Chapter 2

Probability Concepts
and Applications
 Objectives
Students will be able to:
– Understand the basic foundations of probability
analysis
– Do basic statistical analysis
– Know various type of probability distributions
and know when to use them
 Probability

Life is uncertain and full of surprise. Do you

know what happen tomorrow
Make decision and live with the consequence
The probability of an event is a numerical value
that measures the likelihood that the event can
occur
 Basic Probability Properties

Let P(A) be the probability of the event A, then

0  P( A)  1
The sum of the probability of all possible outcomes
should be 1.
 Mutually Exclusive Events

Two events are mutually exclusive if they can not

occur at the same time. Which are mutually
exclusive?
• Draw an Ace and draw a heart from a standard deck of 52
cards
• It is raining and I show up for class
• Dr. Li is an easy teacher and I fail the class
• Dr. Beaubouef is a hard teacher and I ace the class.
 Addition Rule of Probability

If two events A and B are mutually exclusive,

then
P( A  B)  P( A)  P( B)
Otherwise
P( A or B)  P( A)  P( B)  P( A and B)
 P(A or B)

+ -

P(A) P(B) P(A and B)

= P(A or B)
 Independent and Dependent

Events are either

– statistically independent (the occurrence of one
event has no effect on the probability of
occurrence of the other) or
– statistically dependent (the occurrence of one
event gives information about the occurrence of
the other)
 Which Are Independent?

(a) Your education

(b) Your income level
(a) Draw a Jack of Hearts from a full 52 card deck
(b) Draw a Jack of Clubs from a full 52 card deck
(a) Chicago Cubs win the National League pennant
(b) Chicago Cubs win the World Series
 Conditional Probability

Conditional probability
the probability of event B given that event A
has occurred P(B|A) or, the probability of
event A given that event B has occurred
P(A|B)
 Multiplication Rule of Probability

If two events A and B are mutually exclusive,

P( A and B)  P( A) P( B)
Otherwise,
P( A and B)  P( A) P( B | A)  P( B) P( A | B)
 Joint Probabilities, Dependent
Events
Your stockbroker informs you that if the stock market
reaches the 10,500 point level by January, there is a
70% probability the Tubeless Electronics will go up
in value. Your own feeling is that there is only a
40% chance of the market reaching 10,500 by
January.
What is the probability that both the stock market will
reach 10,500 points, and the price of Tubeless will
go up in value?
 Probability(A|B)

P(A) P(AB) P(B)

P(A|B) = P(AB)/P(B)
 Random Variables

Discrete random variable - can assume only a finite

or limited set of values- i.e., the number of
automobiles sold in a year

Continuous random variable - can assume any one

of an infinite set of values - i.e., temperature,
product lifetime
 Random Variables (Numeric)
Experiment Outcome Random Variable Range of
Random
Variable
Stock 50 Number of X = number of 0,1,2,, 50
Xmas trees trees sold trees sold
Inspect 600 Number Y = number 0,1,2,…,
items acceptable acceptable 600
Send out Number of Z = number of 0,1,2,…,
5,000 sales people e people responding 5,000
letters responding
Build an %completed R = %completed 0  R  100
apartment after 4 after 4 months
building months
Test the Time bulb S = time bulb 0  S  80,000
lifetime of a lasts - up to burns
light bulb 80,000
(minutes) minutes
 Probability Distributions
Table 2.4

Outcome X Number P(X)

Responding
SA 5 10 0.10

A 4 20 0.20

N 3 30 0.30

D 2 30 0.30

SD 1 10 0.10
D

0.30
0.25
0.20 Figure 2.5
0.15 Probability
0.10
Function
0.05
0.00
1 2 3 4 5
Expected Value of a Discrete Probability
Distribution
n
E ( X )   X iP ( X i )
i 1
5
E( X )  X
i 1
i P( X i )

 X 1 P( X 1 )  X 2 P( X 2 )  X 3 P( X 3 )
 X 4 P( X 4 )  X 5 P( X 5 )
 (5)( 0.1)  ( 4)( 0.2)  (3)( 0.3)
 ( 2)( 0.3)  (1)( 0.1)
 2.9
 Variance of a Discrete Probability
Distribution
n
   X  EX  P X i 
2 2
i
i 1

  5  2.9  0.1  4  2.9 2 0.2 

2 2

 3  2.9  0.3  (2 - 2.9) 2 (0.3)

2

 (1  2.9) 2 (0.1)
 0.44 - 0.242  0.003  0.243  0.361
 1.29
 Binomial Distribution
Assumptions:
1. Trials follow Bernoulli process – two possible
outcomes
2. Probabilities stay the same from one trial to
the next
3. Trials are statistically independent
4. Number of trials is a positive integer
 Binomial Distribution
n = number of trials
r = number of successes
p = probability of success
q = probability of failure
Probability of r successes
in n trials
n! nr
 r
p q
r!(n - r)!
Binomial Distribution
  np
   np( 1  p )
 Binomial Distribution

N = 5, p = 0.50

0.35
0.30
0.25
0.20
P(r)

0.15
0.10
0.05
0.00
1 2 3 4 5 6
(r) Number of Succes s es
Probability Distribution Continuous Random
Variable
Normal Distribution
Probability density function - f(X)

5 5.05 5.1 5.15 5.2 5.25 5.3 5.35 5.4

1 / 2 ( X   ) 2
1
f (X )  e 2
 2
Normal Distribution for Different Values of 

=40 =50 =60

0
30 40 50 60 70
Normal Distribution for Different Values of

=1
=0.1

=0.3 =0.2

0 0.5 1 1.5 2
 Three Common Areas
Under the Curve

Three Normal distributions with different

areas
 Three Common Areas
Under the Curve
Three Normal
distributions
with different
areas
 The Relationship Between
Z and X
=100
=15 x
Z 


55 70 85 100 115 130 145

-3 -2 -1 0 1 2 3
Haynes Construction Company
Example
Fig. 2.12
Haynes Construction Company
Example
Fig. 2.13
Haynes Construction Company
Example
Fig. 2.14
 The Negative Exponential
Distribution
f ( X )   e  x
Expected value = 1/
Variance = 1/2

4
=5
3

0
0 0.2 0.4 0.6 0.8 1 1.2
 The Poisson Distribution
 x e  Expected value = 
P( X ) 
X! Variance = 
0.30

0.25 =2
0.20

0.15

0.10

0.05

0.00
1 2 3 4 5 6 7 8 9