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Chapter 4 Inferential Statistics Probabilities

This document summarizes key probability concepts and Bayes' theorem. It defines deterministic and probabilistic models, and explains that probability measures uncertainty. It describes basic probability terms like events, experiments, sample spaces, mutually exclusive events, and collectively exhaustive lists. It also discusses odds, relative frequency, and subjective probability approaches. Finally, it introduces Bayes' theorem as a method for revising probability estimates based on new information.

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Harsh
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34 views53 pages

Chapter 4 Inferential Statistics Probabilities

This document summarizes key probability concepts and Bayes' theorem. It defines deterministic and probabilistic models, and explains that probability measures uncertainty. It describes basic probability terms like events, experiments, sample spaces, mutually exclusive events, and collectively exhaustive lists. It also discusses odds, relative frequency, and subjective probability approaches. Finally, it introduces Bayes' theorem as a method for revising probability estimates based on new information.

Uploaded by

Harsh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Chapter 4: Probability Basics

and Bayes Theorem of revising


probabilities
Prof. Arnab Chakraborty
Basic Terms
• Deterministic Models – Covers those situations where everything
related to the situation is known with certainty to the decision maker
when the decision is to be made
• In these models descriptive statistics or frequency distribution measures are used
to arrive at a decision
• Random or Probabilistic Models – the totality of the outcomes is
known but it cannot be certain about which outcome will appear. So
there is always some uncertainty involved in decision making
• In these models probability and probability distributions are used to arrive at a
decision. So probability can also be defined as a measure of uncertainty
Basic Terms
• In general probability is the chance that something will happen. It is
either expressed in fractions or decimals. A probability of 0 means the
event will never occur. And a probability of 1 means the event will surely
occur
• Event – In probability an event is one or more of the possible outcomes
of doing something. If we toss a coin getting a tail would be an event.
Even you getting picked to answer a question out of the 60 students is
also an event. Even when we here the frightening predictions of highway
accidents we hope not to be one of those events.
• Experiment – The activity which produces such an event as mentioned
above is referred to in probability as an experiment
Basic Terms
• Using this formal language we can ask the question – “In a coin toss
experiment what is the probability of the event head?” And if it is a fair
coin with an equal chance of coming down on either side then we would
answer “1/2” or “.5”
• Sample Space – The set of all possible outcomes of an experiment is
known as the sample space for the experiment. In the coin toss
experiment the sample pace is S={head, tail}
• In a card drawing experiment the sample space has 52 members
• Mutually exclusive events – Events are said to be mutually exclusive if
one and only one of them can take place at a time
Basic Terms
• Collectively Exhaustive List – When a list of the possible events that can
result from an experiment includes every possible outcome the list is said to be
collectively exhaustive
• Odds in favor and against – Let us consider that total number of possible
outcomes related to the situation is “N” , out of them “m” are the number of
outcomes where the desired event “E” has occurred. So “N-m” is the number
of outcomes where the desired event has not occurred. Hence we may define
–
• Odds in favor of happening of E = m : N-m
• Odds against the happening of E = N-m : m
• This concept is related to the concept of probability as –
• Probability of happening of event E = m/N
Relative Frequency Approach
Subjective Probability Approach
Baye’s Theorem for Revising Probability
Estimates
End of Chapter 4

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