Quantitative Methods for Management (STAT 5002)

Chapter 6: Probability

Prepared by: M. Reza Peyghami

Humber College
 Outlines

➢ Assigning Probability to Events

➢ Joint, Marginal, and Conditional Probability

➢ Probability Rules and Trees

➢ Bayes’s Law
 Probability
It is often necessary to "guess" about the outcome of an event in order to make a
decision:
➢Politicians study polls to guess their likelihood of winning an election.

➢Doctors choose the treatments needed for various diseases based on their
assessment of likely results

➢You may have chosen your course of study based on the probable
availability of jobs

Probability deals with the chance of an event occurring. It is the branch of

mathematics concerning numerical descriptions of how likely an event is
to occur, or how likely it is that a proposition is true.
 Terminologies
➢ An experiment is an activity in which there are at least two possible
outcomes, and the result is uncertain.

➢ If the result is not predetermined, then the experiment is said to be a

chance (probability) experiment
o flipping a coin
o Rolling a six-sided die
o Selecting a card from a standard deck
o Rolling two dice
o Rotating a spinner
 Terminologies
➢ A result of an experiment is called an outcome
➢ The sample space of an experiment is the set of all possible outcomes.
➢ Three ways to represent a sample space are:
o to list the possible outcomes,
o to create a tree diagram,
o to create a Venn diagram
➢ The uppercase letter 𝑆 is used to denote the sample space
➢ An event is any combination of outcomes. Upper case letters like 𝐴 and 𝐵
represent events.
➢ A simple event is an outcome or an event that cannot be broken down into
simpler components
 Terminologies
➢ The probability of any outcome is the long-term relative frequency of that
outcome.
➢ Probabilities are between zero and one, inclusive
➢ Probability of an event 𝐴 is denoted by 𝑃(𝐴)
o 𝑃(𝐴) = 0 means the event 𝐴 can never happen.
o 𝑃(𝐴) = 1 means the event 𝐴 always happens
o 𝑃(𝐴) = 0.5 means the event 𝐴 is equally likely to occur or not to occur
For example, if you flip one fair coin repeatedly (from 20 to 2,000 to 20,000
times) the relative frequency of heads approaches 0.5 (the probability of
heads).
➢ Equally likely means that each outcome of an experiment occurs with equal
probability
✓ If you toss a fair, six-sided die, each face (1, 2, 3, 4, 5, or 6) is as likely to occur as any other
face.
✓ If you toss a fair coin, a Head (H) and a Tail (T) are equally likely to occur.
 Requirements of probabilities
➢ The list of outcomes must be exhaustive, which means that all possible outcomes must be
included.
➢ The outcomes must be mutually exclusive, which means that no two outcomes can
occur at the same time.

Requirements:

Given a sample space 𝑆 = {𝑂1 , 𝑂2 , … , 𝑂𝑘 }, the probabilities assigned to the outcomes must
satisfy two requirements:
➢ The probability of any outcome must lie between 0 and 1. That is,
𝟎 ≤ 𝑷 𝑶𝒊 ≤ 𝟏, 𝐟𝐨𝐫 𝐞𝐚𝐜𝐡 𝟏 ≤ 𝒊 ≤ 𝒌

➢ The sum of the probabilities of all the outcomes in a sample space must be 1. That is,
𝒌

෍ 𝑷 𝑶𝒊 = 𝟏
𝒊=𝟏
 Approaches to assigning probabilities
Rule 1: Relative Frequency Approximation of Probability (experimental probability)

Conduct (or observe) a procedure a large number of times, and count the number of
times that event 𝐴 actually occurs. Then 𝑃(𝐴) is estimated as follows:

number of outcomes A occured

𝑃 𝐴 =
total number of times trial is repeated

Example: Determine 𝑃(the tack lands point up), when tossing a tack.
Approaches to assigning probabilities
number of outcomes A occured
𝑃 𝐴 =
total number of times trial is repeated
 Approaches to assigning probabilities
Rule 2: Classical Approach to Probability (theoretical probability)
Assume that a given experiment has 𝑛 different simple events, each of which has an
equal chance (equally likely) of occurring. If event 𝐴 can occur in 𝑠 of these 𝑛 ways,
then
number of outcomes for event A 𝑁(𝐴) 𝑠
𝑃 𝐴 = = =
otal number of possible outcomes 𝑁(𝑆) 𝑛
where 𝑁(𝐴) is the number of outcomes in event 𝐴

Example:
➢ Determine P(head), when tossing a fair coin. [P(head) = 1/2]

➢ Determine P(5), when rolling a fair die. [P(5) = 1/6]

 Approaches to assigning probabilities
Rule 3: Subjective Probabilities
𝑃(𝐴), the probability of event 𝐴, is found by simply guessing or estimating its
value based on knowledge of the relevant circumstances.

Example:
➢Determine 𝑃(rain tomorrow), meteorologists use their expert knowledge of
weather conditions.

➢Another example is to ask New York Yankees fans, before the baseball season
starts, about the chances of New York winning the World Series. While there is no
absolute mathematical proof behind the answer to the example, fans might still
reply in actual percentage terms, such as the Yankees having a 25% chance of
winning the World Series.
 Probability of an event
• The probability of an event is the sum of the probabilities of the simple events that
constitute the event.

Example. Assume that the grades 𝐴, 𝐵, 𝐶, 𝐷 and 𝐹 on a statistics test have been recorded
and the relative frequencies are computed as follows:
𝑃(𝐴) = 0.20, 𝑃(𝐵) = 0.30, 𝑃(𝐶) = 0.25, 𝑃(𝐷) = 0.15, 𝑃(𝐹) = 0.10
Find the probability of the event, pass the course.

𝑃 𝐩𝐚𝐬𝐬 𝐭𝐡𝐞 𝐜𝐨𝐮𝐫𝐬𝐞 =

Note. No matter what method was used to assign probability, we interpret it using the relative
frequency approach for an infinite number of experiments.
 Example
Assume that two dice have been rolled.
1. List all the elements of the sample space
2. Find the probability that the sum of two outcomes is 5.
 Joint, marginal and conditional probabilities
➢ Intersection of Events A and B (joint probability)

• The intersection of events 𝐴 and 𝐵 is the event that occurs when both
𝑨 𝐚𝐧𝐝 𝑩 occur. It is denoted as
𝐴 and 𝐵, (for this situation it means; 𝑨 𝐣𝐨𝐢𝐧𝐭 𝑩)

• The probability of the intersection is called the joint probability.

𝑃(𝐴 and 𝐵) = 𝑃(𝐴 joint 𝐵) = 𝑃(𝐴 ∩ 𝐵)
 Joint, marginal and conditional probabilities
➢ Union of Events A and B
• The union of events 𝐴 and 𝐵 is the event that occurs when either 𝑨 𝐨𝐫 𝑩 or both
occur. It is denoted as
𝐴 or 𝐵, (for this situation it means; including 𝑨, 𝑩, 𝑨 𝐣𝐨𝐢𝐧𝐭 𝑩)

• The probability of the union is called the union probability.

𝑃(𝐴 or 𝐵) = 𝑃(𝐴 ∪ 𝐵)
 Joint, marginal and conditional probabilities
➢ Complement Event A
• for event 𝐴, it is denoted by 𝐴′ (read "𝐴 prime") or 𝐴𝑐 or 𝐴.ҧ 𝐴′ consists of all
outcomes that are NOT in 𝐴.

𝑃 𝐴′ = 1 − 𝑃(𝐴)

Compound Event: A compound event is any event combining two or more simple events.
 Some formulas

➢ Addition rule (in general):

𝑃 𝐴 𝐨𝐫 𝐵 = 𝑃 𝐴 + 𝑃 𝐵 − 𝑃(𝐴 𝐚𝐧𝐝 𝐵)

➢ Addition rule (mutually exclusive events):

In case 𝐴 and 𝐵 are distinct (mutually exclusive) events, i.e., 𝐴 ∩ 𝐵 = {}, then
𝑃 𝐴 𝐨𝐫 𝐵 = 𝑃 𝐴 + 𝑃 𝐵

➢ Complement rule:
𝑃 𝐴′ = 1 − 𝑃(𝐴)
 Example
➢ Let’s flip a coin. Find the probability that the outcome is either head or tail.

➢ Now, let’s flip a coin twice (or flipping 2 coins at the same time). What is the probability
of getting at least one head?
 Example
Consider a standard deck of 52 cards. We select a card randomly from the deck. Find the
probability that the selected card is either diamond or Queen.
 Example
The Humber Bookstore has found that in the past 35% of sales include notepads, 75% include
textbooks and 20% include both textbooks and notepads.
1. What is the probability that a sale will include notepads or textbooks?
2. Determine the probability that a sale will include textbooks but not notepads.
3. Determine the probability that a sale will include not notepads and not textbooks.
 Example
There are 30 female students and 20 male students in a STAT class.
1. What is the probability to select one student who is a female student?
2. What is the probability to select one student who is not a female student?
 Example
There are 5 red gumballs, 4 blue gumballs, 3 yellow gumballs and 2 green gumballs in a
gumball machine.
1. What is the probability of choosing a red gumball?
2. What is the probability that a red gumball will not be chosen?
 Contingency table (joint probabilities)
Contingency tables are a great way to classify outcomes and calculate different types of
probabilities. These tables contain rows and columns that display bivariate frequencies of
categorical data.

In a survey, the following data are collected from experimental and control groups to test
Advil.

Advil Placebo Control Group Totals

Headache 50 48 24 122
No Headache 732 616 602 1950
Totals 782 664 626 2072
 Contingency table (joint probabilities)

Advil Placebo Control Group Totals

Headache 50 48 24 122
2072 2072 2072 2072
No Headache 732 616 602 1950
2072 2072 2072 2072
Totals 782 664 626 2072
=1
2072 2072 2072 2072

joint marginal
probabilities probabilities

Marginal probabilities, computed by adding across

rows or down columns, are so named because they are
calculated in the margins of the table.
 Multiplication rule
➢ Independent outcomes: Two events, 𝐴 and 𝐵, are independent if the occurrence of
one does not affect the probability of the occurrence of the other.

Multiplication rule for independent events: 𝑃 𝐴 𝐚𝐧𝐝 𝐵 = 𝑃(𝐴) × 𝑃(𝐵)

Note. In the experiments “with replacement” we have independent events.

➢ Dependent outcomes: If 𝐴 and 𝐵 are not independent, they are said to be dependent.

Multiplication rule for dependent events: 𝑃 𝐴 𝐚𝐧𝐝 𝐵 = 𝑃(𝐴) × 𝑃(𝐵|𝐴)

where 𝑃(𝐵|𝐴) is the conditional probability (will be discussed later!).
Note. In the experiments “without replacement” we have dependent events.
 Multiplication rule
Consider the following contingency table:
Advil Placebo Control Group Totals
Headache 50 48 24 122
No Headache 732 616 602 1950
Totals 782 664 626 2072

a) Randomly select ONE person. What is the probability that the selected person
has headache and uses Advil.

Solution.
 Multiplication rule
Consider the following contingency table:
Advil Placebo Control Group Totals
Headache 50 48 24 122
No Headache 732 616 602 1950
Totals 782 664 626 2072

b) Randomly select TWO persons with replacement. What is the probability that
the selected persons are from control group.

Solution.
 Multiplication rule
Consider the following contingency table:
Advil Placebo Control Group Totals
Headache 50 48 24 122
No Headache 732 616 602 1950
Totals 782 664 626 2072

c) Randomly select TWO persons without replacement. What is the probability

that the selected persons are from Placebo group.

Solution.
 Conditional Probability
➢ A conditional probability of an event applies when the probability is affected by the
other events.
➢ 𝑃(𝐵|𝐴) represents the probability of 𝐵 occurring after it is assumed that the event 𝐴
has already occurred.
➢ 𝑃(𝐵|𝐴) (We can read 𝐵|𝐴 as “𝐵 given 𝐴”) can be found by dividing the probability of
events 𝐴 𝐚𝐧𝐝 𝐵 both occurring by the probability of event 𝐴.

𝑃(𝐵 𝐚𝐧𝐝 𝐴) 𝑃(𝐵 𝐣𝐨𝐢𝐧𝐭 𝐴)

𝑃 𝐵𝐴 = =
𝑃(𝐴) 𝑃(𝐴)

Keywords:
Given that …, Suppose that …, Assume that …
 Example
Consider the following contingency table:
Advil Placebo Control Group Totals
Headache 50 48 24 122
No Headache 732 616 602 1950
Totals 782 664 626 2072

a) If a person is randomly selected, what is the likelihood that he/she got headache,
given that the person in placebo group is selected?
b) Given that a person in headache group is selected, what is the probability that
the person got Advil?
 Example
Solution a) Advil Placebo Control Group Totals
Headache 50 𝟒𝟖 24 122
No Headache 732 616 602 1950
Totals 782 𝟔𝟔𝟒 626 𝟐𝟎𝟕𝟐
 Example
Solution b) Advil Placebo Control Group Totals
Headache 𝟓𝟎 48 24 𝟏𝟐𝟐
No Headache 732 616 602 1950
Totals 782 664 626 𝟐𝟎𝟕𝟐
 Example
Consider the following contingency table:
Advil Placebo Control Group Totals
Headache 50 48 24 122
No Headache 732 616 602 1950
Totals 782 664 626 2072

If a person is randomly selected, what is the likelihood that he/she got no headache, or
Advil?

Solution. We use the addition rule:

Example
 Mutually exclusive events
Events A and B are mutually exclusive if they cannot occur simultaneously.
𝑃(𝐴 𝐨𝐫 𝐵) = 𝑃(𝐴) + 𝑃(𝐵)

The following Venn Diagram Shows Non-overlapping Events

 Example
Consider the following contingency table:
Advil Placebo Control Group Totals
Headache 50 48 24 122
No Headache 732 616 602 1950
Totals 782 664 626 2072

If a person is randomly selected, what is the likelihood that he/she is in Placebo or Control
groups?
Solution. Two events are mutually exclusive:
 Example – Practice at home
Suppose a study of speeding violations and drivers who use cell phones produced the following fictional
data:

a) What is the probability of selecting a person in a car phone user?

b) What is the probability of randomly selecting a person who had no speeding violation in the last year?
c) What is the probability of randomly selecting a person who had no speeding violation in the last year
but was a car phone user?
d) What is the probability of selecting two persons who are in car phone user?
e) What is the probability of selecting a person who is a car phone user, or a person had no speeding
violation in the last year?
f) What is the probability of selecting a person who in a car phone user or person was not a car phone
user?
g) What is the probability of randomly selecting a person who is a car phone user given that person had a
speeding violation in the last year?
Example – Practice at home (solution)
 Probability tree diagram
• A tree diagram is a picture of all the possible outcomes of an experiment.

• It consists of nodes and branches. The end node is called a leaf.

• These diagrams are helpful in counting the number of possible outcomes if the
number of possible is not too large.

• Tree diagrams can be used to visualize and solve conditional probabilities.

➢ At the branches, we have the conditional probabilities
➢ At leaf node, we multiply the probabilities along the branches
 Basic Example
A couple plans to have two children, each child has two genders boy (B) or girl (G).
Find the probability of one boy and one girl.
 Basic Example
A couple plans to have two children, each child has two genders boy (B) or girl (G).
Find the probability of one boy and one girl.

P(1 Boy and 1 Girl) = P(B and G) + P(G and B) = 0.25 + 0.25 = 0.50
 Example
An insurance company survey shows that 90% of Ontario drivers/passengers wear seatbelt. For
those who wear seatbelt, it is estimated that the chance of getting a serious injury in a car
accident is 20% whereas those who do not have a 60 % chance of getting a serious injury.
a) Draw a probability tree diagram. Show all possible outcomes and probabilities.
b) What is the probability that the driver/passenger suffers serious injury in a car
accident?
c) If there is a serious injury, find the probability that the driver/passenger does not wear
seatbelt.

Solution. Some information and facts:

P(Seatbelt) = 90% = 0.90 P(no Seatbelt) = 10% = 0.10

P(Injury | seatbelt) = 20% = 0.20 P(no Injury | seatbelt) = 80% = 0.80

P(Injury | no Seatbelt) = 60% = 0.60 P(no Injury | no Seatbelt) = 40% = 0.40

 Example
a)

b)
𝑃 serious injury = 𝑃 seatbelt and serious injury + 𝑃 no seatbelt and serious injury
= 0.18 + 0.06 = 0.24
c)
𝑃 no seatbelt joint serious injury 0.06
𝑃(no seatbelt | serious injury) = =
𝑃 serious injury 0.06 + 0.18
0.06
= = 0.25
0.24
 Bayes’s law (Optional)
Bayes’s theorem (Bayes's law or Bayes's rule) describes the probability of an event, based on prior
knowledge of conditional probabilities that might be related to the event.
Reading Materials.
Please study Chapter 6 – Probability from the official textbook.
Also, please see extra examples at the end of Chapter 6 (notes) posted on the
course page.

You may wish to practice the following suggested problems from Chapter 6

Exercise 6.1: Questions 6.5, 6.8

Exercise 6.2: Questions 6.32, 6.34, 6.36, 6.44, 6.48, 6.50, 6.52, 6.54
Exercise 6.3: Questions 6.64, 6.66, 6.68