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Lecture 3: A Survey of
Probability Concepts

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Outline
• Define probability
• Describe the classical, empirical, and subjective
approaches to probability
• Understand the terms: experiment, outcome, event,
permutations, and combinations
• Define the terms: conditional probability and joint
probability
• Calculate probabilities applying the rules of addition and
the rules of multiplication
• Use a tree diagram to organize and compute
probabilities

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Probability: Definition

A probability is a measure of the likelihood that an

event in the future will happen

A value between zero and one,

inclusive, describing the relative
possibility (chance or likelihood)
an event will occur.

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Three Key Words

 An experiment is the observation of some activity or the act of
taking some measurement
 An outcome is the particular result of an experiment.
 An event is the collection of one or more outcomes of an
experiment.
experiment

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Mutually Exclusive Events

Events are Mutually Events are Independent if the
Exclusive if the occurrence of one event does
occurrence of any one not affect the occurrence of
event means that none another.
of the others can occur
at the same time.
Independence: Rolling a 2
on the first throw does not
Mutually exclusive: influence the probability of a
Rolling a 2 precludes 3 on the next throw. It is still
rolling a 1, 3, 4, 5, 6 on a one in 6 chance.
the same roll.

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Collectively Exhaustive Events

Events are Collectively Exhaustive if at
least one of the events must occur when
an experiment is conducted

The sum of probabilities of all collectively exhaustive and

mutually exclusive events is 1.0 (or 100%)

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Assigning Probabilities
There are three definitions of probability: classical,
empirical, and subjective.

The Classical The Empirical Subjective

definition probability is probability is
applies when based on relative based on
there are n frequency. whatever
equally likely information is
outcomes.
t available.
il bl

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Classical Probability
• The classical method of computing probabilities requires
equally likely outcomes.
• An experiment is said to have equally likely outcomes
when each simple event has the same probability of
occurring.

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Example 1
Consider an experiment of rolling a six-sided die. What
is the probability of the event “an even number of spots
appear face up”?
Th possible
The ibl outcomes are:

There are three “favorable” outcomes (a two, a four,

and a six) in the collection of six equally likely possible
outcomes.
Probability of an even number = 3/6 = 0.5
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Empirical Probability
• The probability of an event happening is the fraction of
the time similar events happened in the past.

The empirical approach to probability is based on what is called

the law of large numbers. The key to establishing probabilities
empirically is that more observations will provide a more accurate
estimate of the probability.

Probabilit y of Number of times event occured in past

event happening 
Total number of observatio ns

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Example 2

On February 1, 2003, the Space Shuttle Columbia

exploded. This was the second disaster in 113 space
missions for NASA.
NASA On the basis of this information,
information
what is the probability that a future mission is
successfully completed?

Numberof successful flights

Probability of a successful flight 
111 Total number of flights
  0.98
113

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Example 3
Throughout her
teaching career This is an example of the
Professor Jones empirical definition of
has awarded 186 probability.
A’s out of 1,200 Tofind the probability a
students. What selected student earned an A:
is the probability
that a student in
h section
her ti thi
this
186
semester will P( A)   0.155
receive an A? 1200

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Subjective Probability
• The likelihood (probability) of a particular event
happening is assigned by an individual based on
whatever information is available.
available

• If there is little or no past experience or information on

which to base a probability, it may be arrived at
subjectively.

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Illustrations of Subjective
Probability

Estimating
g the p
probabilityy the Bangladesh
g
Cricket Team will win the World Cup 2023.

Estimating the probability mortgage rates

for home loans will top 8 percent.

E ti ti
Estimating th likelihood
the lik lih d you will
ill be
b
married before the age of 30.

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Summary of Types of Probability

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Basic Rules of Probability

Rules of Addition
• Special Rule of Addition - If two
events A and B are mutually
exclusive:
P(A or B) = P(A) + P(B)

• The General Rule of Addition - If A

and B are two events that are not
mutually exclusive:
P(A
( or B)) = P(A)
( ) + P(B)
( ) - P(A
( and B))

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Example 4
New England Commuter Airways recently supplied the following
information on their commuter flights from Boston to New York:

Arrival Frequency
q y
Early 100
On Time 800
Late 75
Canceled 25
Total 1000

What is the probability that a flight is either early or late?

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Example 4 (cont’d)
If A is the event that
If B is the event that a
a flight arrives
flight arrives late, then
early then P(A) =
early,
P(B) = 75/1000
/1000 = .075.
0
100/1000 = .10.

The probability that a flight is either early or

late is:
P(A or B) = P(A) + P(B) = .10 + .075 =.175.
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Example 5
In a sample of 500 students, 320 said they had a
stereo, 175 said they had a TV, and 100 said they
had both. 5 said they had neither.

TV
175
Both
Stereo 100
320

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Example 5 (cont’d)
What is the probability that the student
has both a stereo and TV?
If a student is selected at random, what is
the probability that the student has only a
stereo or TV?

P(S and TV) = 100/500

= 0.20
P(S or TV) = P(S) + P(TV) - P(S and TV)
= 320/500 + 175/500 – 100/500
= 0.79.
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The Complement Rule

The Complement Rule is used to determine

the probability
y of an event occurringg by
y subtractingg
the probability of the event not occurring from 1.

If P(A) is the probability of event A and P(A’) is the

complement of A,
P(A) + P(A’) = 1 or P(A) = 1 - P(A’)

Notice that the events A and A’ are mutually exclusive and

collectively exhaustive.

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The Complement Rule (cont’d)

A Venn Diagram illustrating the complement

rule
l would
ld appear as:

A
A’
A

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Example 6
A sample of employees of Worldwide Enterprises is to be surveyed about
a new health care plan. The employees are classified as follows:

(a) What is the probability that the first person selected is:
((i)) either in maintenance or a secretary?
y
(ii) not in management?
(b) Draw a Venn diagram illustrating your answers to part (a).
(c) Are the events in part (a)(i) complementary or mutually exclusive or
both?

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Example 6 (cont’d)

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Joint Probability
A Joint Probability measures the
likelihood that two or more events will
happen concurrently.
concurrently

An example would
be the event that a
student has both
a stereo and TV in
his or her dorm
room.

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Special Rule of Multiplication

The Special Rule of

p
Multiplication requires
q that two
events A and B are independent.

Two events A and B are independent if the

occurrence of one has no effect on the
probability
p y of the occurrence of the other.

This rule is written: P(A and B) = P(A)P(B)

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Example 7
Chris owns two stocks,
IBM 5-year stock prices
IBM and General Electric GE

(GE). The probability that 45

40
IBM stock
t k will
ill increase
i i
in 35

value next year is 0.5 and 30

Sto ck price $
25
the probability that GE 20
15
stock will increase in 10
value next year is 0.7. 5
0
Assume the two stocks 1 2 3 4 5

are independent.
independent What is Year

the probability that both

stocks will increase in
value next year?
P(IBM and GE) = (.5)(.7) = 0.35

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Example 7 (cont’d)

What is the probability P(at least one)

that at least one of = P(IBM but not GE)
these stocks increase + P(GE but not IBM)
in value in the next + P(IBM and GE)
year? This means that
either one can
increase or both. (0.5)(1 - 0.7)
+ (0.7)(1
(0 7)(1 - 0.5)
0 5)
+ (0.7)(0.5)
= 0.85

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Conditional Probability

A Conditional Probability is the

probability
p y of a p
particular event
occurring, given that another event has
occurred.

The probability of
event A occurring
given
i that
th t the
th eventt
B has occurred is
written P(A|B).

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General Multiplication Rule

The General The joint probability,

Rule of P(A and B), is given by
Multiplication the following formula:
is used to find the
joint probability that P(A and B) = P(A)P(B/A)
two events will or
occur. P(A and B) = P(B)P(A/B)

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Example 8
A golfer has 12 golf shirts in his closet. Suppose 9 of
these shirts are white and the others blue. He gets
dressed in the dark, so he just grabs a shirt and puts it
on He plays golf two days in a row and does not do
on.
laundry. What is the likelihood both shirts selected are
white?

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General Multiplication Rule for

more than two events

In the case of the golf shirt example, the probability

of selecting three white shirts
without replacement is:

So the likelihood of selecting three shirts without

replacement and all being white is .38.

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Contingency Tables
A contingency table is used
to classify observations
according to two identifiable
characteristics.

Contingency tables are used

when one or both variables are
nominally scaled.

A contingency
ti t bl iis a
table
cross tabulation that
simultaneously summarizes
two variables of interest and
their relationship.
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Example 9
The Dean of the School of Business at Owens
University collected the following information
about undergraduate students in her college:
Major Male Female Total
Accounting 170 110 280

Finance 120 100 220

Marketing
g 160 70 230

Management 150 120 270

Total 600 400 1000

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Example 9 (cont’d)
If a student is selected at random, what
is the probability that the student is a
female (F) accounting major (A)?
P(A and F) = 110/1000.

Given that the student is a

female, what is the
probability that she is an
accounting major?

P(A|F) = P(A and F)/P(F)

= [110/1000]/[400/1000] = 0.275
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Tree Diagrams

A Tree Diagram is useful for portraying conditional

and joint probabilities. It is particularly useful for
analyzing business decisions involving several
stages.

• A Tree Diagram is helpful in organizing

calculations that involve several stages.
• Each segment in the tree is one stage of
problem.
• The branches of a tree diagram are
weighted by probabilities.

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Example 10
In a bag containing 7 red chips and 5 blue chips you
select 2 chips one after the other without replacement.
Construct a tree diagram showing this information.

6/11 R2

7/12 R1
5/11 B2
7/11
R2
5/12 B1
4/11 B2

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Example 11
Loyalty of Executives and Length of Service with Company shown in
the table below. What is the probability of randomly selecting an
executive who is loyal to the company and who has more than 10
yyears of service.
Length of Service
Less 1-5 6-10 More
than 1 years years than 10
year years
B1 B2 B3 B4
Loyalty Total
Would 10 30 5 75 120
remain, A1
Would not 25 15 10 30 80
remain, A2
35 45 15 105 200

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Example 11 (Cont’d)

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Some Principles of Counting

The Multiplication
Formula indicates that if
there are m ways of doing Example
p 13:
one thing
thi and d n ways off Dr. Delong has
doing another thing, there 10 shirts and 8
are m x n ways of doing
ties. How many
both.
shirt and tie
outfits does he
have?

(10)(8) = 80

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Some Principles of Counting

(cont’d)

A Permutation is any arrangement of r

objects selected from n possible objects.

Note: The order of arrangement is

important in permutations.

n!
n Pr 
n  r !
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Some Principles of Counting

(cont’d)
A
Combination n!
is the number of nCr 
r!(n  r )!
ways to choose r
objects from a
group of n
objects without
regard to order.

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Example 14
There are 12 players
on the Carolina Forest
High School
basketball team.
Coach Thompson
must pick five players
among the twelve on
the team to comprise
the starting lineup. 12!
H
How many diff
differentt 12C 5   792
groups are possible? 5! (12  5)!
(Order does not
matter.)

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Example 14 (cont’d)
Suppose that in
addition to
selecting the
group, he must
also rank each
of the players
in that starting 12!
12 P5  95 ,040
lineup
eup (12  5 )!
according to
their ability
(order matters).

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Practice Problems

• Problems 3, 5 (Page 152)

• Problem
P bl 9 (Page
(P 153)
• Problems 13, 15, 18, 21 (Pages 158-159)

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Assignment-2

• Problem 22 (Page 159)

• Problems 24,
24 26,
26 27,
27 29 (Page 166)

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