Probability (Mar. 3, 2023 - Business Stats)
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TaniyaProbability (Mar. 3, 2023 - Business Stats)
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TaniyaProbability
It is a numerical measurement that measures what are the chances an event will occur. The values
used are always assigned in between from 0 to 1, inclusive. For example, it will rain tomorrow, it will
report that there is a .90 possibility that it will likely rain tomorrow. While a near zero number of
probability means that there is almost no chance of raining.
Experiment- is any process that generates number of outcomes.
Example: When you toss a coin for an experiment it will either have a two outcomes of whether it
will go to head or a tail. The two outcomes of that experiment is called a sample space.
While a singular outcome is called a sample point.
Counting Rule for Multiple-Step experiments
If there an experiment that consist of many sequence the first step will be called n1 which consist
of the possible results of that step while the possible results for the next step is called n2 . As for
the last step that is unknown it will be nk. Hence, the outcomes will be given as (n1) (n2) . . . (nk).
To fully understand it we look at this tree diagram of tossing a coin for two times.
The tossing has two steps which is the 1 st toss and the 2nd toss. The outcome for the 1st toss will be n1
and the 2nd will be n2. And each of these tosses has 2 possible complete times.
Hence,
1st toss n1= 2
2nd toss n2= 2
Total No. of Experimental Outcomes n1n2 = (2)(2) = 4
Assigning Probabilities
In assigning probabilities, we have these two basic requirements.
1.) The probability assigned to the experimental outcome should be between 0 and 1, inclusively.
0 ≤ P( E i )≤ 1
where: Ei is the ith experimental outcome; P(Ei) is its probability.
2.) The sum of all the probabilities of the experimental outcomes must be equal to 1.
Methods of Assigning Probabilities
Classical Method- the way of assigning the probabilities assumes that the result of those has
“equally likely outcomes”.
Relative Frequency Method- the way of assigning the probabilities is based on “experimentation or
historical data”. It can also be based on the observation of an individual that doesn’t require his
judgement.
Subjective Method- the way of assigning the probabilities is based on “judgement”. This is use when
it is inappropriate to use data based on historical data like in an economic condition of the company
or if the data should be based on our experiences or intuition. Since, the data used is subject to a
person’s belief, it is personal.
Event and Their Probabilities
Event- collection of sample points that meet the criteria of the event.
Probability of any event- is equal to the sum of the probabilities of sample points belong to the
event.
Some Basic Relationships of Probability
There are some basic probability relationships that can be used to compute the probability of an
event without knowledge of all the sample point probabilities.
a.) Complement of an Event A- it is an event that has all the sample points that don’t belong to
Event A. It is denoted by Ac. And it has an equation of P(A) + P (Ac) = 1
Note: Those in the sample space which is the rectangular represents all of the possible sample
points. While those in the shaded part belongs to the event that consist of sample points that don’t
belong to Event A. And those in the circle belongs to Event A.
b.) Union of Two Events
The union which is the merging of events of A and B is the event that has all sample points that
are either in A or B or both. It is denoted by AυB.
c.) Intersection of Two Events- when two circles overlap, that part where they overlap is the
intersection which contains all the sample points that are both in A and B. It is donated by A∩B.
d.) Mutually Exclusive Events- two events are mutually exclusive if the events have no sample
points in common which means one event occurs while the other cannot. It is denoted by
P(A∩B)= 0.
e.) Conditional Probability- an event will occur if the other event also happens. The conditional
probability of A given B is denoted by P(A|B). It is computed as follows:
P( A ∩ B) P( A ∩ B)
P( A∨B)= ∨P(B∨ A)=
P(B) P( A )
Independent Events- if the probability of one event which is Event A is not changed the existence of
event B, then Event A and B are independent to each other. It is independent two each other if P(A|
B) = P(A) or P(B|A) = P(B)
Multiplication Law- if two events came from the same sample space, the probability that both A and B
occur is equal to the probability the event A occurs times the probability that B occurs, given that A
has occurred. It also provides a way to compute the probability of the intersection of two events. The
law is written as: P(A∩B) = P(B)P(A|B)
Addition Law- provides a way to compute the probability of event A, or B, or both A and B occurring.
The law is written as: P(AυB) = P(A) + P(B) - P(A∩B). The first two terms P(A) + P(B) has all the sample
points in (AυB), however the sample points on the A∩B was already in it and will be counted twice. It
will correct if we subtract P(A∩B).
