SDM 8US209 BIS SDIT Week 3 OT BUS_209 Pro Introduction 40 Probability: tobability is essential j inti sential in by cision. i i . allows businesses tg ee nies decision-making ast helps quantify and analyze uncertainties css risks, evaluate alternatives, make predictions, and improve processes. 10 different outcomes, businesses can estimate the likelihood of events, 8, and make informed decisions based on data-driven analysis. Probability “Assessment, forecasting, investment evaluation, quality control, marketing, and esses {0 manage uncertainties effectively and improve overall performance. By assigning probabilities calculate expected value lays a role in risk sales, enabling bus Probability is a numerical me asure of the likelihood of an event occurring, It quantifies uncertainty and ranges from 0 (impos ng ible) to 1 (certain). For example, flipping a fair coin has a 50% Probability of heads or tails, rolling a fair die has a 1/6 or approximately 16.7% probability for cach number, and drawing a spade from a standard deck has a 1/4 or 25% probability. Probability nables us to analyze and prediet outcomes in a wide range of scenarios. Here are some additional examples of probability: Lottery: In a lottery with 100 numbered balls, if only one ball is drawn, the probability of any specific number. being drawn is 1/100 or 1%. Each ball has an equal chance of being selected. Weather Forecast: A weather forecast predicts a 70% chance of sunshine tomorrow. This means that, based on historical data or meteorological models, there is a 70% probability of sunny weather occurring, Stock Market: When analyzing stock market trends, investors might assess the probability of a Particular stock increasing or decreasing in value based on historical data, market conditions, and other factors. Medical Diagnoses: Probability is used in medical diagnoses to assess the likelihood of a Patient having a certain condition based on symptoms, medical history, and test results. For example, a doctor might estimate the probability of a patient having a specific disease based on statistical data and diagnostic tests. Sports: Probability is applied in sports betting to determine the odds of a particular team winning ‘a game or a player scoring a goal. Bookmakers calculate these probabilities to set the odds and determine payouts.These examples illustrate how probability is used in various contexts, ranging from games oy chance to real-world applications such as weather forecasting, finance, and healthcare. Probability allows us to assess and understand the likelihood of different outcomes, enabling informed decision-making and analysis. Experiments and Sample Spac In probability theory, experiments and sample spaces are fundamental concepts used to analyze and study random events. Experiment: An experiment is a process or activity that generates uncertain outcomes. It could be physical or conceptual action, such as flipping a coin, rolling a die, conducting a survey, or phy’ epi pp observing the behavior of a system. The purpose of an experiment is to observe and understand ‘the possible outcomes that can occur, Sample Space: The sample space of an experiment is the set of all possible outcomes or results that can occur. It is denoted by the symbol "S." Each outcome in the sample space represents a distinet and mutually exclusive possibility associated with the experiment. For example: Flipping a Coin Experiment: Experiment: Flipping a fair coin, Sample Space: {Heads (H), Tails (1)). The sample space consists of two possible outcomes, heads or tails. Rolling a Six-Sided Die Experiment: Experiment: Rolling a fair six-sided die. Sample Space: {1, 2, 3, 4, 5, 6). The sample space consists of six possible outcomes, each representing the number shown on the face of the die. Tossing Two Coins Experiment: Experiment: Simultaneously tossing two fair coins.sample Space: (UH, HT, TH, TT). The sample space consists of four possible outcomes, where cach outcome represents the combination of heads (H1) and tails (T) for the two coins. The sample space represents the complete set of possible outcomes for an experiment. It serves as a foundational concept in probability theory, providing a basis for analyzing probabilities and ‘understanding the likelihood of specific events occurring. Assigning probabilities to experimental outcomes Assigning probabilities to experimental outcomes involves determining the likelihood or chance ‘of cach outcome occurring, The assignment of probabilities is based on factors such as the nature ‘of the experiment, assumptions, observations, or historical data. Here are a few common methods for assigning probabilities to experimental outcomes: Equally Likely Outcomes: When all outcomes are equally likely, the probability of each outcome is calculated as | divided by the total number of outcomes. For example, in rolling a fair six-sided die, each number has a probability of 1/6 or approximately 16.7%. Subjective Assessment: Probabilities are assigned based on personal judgment or subjective beliefs. For example, a salesperson may assign a higher probability to closing a deal based on their assessment of the customer's interest and engagement. Empirical Probability: Probabilities are based on observed frequencies from past data or experiments. For instance, ifa coin is flipped 100 times and lands on heads 60 times, the empirical probability of heads is 60/100 or 0.6. ‘Theoretical Models: Probabilities are assigned using mathematical models and assumptions. For example, in a game of poker, the probability of getting a royal flush is calculated based on the known number of possible royal flush combinations out of the total number of possible hands. In summary, probabilities are assigned to experimental outcomes by considering factors such as faimess, personal judgment, observed frequencies, and theoretical models. These probabilities help quantify the likelihood of each outcome occurring in a given experiment or situation. ents and Probabilit Event: An event is a specific outcome or a collection of outcomes within an experiment or sample space.SOM WUS209_nS \ Probability: The probability of an event represents the likelihood of that event occurring, ranging from 0 (impossible) to 1 (certain). Example 1. Coin Toss Experiment: Event: Getting heads (H), Probability: 0.5 (or 50%) > 2. Rolling a Die Experiment: Event: Rolling an even number, Probability: 0.5 (or 50%) 3, Drawing a Card Experiment: Event: Drawing a heart, Probability: 0.25 (or 25%) Kvents and their associated probabilities allow us to quantify the chances of specific outcomes and make informed decisions based on the likelihood of events occurring. lationships of probability ‘There are several basic relationships and properties in probability theory that help us understand and analyze the behavior of probabilities. Here are a few fundamental relationships: Complement Rule: The complement of an event A, denoted as A’, represents all outcomes that are not in event A. The probability of the complement of A is equal to 1 minus the probability of A. Mathematically, P(A') = 1 - P(A). For example, if the probability of event A is 0.8, then the probability of the complement of A is | - 0.8 = 0.2. Union Rule: The probability of the union of two events A and B (A U B) is calculated by adding their individual probabilities and subtracting the probability of their intersection (A. B) to avoid double-counting. Mathematically, P(A U B) = P(A) + P(B) - P(A 1 B). For example, if the Probability of event A is 0.4, the probability of event B is 0.3, and the probability of their intersection is 0.1, then the probability of their union is 0.4 + 0.3 -0.1= 0.6. Conditional Probability: Conditional probability measures the probability of an event A occurring given that event B has already occurred. It is denoted as P(A|B) and calculated as the probability of the intersection of A and B divided by the probability of event B. Mathematically, P(AIB) = P(A. B)/P(B). For example, if the probability of event A occurring given event B has occurred is 0.2, and the probability of event B is 0.5, then P(AIB) = 0.2/0.5 = 0.4. Multiplication Rule: The multiplication rule is used to calculate the probability ofthe intersection of two independent events A and B, For independent events, the probability of A and B occurring together isthe product of their individual probabilities. Mathematically, P(A A B) = P(A) * P(B).For example, if the probability of event A is 0.3 and the probability of event B is 0.4, then the probability of both events occurring is 0.3 * 0.4 = 0.12 ‘These basi ¢ relationships of probability provide a foundation for understanding the behavior of probabilities and solving various probability problems. Examples of the basic relationships of probability: Complement Rule: Event A: Getting a head when flipping a fair coin, Probability of A: P(A) = 0.5 Complement of A: Not getting a head (getting a tail) Probability of the complement of A: P(A')= I - P(A) = 1 - 0.5 = 0.5 Union Rule: Event A: Rolling an even number on a fair six-sided die. Probability of A: P(A) = 3/6 = 0.5 Event B: Rolling a number greater than 3 on the same die. Probability of B: P(B) = 3/6 = 0.5 Intersection of A and B: Rolling an even number greater than 3 (4 or 6). Probability of A U B: P(A U B) = P(A) + P(B) - P(A NB) = 0.5 + 0.5 - (1/6) = 5/6 Conditional Probability: Event A: Drawing a red card from a standard deck of 52 playing cards. Probability of A: P(A) = 26/52 = 0.5 Event B: Drawing a heart from the same deck.SDI.WUS200_avns Probability of B: P(B) 13/52 © 0.25 Intersection of A and B: Drawing @ red heart card. Probability of A given B: P(AIB) = P(A 1B) / PCB) * (13/52) / (13/52) = 1 Multiplication Rule: Event A: Drawing a spade from a standard deck of $2 playing cards, Probability of A: P(A) = 13/52 = 0.25 Event B: Drawing a king from the same deck. Probability of B: P(B) = 4/52 = 1/13 Intersection of A and B: Drawing the king of spades, Probability of A and B: P(A 1 B) = P(A) * P(B) = (13/52) * (1/13) = 1/52 ‘These examples illustrate how the basic relationships of probability can be applied in different scenarios to calculate probabilities of events and understand their interplay. More Examples: 1. Scenario: Let's consider a situation where you are planning a picnic. You want to assess the probabilities of different events related to the weather and food for the picnic.Complement Rule tivent A: It will rain during the picnic, Probability of A: P(A) = 0.3 (based on weather forecasts) Complement of A: It will not rain during the picnic. Probability of the complement of A: P(A’) = 1 P(A) = 10.3 = 0.7 Union Rule: Event A: The temperature will be above 25°C during the picnic. Probability of A: P(A) = 0.6 (based on historical data) Event B: There will be a breeze during the picnic. Probability of B: P(B) = 0.4 (based on weather forecasts) Intersection of A and B: The temperature will be above 25°C and there will be a breeze during the picnic. Probability of A U B: P(A U B) = P(A) + P(B) - P(A M B) = 0.6 + 0.4 - (0.6 * 0.4) = 0.76 Conditional Probability: Event A: The picnic will be successful. Probability of A: P(A) = 0.8 (based on your subjective assessment) Event B: It will be a sunny day. Probability of B: P(B) = 0.5 (based on weather forecasts) Intersection of A and B: The picnic will be successful given that it is a sunny day. Probability of A given B: P(A|B) = P(A MB) / P(B) = (0.8 * 0.5) / 0.5 = 0.8 Multiplication Rule: Event A: The food you prepared will be tasty. Probability of A: P(A) = 0.7 (based on your cooking skills)RUS PY Hvent 1 The guests will enioy the food. Probability of Bs PCW) © 09 (haved on previous feedback) Intersection of A andl 18 The foo you prepared will be tasty, and the guests will enjoy the food. lersection of A and Probability of A and 1B: BCA AD) PLAY ® PCB) © 0.7 8 09 063 in this example, the basic relationships of probability are applied 1 assess the likelihood of differ events related tothe plenie, The probabilities help you make informed decisions, such as preparing for potential rain, considering weather conditions, evaluating the success of the picnic, and estimating the enjoyment of the food by the guests, 2. Scenario; Imagine you are a manager at a customer rvice call center, You want to analyze the probabilities of different events related to customer calls and i resolution. Complement Rule: Event A: A customer's call is resolved within 5 minutes, Probability of A: P(A) = 0.8 (based on historical data) Complement of A: A customers call is not resolved within 5 minutes. Probability of the complement of A: P(A’) = 1 - P(A) = 1 - 0.8 = 0.2 Union Rule: Event A: The customer is satisfied with the resolution. Probability of A: P(A) = 0.9 (based on customer feedback) Event B: The customer's issue is fully resolved. Probability of B: P(B) = 0.85 (based on performance metrics) Intersection of A and B: The customer is satisfied with the resolution, and their issue is fully resolved. Probability of A U BB: P(A UB) = P(A) + P(B) - P(A B) = 0.9 + 0.85 - (0.9 * 0.85) = 0.995conditional Probability: Event A: A customer's call is escalated 10 a supervisor. Probability of A: P(A) = 0,2 (based on historical data) i 4 C1 on vent B: The customer's issue is resolved afler escalation. Mm ility pK robability of B: P(B) = 0.75 (based on performance metrics) Intersection of A and 1B: The customer's call is es ‘we A H r 's call is escalated to a supervisor, and their issue is resol after escalation, Probability of A given B: P(AIB) = P(A 1 B)/ P(B) = (0.2 # 0.75) /0.75 = 0.2 Multiplication Rule: Event A: A customer provides positive feedback. Probability of A: P(A) = 0.85 (based on customer surveys) Event B: A customer repurchase from the company. Probability of B: P(B) = 0.9 (based on customer retention data) Intersection of A and B: A customer provides positive feedback, and they repurchase from the company. Probability of A and B: P(A 1 B) = P(A) * P(B) = 0.85 * 0.9 = 0.765 In this example, the basic relationships of probability are applied to analyze the probabilities of different events related to customer calls and issue resolution. These probabilities can help you understand the efficiency of call resolution, customer satisfaction, and the likelihood of positive ‘outcomes such as issue resolution and customer retention. Conditional probability Conditional probability refers to the probability of an event A occurring given that another event B has already occurred, It is denoted as P(A|B) and read as "the probability of A given B." To calculate conditional probability, you can use the formula; P(A|B) = P(A and B)/ P(B) Here's an example to illustrate conditional probability:SUN DUsLUY_s6Hy 1. Consider a bag of colored balls. The bag contains 10 red balls, 8 blue balls, and 12 green balls, We randomly select a ball from the bag, and event A is selecting a red ball, Event B is selecting a blue ball. Calculate P(A), the probability of selecting a red ball: There are 10 red balls out of a total of 30 balls in the bag. So, P(A) = 10/30 = 1/3. Calculate P(B), the probability of selecting a blue ball: There are 8 blue balls out of a total of 30 balls in the bag. So, P(B) = 8/30 = 4/15. Calculate P(A and B), the probability of selecting both a red and a blue ball: Since there are no balls that are both red and blue, P(A and B) = 0. Calculate P(A|B), the probability of selecting a red ball given thai blue ball is selected: P(AIB) = P(A and B)/ P(B) = 0 / (4/15) =0. This means that if a blue ball is selected, the probability of it being red is 0. In this example, we see that selecting a blue ball from the bag makes it impo: le to select a red ball since there are no balls that are both red and blue. Therefore, the conditional probability of selecting a red ball given that a blue ball is selected is 0. 2. Consider a company that manufactures electronic devices. Let's assume that 80% of the devices produced by the company are of high quality (event A), while the remaining 20% arc of low quality (event A’). It is known that among the high-qualitydevices, only § devices, only 8% have n defect (event Bt), while among the low-quality devices, 90% have a defect (event BY), Caleutate P(A), a the probability of a randomly selected device being of high quality: Since of the devices are of high quality, P(A) = 0.8. n ‘aleulate P(t), the probability of a randomly selected device having # defect: We need to Consider the probability of a device having a defect, taking into account both high-quality and low- quality devices, PUB) = PA) * POBIA) + PCA) * PCBIA') = 0.8 * 0.05 + 0.2 * 0.90 = 0.04 + 0.18 = 0.22 Calculate P(AIB), the probability of a randomly selected device being of high quality given that it has a defect: P(A|B) = (P(A) * P(BIA)) / P(B) = (0.8 * 0.05) / 0.22 = 0.04 / 0.22 = 0.182 (or approximately 18.2%) This means that if a randomly selected device has a defect, there is approximately an 18.2% chance that it is of high quality. In this example, we used conditional probability to determine the likelihood of a device being of high quality given that it has a defect. It demonstrates how conditional probabilities can provide insights into the relationship between the quality of a device and the occurrence of defects. Multiplication Law ‘The Multiplication Law states that for independent events A and B, the probability of both events occurring (the intersection of A and B) is equal to the product of their individual probabilities: P(A and B) = P(A) * P(B)SD_BUS209_BBS this tule can be extended to multiple independent events: P(A and Band C) = P(A) * PCB) * PC) The Multiplication Law is used when events are independent, meaning the occurrence of one event does pot affect the probability of the other event, It is a fundamental principle in probability theory and is commonly applied in various calculations involving independent events. Example: A medical test is used to detect a certain disease. The disease occurs in 1% of the population. The test is known to correctly identify the disease 95% of the time (true positive rate) and incorrectly identifies a healthy person as having the disease 2% of the time (false positive rate). Ifa person tests positive for the disease, what is the probability that they actually have the disease? Let's define the events: A: Having the disease B: Testing positive for the disease Given information: P(A) =0.01 (prior probability of having the disease) P(B | A) = 0.95 (probability of testing positive given that the person has the disease) P(B | ~A) = 0.02 (probability of testing positive given that the person does not have the disease) We are asked to find P(A | B) (the probability of having the disease given that the person tested positive). Using Bayes’ theorem: P(A | B) = (P(B | A) * P(A))/ P(B) To calculate P(B), we need to use the law of total probability: P(B) = P(B | A) * P(A) + P(B | ~A) * P(A)First, caleulate P(~A) (probability of not having the disease): P(~A) = 1 = P(A) = 1 - 0.01 = 0,99 Now, substitute the values into the formula for P(B): P(B) = P(B | A) * P(A) + P(B | =A) * P(A), = 0.95 * 0.01 + 0.02 * 0.99 = 0.0095 + 0.0198 = 0.0293 Finally, substitute the values into Bayes’ theorem: P(A |B) = (PB | A) * P(A) / PB) = (0.95 * 0.01) / 0.0293 = 0,095 / 0.0293 = 0.324 ‘Therefore, the probability that a person actually has the disease given tha approximately 0.324, or about 32.4%. they tested positive is