Y

m


 


m
by
AMIR D. ACZEL
&
JAYAVEL SOUNDERPANDIAN
6th edition.
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w Using Statistics
w Basic Definitions: Events, Sample Space, and

Probabilities
w Basic Rules for Probability

w Conditional Probability

w Independence of Events

w Combinatorial Concepts

w The Law of Total Probability and Bayes¶ Theorem

w Joint Probability Table

w Using the Computer

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w Define probability, sample space, and event.
w Distinguish between subjective and objective probability.
w Describe the complement of an event, the intersection, and
the union of two events.
w Compute probabilities of various types of events.
w Explain the concept of conditional probability and how to
compute it.
w Describe permutation and combination and their use in
certain probability computations.
w Explain Bayes¶ theorem and its applications.
 Y

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w A quantitative measure of 
 

w A measure of the §   
 in the
occurrence of an uncertain event
w A measure of the degree of

 


  


 of an uncertain
event
w Measured by a number between 0 and 1 (or
between 0% and 100%)
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w 
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§§

 

‰ based on equally-likely events
‰ based on long-run relative frequency of events

‰ not based on personal beliefs

‰ is the same for all observers (objective)

‰ examples: toss a coin, throw a die, pick a card

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‰ based on personal beliefs, experiences, prejudices,
intuition - personal judgment
‰ different for all observers (subjective)

‰ examples: Super Bowl, elections, new product

introduction, snowfall
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w  


  
  §  
§ 
 §
‰ Empty set (denoted by å)
w a set containing no elements
‰ Universal set (denoted by S)
w a set containing all possible elements
‰ Complement ü@is
(Not). The complement of A
w a set containing all elements of S not in A
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Venn Diagram illustrating the Complement of an event

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‰
§
 (And) ü@ ^
± a set containing all elements in both A and B
‰   (Or) ü@

± a set containing all elements in A or B or both
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$ & ' ( ) 

@^
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Y

$ & * 

@Ñ
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*




§ §  §§
±sets having no elements in common, having no
intersection, whose intersection is the empty set
* 
±a collection of mutually exclusive sets which
together include all possible elements, whose
union is the universal set
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+ ,- .  !/ $

§     

 
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* Process that leads to one of several possible
outcomes *, e.g.:
‰ Coin toss
* eads, Tails
‰ Throw die
* 1, 2, 3, 4, 5, 6
‰ Pick a card
A , K , Q , ...
‰ Introduce a new product
* Each trial of an experiment has a single observed
outcome.
* The precise outcome of a random experiment is
unknown before a trial.
* Also called a basic outcome, elementary event, or simple event
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,.  !
w Sample Space or Event Set
‰ Setof all possible outcomes (universal set) for a given
experiment
w E.g.: Roll a regular six-sided die
S = {1,2,3,4,5,6}

w Event
‰ Collection of outcomes having a common characteristic
w E.g.: Even number
A = {2,4,6}
Event A occurs if an outcome in the set A occurs
w Probability of an event
‰ Sum of the probabilities of the outcomes of which it consists
w P(A) = P(2) + P(4) + P(6)
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,0 1 

2   ' ,-#
*
or example:
‰ Throw a die
* Six possible outcomes {1,2,3,4,5,6}
* If each is equally-likely, the probability of each is 1/6 = 0.1667 =
16.67%
1
à( ) ƒ

(  )
* Probability of each equally-likely outcome is 1 divided by the number of
possible outcomes
‰ Event A (even number)
* P(A) = P(2) + P(4) + P(6) = 1/6 + 1/6 + 1/6 = 1/2
* à ( @ ) ƒ à ( ) for e in A

( @ ) 3 1
ƒ ƒ ƒ

(  ) 6 2
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o§  § m
§ §
Union of A A A A
K K K K
Event µAce¶
Events µ eart¶ Q Q Q Q

( @
) 4 1
and µAce¶ J J J J
à ( @
) ƒ ƒ ƒ
10 10 10 10
à(    @
) ƒ
( ) 52 13
9 9 9 9
8 8 8 8

(    @
) 7 7 7 7
ƒ 6 6 6 6

( ) 5 5 5 5
4 4 4 4
16 4 3 3 3 3
ƒ
2 2 2 2
52 13

The intersection of the

events µ eart¶ and µAce¶
Event µ eart¶
comprises the single point

(   ) 13 1
à (   ) ƒ ƒ ƒ circled twice: the ace of hearts

( ) 52 4
(    @
) 1
à (    @
) ƒ ƒ

( ) 52
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Y
 3  

w d  
§  0 a à ( @) a 1

w m 
  § - Probability of

A
à( @ ) ƒ 1 à( @)

w
§
 - Probability of both A 
 B
à ( @ ^ ) ƒ
( @ ^ )

(  )
‰




§ § (A and C) :
à( @ ^
) ƒ 0
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 3  


*   - Probability of A ¦ B or both (rule of unions)
à( @
) ƒ
( @
) ƒ à ( @)
à ( ) à( @ ^ )

(  )

‰Mutually exclusive events: If A and B are mutually exclusive, then

à( @ ^ ) ƒ 0
¦ à ( @
) ƒ à ( @)
à ( )
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$ & * 

à( @
)
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Y   

* m  
 
 - Probability of A Õ

B

à(@ ^ )
à(@ )ƒ ,   à( ) â 0
à( )

‰Independent events:
à( @ ) ƒ à( @)
à( @) ƒ à( )
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d
§ 
 
 


à( @ ) ƒ à( @ ^ ) so à( @ ^ ) ƒ à( @ ) à( )
à( )
ƒ à( @) à( @)

If events A and D are §§


   :

à ( @  ) ƒ à ( @)
so à ( @ ^  ) ƒ à ( @) à (  )
à (  @) ƒ à (  )
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Counts


 



 
 40 10  Probability that a project
m § 20 30 
is undertaken by IBM
Õ

it is a
 
  
telecommunications
Probabilities project:
à(   )


 
à(  ) ƒ
à ( )


 
 .40 .10 
0 . 10
ƒ ƒ 0 .2
m § .20 .30  0 . 50

 
  
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Y  '   ,.

Conditions for the statistical independence of events A and B:

à ( @ ) ƒ à ( @)
à ( @) ƒ à ( )


à ( @  ) ƒ à ( @) à ( )
à ( @
  ) à(   @
)
à ( @
 ) ƒ à(  @
) ƒ
à(  ) à ( @
)
1 1
1 1
ƒ 52 ƒ ƒ à ( @
) ƒ 52 ƒ ƒ à (  )
13 13 4 4
52 52

4 13 1
à ( @
   ) ƒ * ƒ ƒ à ( @
) à (   )
52 52 52
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  ,. 4
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Events 

¦
() and ¦ ( ) are

assumed to be    

)à(  ) ƒ à( ) à( )
ƒ 0.04 * 0.06 ƒ 0.0024
)à( ) ƒ à( )
à( ) à(  )
ƒ 0.04
0.06 0.0024 ƒ 0.0976
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  3  ' ,.

The probability of the  §
 of several independent events

is the product of their separate individual probabilities:
à ( @ ^ @ ^ @ ^’ ^ @
) ƒ à( @ ) à ( @ ) à ( @ )’ à( @
)
1 2 3 1 2 3
The probability of the   of several independent events
is 1 minus the product of probabilities of their complements:
à ( @ Ñ @ Ñ @ ђ Ñ @
) ƒ 1
à( @ ) à( @ ) à( @ )’ à ( @
)
1 2 3 1 2 3

Example 2-7:
(´ Ñ´ Ñ´ ђ Ñ´ ) ƒ1
à(´ )à(´ )à(´ )’ à(´ )
1 2 3 10 1 2 3 10
ƒ1
0.9010 ƒ1
0.3487 ƒ 0.6513
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Y  #  

Consider a pair of six-sided dice. There are six possible outcomes
from throwing the first die {1,2,3,4,5,6} and six possible outcomes
from throwing the second die {1,2,3,4,5,6}. Altogether, there are
6*6 = 36 possible outcomes from throwing the two dice.
In general,  
 §   
    
  §§
§
      §  
 
§
 
 § 

§
.
w Pick 5 cards from a deck of w Pick 5 cards from a deck of
52 -  

   52 -  

  
‰ 52*52*52*52*52=525 ‰ 52*51*50*49*48 =
380,204,032 different 311,875,200 different
possible outcomes possible outcomes
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+  #  

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.
Order the letters: A, B, and C
C
. ABC

. .. B
C B .. ACB

. . . A
B A C

.. BAC

. . C
C
A
A
B
BCA

. B
A
. CAB

CBA
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§

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There are 3 choices for the first letter, 2 for the second, and 1 for
the last, so there are 3*2*1 = 6 possible ways to order the three
letters A, B, and C.

o   §    

§

m



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:
or any positive integer
, we define
 
  as:





 
 . We denote n factorial as
.
The number
is the number of ways in which
objects can
be ordered. By definition 

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# 5  #


§
   
§

m


  
There are 6 ways to choose the first letter, 5 ways to choose the
second letter, and 4 ways to choose the third letter (leaving 3
letters unchosen). That makes 6*5*4=120 possible orderings or
  §.

  § are the possible selections of  objects out

of a total of
objects. The number of permutations of
objects
taken  at a time is denoted by
where
à ƒ
#

 
 #
¦  :
6! 6! 6 * 5 * 4 * 3 * 2 * 1
6 à3 ƒ ƒ ƒ ƒ 6 * 5 * 4 ƒ 120
( 6 3 )! 3! 3 * 2 *1
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Suppose that when we pick 3 letters out of the 6 letters A, B, C, D, E, and

we chose BCD, or BDC, or CBD, or CDB, or DBC, or DCB. (These are the
6 (3!) permutations or orderings of the 3 letters B, C, and D.) But these are
orderings of the same combination of 3 letters. ow many combinations of 6
different letters, taking 3 at a time, are there?
m   § are the possible selections of  items from a group of
items 

regardless of the order of selection. The number of combinations is denoted  
and is read as
 . An alternative notation is
We define the number
of combinations of r out of n elements as:



  ƒ
  ƒ
  


¦  :

 6! 6! 6 * 5 * 4 * 3 * 2 *1 6 * 5 * 4 120
  ƒ 6
3 ƒ ƒ ƒ ƒ ƒ ƒ 20
 3! ( 6
3 )! 3!3! (3 * 2 * 1)(3 * 2 * 1) 3 * 2 *1 6
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# 6 #
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8 #
The law of total probability:
à( @) ƒ à( @ ^ )
à( @ ^ )

In terms of conditional probabilities:

à( @) ƒ à( @ ^ ) à( @ ^ )
ƒ à ( @ ) à ( )  à( @ ) à( )

More generally (where Bi make up a partition):

à( @) ƒ à( @ ^ )
ƒ à( @ ) à( )
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Event U: Stock market will go up in the next year
Event W: Economy will do well in the next year
à (  ) ƒ .7 5
à (  ) ƒ 3 0
à ( ) ƒ .8 0 à ( ) ƒ 1
.8 ƒ .2

à (  ) ƒ à (  ^  )  à ( ^  )
ƒ à (  ) à ( )  à (  ) à ( )
ƒ (.7 5 )(.8 0 )  (.3 0 )(.2 0 )
ƒ .6 0  .0 6 ƒ .6 6
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* § theorem enables you, knowing just a little
more than the probability of A given B, to find the
probability of B given A.
* Based on the definition of conditional probability
and the law of total probability.
à(@ )
à( @) ƒ
à ( @)
à(@ ) Applying the law of total
ƒ probability to the denominator
à(@ )  à(@ )
à(@ )à( ) Applying the definition of
ƒ
à(@ )à( )  à(@ ) à( ) conditional probability throughout
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* A medical test for a rare disease (affecting 0.1% of the

population [ à ( ) ƒ 0.001 ]) is imperfect:
‰When administered to an ill person, the test will indicate so
with probability 0.92 [ à(
) ƒ .92  à(
) ƒ .08 ]
The event (
) is a 
§ 
‰When administered to a person who is not ill, the test will
erroneously give a positive result (false positive) with
probability 0.04 [ à(
) ƒ 0.04  à(
) ƒ 0.96 ]
The event (
) is a 
§ §. .
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%  

à ( ) ƒ 0.001 à( 
)
à(
) ƒ
à(
)
à( 
)
ƒ
à( 
)
à( 
)
à ( ) ƒ 0.999
à(
) à( )
ƒ
à(
) à( )
à(
) à( )
à (
) ƒ 0.92 ƒ
(.9 2 )( 0.0 0 1)
(.9 2 )( 0.0 0 1)
( 0.0 4 )(.9 9 9 )
0.0 0 0 9 2 0.0 0 0 9 2
ƒ ƒ
0.0 0 0 9 2
0.0 3 9 9 6 .0 4 0 8 8
à (
) ƒ 0.04
ƒ .0 2 2 5
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%  !(#

Prior Conditional Joint
Probabilities Probabilities Probabilities

à(  ) ƒ 092
. à(
 ) ƒ (0.001)(0.92) ƒ.00092

à(  ) ƒ 008
. à(
 ) ƒ (0.001)(0.08) ƒ.00008
à( ) ƒ 0001
.

à( ) ƒ 0999
. à(
) ƒ 004
. à(   ) ƒ (0.999)(0.04) ƒ.03996

à(
) ƒ 096
.

à(   ) ƒ (0.999)(0.96) ƒ.95904
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* iven a partition of events B1,B2 ,...,Bn:

à( @^ )
à( @) ƒ
1
1

à( @)
Applying the law of total
à( @^ ) probability to the denominator
ƒ 1

à( @^ )
Applying the definition of
à( @ ) à( ) conditional probability throughout
ƒ 1 1

 à( @ ) à( )
 Y Y

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w An economist believes that during periods of high economic growth, the U.S.
dollar appreciates with probability 0.70; in periods of moderate economic
growth, the dollar appreciates with probability 0.40; and during periods of
low economic growth, the dollar appreciates with probability 0.20.
w During any period of time, the probability of high economic growth is 0.30,
the probability of moderate economic growth is 0.50, and the probability of
low economic growth is 0.50.
w Suppose the dollar has been appreciating during the present period. What is
the probability we are experiencing a period of high economic growth?
 : Event A
Appreciation
- igh growth P( ) = 0.30 à ( @  ) ƒ 0.70
M - Moderate growth P(M) = 0.50 à ( @  ) ƒ 0.40
L - Low growth P(L) = 0.20 à ( @ ) ƒ 0.20
 Y 

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à(  @)
à( @) ƒ
à( @)
à(  @)
ƒ
à(  @)
à(   @)
à(   @)
à ( @ ) à( )
ƒ
à( @ ) à( )
à( @  ) à(  )
à( @ ) à( )
( 0.70)( 0.30)
ƒ
( 0.70)( 0.30)
( 0.40)( 050
. )
( 0.20)( 0.20)
0.21 0.21
ƒ ƒ
0.21
0.20
0.04 0.45
ƒ 0.467
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Prior Conditional Joint
Probabilities Probabilities Probabilities
à( @ ) ƒ 0. 70 à ( @   ) ƒ ( 0.30 )( 0. 70 ) ƒ 0. 21

à( @ ) ƒ 0.30
à (  ) ƒ 0 .3 0 à( @  ) ƒ ( 0.30 )( 0.30 ) ƒ 0. 09

à ( @  ) ƒ 0. 40 à ( @   ) ƒ ( 0.50)( 0. 40) ƒ 0. 20

à (  ) ƒ 0.50

à ( @  ) ƒ 0.60 à ( @   ) ƒ ( 0.50)( 0.60) ƒ 0.30

à ( @  ) ƒ 0. 20
à (  ) ƒ 0. 20 à ( @   ) ƒ ( 0. 20 )( 0. 20 ) ƒ 0. 04

à ( @  ) ƒ 0.80 à ( @   ) ƒ ( 0. 20 )( 0.80) ƒ 0.16

 Y 

Y   9  

w A joint probability table is similar to a contingency

table , except that it has probabilities in place of
frequencies.
w The joint probability for Example 2-11 is shown

below.
w The row totals and column totals are called

marginal probabilities.
 Y 

 9  

w A joint probability table is similar to a contingency

table , except that it has probabilities in place of
frequencies.
w The joint probability for Example 2-11 is shown on

the next slide.

w The row totals and column totals are called

marginal probabilities.
 Y 

 9  

,-# Y

w The joint probability table for Example 2-11

is summarized below.
o
    



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Y Y  
 
§
$   

 
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Marginal probabilities are the   
§ and the

  
§.
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