PROBABILITY

By:
Hina Gul
MBA 2nd Semester
Dec. 1, 2009
PROBABILITY
 A quantitative measure of uncertainty.
 It can be expressed as fractions, or as decimals..
BASIC PROBABILITY INFORMATION
AՍB
The union of two sets A and B means the set of all elements that
belong to at least one of the sets A and B.
AՈB
The intersection of two sets A and B means that the set of all
elements that belong to both A and B.

Mutually Exclusive or Disjoint

When two sets A and B have no elements in common.

Complementation
The set of all those elements of S which do not belong to A. Its
denoted by A Ᾱ.
BASIC PROBABILITY INFORMATION
 Random Experiment: An experiment which is repeated a large number
of times under similar conditions, produces different outcomes/results
every time its repeated.
 An experiment in which the outcome can't be predicted with certainty.

 Example: Tossing of a fair coin, throwing of a balanced die, drawing of a

card from a deck of well shuffled deck of 52 playing cards, etc.

 Sample Space: The set of all possible outcomes that can result from a
random experiment. it is denoted by 'S' and its number of elements are
n(s).
 Example; In throwing a dice, the number that appears at top is any one
of 1,2,3,4,5,6. So here:
 S ={1,2,3,4,5,6} and n(s) = 6

 Sample space can be discrete or continuous.

EVENTS
 Event: Every subset of a sample space is an event. It is denoted by 'E'.
 Example: In throwing a dice S={1,2,3,4,5,6}, the appearance of an event
number will be the event E={2,4,6}.
 Clearly E is a sub set of S.

 Simple event; An event, consisting of a single sample point is called a simple

event.
 Example: In throwing a dice, S={1,2,3,4,5,6}, so each of {1},{2},{3},{4},{5}
and {6} are simple events.
 Compound event: A subset of the sample space, which has more than one
element is called a mixed event.
 Example: In throwing a dice, the event of appearing of odd numbers is a
compound event, because E={1,3,5} which has '3' elements.
 Equally likely events: Events are said to be equally likely, if we have no
reason to believe that one is more likely to occur than the other.
 Example: When a dice is thrown, all the six faces {1,2,3,4,5,6} are equally
likely to come up.
EVENTS CONT.
 Sure event: Let 'S' be a sample space. If E is a subset of or equal to S then E is
called a sure event.
 Example: In a throw of a dice, S={1,2,3,4,5,6}

 Let E1=Event of getting a number less than '7'.

 So 'E1' is a sure event.

 So, we can say, in a sure event n(E) = n(S)
 Mutually exclusive or disjoint event: If two or more events can't occur
simultaneously, that is no two of them can occur together.
 Example: When a coin is tossed, the event of occurrence of a head and the
event of occurrence of a tail are mutually exclusive events.
 Independent or mutually independent events: Two or more events are said
to be independent if occurrence or non-occurrence of any of them does not
affect the probability of occurrence or non-occurrence of the other event.
 Example: When a coin is tossed twice, the event of occurrence of head in the
first throw and the event of occurrence of head in the second throw are
independent events.
APPROACHES TO PROBABILITY
 Classical Approach
 Relative Frequency Approach
 Subjective Approach
 Axiomatic Approach
RELATIVE FREQUENCY APPROACH
 Also called Business Approach.
 Its based on past data.

 Conduct (or observe) an experiment a large number of

times, and count the number of times event A actually
occurs, then an estimate of P(A) is

number of times A occurred

P(A) = number of times trial was repeated
SUBJECTIVE APPROACH
 It is based on personal judgment, accumulation of
knowledge, and experience. For example, medical
doctors sometimes assign subjective probabilities to the
length of life expectancy for people having cancer.
Weather forecasting is another example of subjective
probability.
 Probability in this sense is purely subjective and is based
on whatever evidence is available to the individual.
CLASSICAL APPROACH
 It states that if a random experiment can produce n
mutually exclusive and equally likely outcomes and if m
out of these outcomes are considered favorable to the
occurrence of a certain event A, then the probability of
the event A, denoted by P(A), is defined as the ration
m/n.

P(A) = m
n
Number of favorable outcomes
P( A) 
Total number of outcomes for the experiment
EXAMPLE
 From a standard deck of 52 playing cards. If we
randomly draw a card from the deck, we can think of
each card as a possible outcome. Therefore, there are 52
total outcomes. N=52.
 What is the probability of drawing a club?

P(A) =
 There are 4 kings (one of each suit). The probability of
drawing a king is .
AXIOMATIC APPROACH
 Axiom – a statement that is assumed to be true.
 Based on a set of axioms.

 Axiom 1)
P(A) = m/n.
 Axiom 2)
0 ≤ P(A) ≤ 1.
 Axiom 3)
P(AՍB) = P(A) + P(B),
if A and B are mutually exclusive events.
ADDITION THEOREM
 The addition rule is a result used to determine the
probability that event A or event B occurs or both occur.
 The result is often written as follows, for joint events:

P(AՍB) = P(A) + P(B) – P(AՈB)

 For mutually exclusive event or disjoint events,

P(AՈB) = 0
 The addition rule therefore reduces to

P(AՍB) = P(A) + P(B)

EXAMPLE
 Find the probability of drawing either a king or a spade in
a single draw from a pack of 52 playing cards. We define
the events:
 A = draw a king

 B = draw a spade

 Since there are 4 kings in the pack and 13 spades, but 1

card is both a king and a spade, we have:
P(AՍB) = P(A) + P(B) – P(AՈB)
= 4/52 + 13/52 – 1/52
= 16/52
So, the probability of drawing either a king or a spade is
16/52 = 4/13.
CONDITIONAL PROBABILITY
 The probability of an event occurring given that another
event has already occurred is called a conditional
probability.
 The probability that event B occurs, given that event A
has already occurred is
P(B|A) = P(AՈB) / P(A)
 It can be only found in joint events.
EXAMPLE
 A jar contains black and white marbles. Two marbles are
chosen without replacement. The probability of selecting
a black marble and then a white marble is 0.34, and the
probability of selecting a black marble on the first draw
is 0.47. What is the probability of selecting a white
marble on the second draw, given that the first marble
drawn was black? Solution:  P(White|Black)  = 
P(Black and White)  =  0.34  =  0.72  =  72%
P(Black) 0.47
COUNTING RULES
 Multiplication Rule
 Permutation Rule

 Combination Rule
MULTIPLICATION RULE
 If an experiment can result in n1 outcomes and another
experiment results in n2 outcomes, then if the two
experiments are combined together, the total outcome
would be n1*n2.
PERMUTATION RULE
 Any ordered subset from a set of n distinct objects. The
P  n!

number of permutations of r objects, selected in a

n r ( n  r )!

definite order from n distinct objects is denoted by the

symbol