated with
one trial of the experiment
– Outcomes: audit done early, on time, or late

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Event of Interest
• Step 3: Define the sample space
– There are nine experimental outcomes for two audits
e1={early, early}, e2={early, on time}, e3={early, late},
e4={on time, early}, e5={on time, on time}, e6={on time, late},
e7={late, early}, e8={late, on time}, e9={late, late}

• Step 4: Define the event of interest

– At least one audit is completed late:
E = {e3, e6, e7, e8, e9}

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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.

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Events Examples
• Mutually exclusive
– The product can be either good of defective
• Independent E1 = heads on one flip of fair coin
E2 = heads on second flip of same coin
– Result of second flip does not depend on the result of the first
flip
E1 = rain forecasted on the news
• Dependent E2 = take umbrella to work

– Probability of the second event is affected by the occurrence of

the first event

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Assigning Probability

Methods of
Assigning Probability

Classical Relative Subjective

Probability Frequency Probability
Assessment Assessment Assessment

P(Ei) = Probability of event Ei occurring

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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.

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Classical Probability Assessment
• Step 1: Define the experiment
• Step 2: Determine whether the possible
outcomes are equally likely
• Step 3: Determine the total number of
outcomes
• Step 4: Define the event of interest
• Step 5: Determine the number of outcomes
associated with the event of interest
• Step 6: Compute the classical probability

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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

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Relative Frequency Probability
Assessment
• Step 1: Define the experiment
• Step 2: Define the events of interest
• Step 3: Determine the total number of
occurrences
• Step 4: For the event of interest, determine
the number of occurrences
• Step 5: Determine the relative frequency
probability assessment.

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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
• Only approximate guide to the future

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4.1 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

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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

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Addition Rule for Individual
Outcomes
Probability Rule 3

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)

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Addition Rule for Individual
Outcomes
• Step 1: Define the experiment
• Step 2: Define the possible outcomes
• Step 3: Determine the probability of each
possible outcome
• Step 4: Define the event of interest
• Step 5: Apply Probability Rule 3 to
compute the desired probability

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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

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Addition Rule for Any Two Events
Probability Rule 4

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

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Addition Rule for Any Two Events
• Step 1: Define the Experiment
• Step 2: Define the events of interest
• Step 3: Determine the probability for each
event
• Step 4: Determine whether the two events
overlap, and if so, compute the joint probability
• Step 5: Apply Probability Rule 4 to compute
the desired probability

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Addition Rule for Any Two Events -
Example
P(Red or Ace) = P(Red) + P(Ace) - P(Red and Ace)

P(Red or Ace) = 26/52 + 4/52 - 2/52 = 28/52

Color Don’t count

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

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Addition Rule for Mutually
Exclusive Events
Probability Rule 5

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

Both events cannot occur at the same time: P(E1 and E2) = 0

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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

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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

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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.

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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)

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Multiplication Rule – Tree Diagram

2
) = 0. P(E1 and E3) = 0.8 x 0.2 = 0.16
E
(E 3| 1
ru c k: P
T
Car: P(E4|E1) = 0.5
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
uc k: P(E 3 P(E2 and E3) = 0.2 x 0.6 = 0.12
P(E1) = 0.2 Tr
Car: P(E4|E2) = 0.1
P(E2 and E4) = 0.2 x 0.1 = 0.02
SUV
: P(E
|E ) P(E3 and E4) = 0.2 x 0.3 = 0.06
2 = 0
5
.3

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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)

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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

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Bayes’ Theorem Equation

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Bayes’ Theorem Tabular Approach
• Step 1: Define the events
• Step 2: Determine the prior probability for the events
• Step 3: Define an event that if it occurs could alter
the prior probabilities
• Step 4: Determine the conditional probabilities
• Step 5: 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)

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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 detailed tests, and 20% of
unsuccessful wells have had detailed tests.
• Given that this well has been scheduled for a
detailed test, what is the probability
that the well will be successful?

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Bayes’ Theorem Example
• Let S = successful well and U = unsuccessful well
• P(S) = 0.4 , P(U) = 0.6 (prior probabilities)
• Define the detailed test event as D
• Conditional probabilities: P(D|S) = 0.6 P(D|U) = 0.2
• Revised probabilities

Event Prior Conditional Joint Revised

Probabilities Probabilities Probabilities Probabilities
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 detailed test, the revised probability of a

successful well has risen to 0.67 from the original estimate of 0.4

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