Probability

- The numeric value representing the chance, likelihood, or a possibility that a particular event
will occur, such as the price of a stock increasing, a rainy day, a defective product, or the
outcome of five dots in a single toss of a die.
- The likelihood or chance of an event occurring, expressed as a number between 0 (indicating
impossibility) and 1 (indicating certainty).
- Probability is putting a quantity on the chance that something will occur. Say for example us
saying that there is a 100% chance that it will rain because of the current weather condition. So
that certainty, which is expressed in terms of quantity, which is 100%, is the probability. Another
example is that, in a game of tossing where we will bet which side will land, we know that there
is a 50% chance that it will land as a head, and there is also a 50% chance that it will land as a
tail. Where did that 50% came from?
- Businesses uses probability in making decisions by helping organizations assess risks, make
predictions, allocate resources, and prioritize actions.
- Let’s check out the formula for the probability, probability with a symbol of P, is equal to X
which is the number of ways in which the event occurs divided by T which is the total number of
possible outcomes.
- In the coin tossing example, the probability that a head will occur is equal to
- P = ½ = 0.5 or 50%
- We have three types of probability, the priori, empirical, and subjective probability.
- Priori probability is an approach to determine the probability when the possible outcomes is
known. So in our previous example, the number of possible outcomes for a dice to land head is
known which is 1, so that is an example of a priori probability.
- Another type is the empirical probability, it is used when the data that will be used is coming
from an observed sample. So probability from a survey questionnaire is an example of this.
- And then the last approach, we have the so called subjective probability. We use this approach
when the probability we have came from personal opinion that is why its called subjective,
because it depends on each person. This type is greatly affected by a person’s optimism. So an
example of this is when I say, I have a great feeling about this new dish, I would definitely say it
will succeed 100%. That certainty, 100%, is the subjective probability.
- Lets move on the basic elements of probability. First one we have Event, each possible outcome
is referred to an event. Let’s say the chance that the coin will land head, that is an event. And
the chance that the coin will land tail is also an event. Another example is a die, we know that
there are 6 sides of a die right? So there are also a total number of 6 events that could occur
when you roll a die, 1dot, 2dot, 3dot, 4dot, 5dot, 6dot. If we sum this all, we could say that there
are 6 events that could occur when you roll a die. That is for the simple event.
- For the joint event, lets define it first. A joint event is an event that has two or more
characteristics. It is the occurrence of multiple elements happening together. When you say you
toss two coins together, the occurrence of two heads is a joint event. Another example is when
you toss a coin and it lands as head at first toss and tail at second toss, that is also a joint event
because you have two different events but expecting a single outcome.
- Lets move on to the definition of complement, complement refers to the event that event A
does not occur and it is denoted as A’. So it includes all events that does not include event A.
- The complement of five dots on a die is not getting five dots. Not getting five dots consists of
getting one, two, three, four, or six dots.
- And then lastly, we have here Sample Space. Sample space is defined as the collection of all
possible events.
- Lets use take a look at this survey data. We have here a result from a survey conducted to
determine the number of respondents who planned to purchase a television and actually
purchased it.

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- The sample space consists of the 1,000 respondents. Simple events are “planned to purchase,”
“did not plan to purchase,” “purchased,” and “did not purchase.” The complement of the event
“planned to purchase” is “did not plan to purchase.” The event “planned to purchase and
actually purchased” is a joint event because in this joint event the respondent must plan to
purchase the television and actually purchase it.
- That’s it for the Basic Elements of Probability, let’s then discuss the tables and diagrams. We
have two different charts to illustrate out data, the contingency tables and venn diagrams. Our
previous example is an example of a contingency table. You get the values in the cells of the
table by subdividing the sample space of 1,000 households according to whether someone
planned to purchase and actually purchased a big-screen television set. For example, 200 of the
respondents planned to purchase a big-screen television set and subsequently did purchase the
big-screen television set.