ChaPter 4 $tudent Lecture Notes

S ubjective P robability Assessment

Relative FrequencY of Occurrence
r- An opinion or judgment by a decision .rnak:r
.'Based on actual observations the likelihood of an event based on their
RelativeFreq.of Ei = !!]!!!9!9!-fi=."Ei.999!l9 "Jout
expertise
Es. Infinalisins a bid amount, 1t"T9"l-i9-11t':li::iT"t:
r Also known as Empirical probability
difficultios in Starbucks business is determining
"E.q." One of the of its product to prepare for the o"y
i"* t""r'l 1 570
Th9--^
i-rn"o", observed 2250 sales of coffee' of which
*"i" t"ot c.f"in"ted drinks Thus the chance that a company.
customer purchase caffsinated drink is
= 15701225A = 0 6970 = 0'70

al Rules of ProbabilitY
L! Rules of ProbabititY
(conrnued)

-fi-**
';"']Trobability
event will occur
measuresthe perceived uncertainly aboutwhether
an
=$S:-*
Addition Rule for Elementary Events
to the
.- The probability of an event E1 is equal
sum'ot tne proUaUitities of the individual
isu*otnrrvalues I

llndividual Valuesi outcomes forming E''

l .--.-
For
s P(Er) 5
rv event
1
Lt,u,,=tl
trtul . That is, if: trF;6-"tt-]
IR.'"fl *Tl€umber of indivldualod6me6 in th€

Thevalue ol I Probability is e, = is individual

outdme
F-dA
betw€en o .nd 1
The €um of ths Probabilitie' oi 'll
0 = no chanco ot osurring the outcomes in a gamPle 6Pace
must= I or 100%
I = 1OOY. chang! of occulilng

'hl Addition Rule for Two Events

Rules of ProbabilitY
_'=T * ' {continued)
- Complement Rule . AdditiOn RUlg 1*t''n '"'nt"
atc Nor mutuctlvercl$iv'):

r- The complement of an event E is the collection of

in
elementary events not.contained
e.-in" complement of event E is-
"iipoi"idru
"",i"t
represented bY E.
e,g,, lf thec is a 40%
chance it will lain'
r ComPlement Rule: th€rei9a6 chanct
itrcn'tninl
f i Don't count common
ilotE: 'br" indic.ls i .:ler"e.l!"'"t*-1""1,... ....

addltion otevcot.
iotnt Probability

@ 2008 Prentice-Hall, Inc'

Approach' 7e
Business Statistics: A Decision-Making