INTRODUCTION

In the vast landscape of mathematics, probability theory stands as a beacon of rationality amidst uncertainty. Its
principles are not only pillars of statistical inference but also integral to decision-making processes across
diverse fields ranging from economics to medicine. In this project, we embark on a journey to unravel three
pivotal concepts within probability theory: Conditional Probability, Total Probability Theorem, and Bayes'
Theorem. As we delve into these concepts, we will unearth their profound implications, both theoretical and
practical, in our quest to comprehend and navigate the stochastic nature of the world around us.

Probability theory serves as a cornerstone of rational thinking, providing a systematic framework to quantify
uncertainty and assess the likelihood of events. At its core lies the notion of probability, a measure of the
likelihood of an event occurring, which underpins all subsequent concepts and methodologies within the
discipline. Through the lens of conditional probability, we gain insight into the dynamic nature of probabilistic
events, where the occurrence of one event influences the likelihood of another. The Total Probability Theorem
extends this paradigm by offering a systematic approach to compute the probability of an event by considering
all possible avenues through which it may occur, thereby illuminating the intricate interplay between different
probabilistic outcomes. Furthermore, Bayes' Theorem stands as a beacon of inference, enabling us to refine our
beliefs and update our probabilities considering new evidence, thus embodying the essence of rational decision-
making under uncertainty.
 Conditional Probability
The probability of occurrence of any event A when another event B in relation to A has already occurred is
known as conditional probability. It is depicted by P(A|B).

As depicted by above diagram, sample space is given by S and there are two events A and B. In a situation
where event B has already occurred, then our sample space S naturally gets reduced to B because now the
chances of occurrence of an event will lie inside B.

As we have to figure out the chances of occurrence of event A, only portion common to both A and B is enough
to represent the probability of occurrence of A, when B has already occurred. Common portion of the events is
depicted by the intersection of both the events A and B i.e. A ∩ B.

This explains the concept of conditional probability problems i.e. occurrence of any event when another event in
relation to has already occurred.

Mathematically this can be represented as,

P(A|B) = N(A∩B)/N(B)

 Conditional Probability Properties

Property 1: Let E and F be events of a sample space S of an experiment, then we have P(S|F) = P(F|F) = 1.

Property 2: f A and B are any two events of a sample space S and F is an event of S such that P(F) ≠ 0,
then P((A ∪ B)|F) = P(A|F) + P(B|F) – P((A ∩ B)|F).

Property 3: P(A′|B) = 1 − P(A|B)

Conditional Probability Example

Example: Two dies are thrown simultaneously and the sum of the numbers obtained is found to be 7.
What is the probability that the number 3 has appeared at least once?

Solution: The sample space S would consist of all the numbers possible by the combination of two dies.
Therefore S consists of 6 × 6 i.e. 36 events.

Event A indicates the combination in which 3 has appeared at least once.

Event B indicates the combination of the numbers which sum up to 7.

A = {(3, 1), (3, 2), (3, 3)(3, 4)(3, 5)(3, 6)(1, 3)(2, 3)(4, 3)(5, 3)(6, 3)}

B = {(1, 6)(2, 5)(3, 4)(4, 3)(5, 2)(6, 1)}

P(A) = 11/36

P(B) = 6/36

A∩B=2

P(A ∩ B) = 2/36

Applying the conditional probability formula we get,

Bayes’ theorem
Bayes’ theorem describes the probability of occurrence of an event related to any condition. It is also
considered for the case of conditional probability. Bayes theorem is also known as the formula for the
probability of “causes”. For example: if we must calculate the probability of taking a blue ball from the second
bag out of three different bags of balls, where each bag contains three different colour balls viz. red, blue, black.
In this case, the probability of occurrence of an event is calculated depending on other conditions is known as
conditional probability. In this article, let us discuss the statement and proof for Bayes theorem, its derivation,
formula, and many solved examples.

 Note:

The following terminologies are also used when the Bayes theorem is applied:

Hypotheses: The events E1, E2,… En is called the hypotheses

Priori Probability: The probability P(Ei) is considered as the priori probability of hypothesis Ei

Posteriori Probability: The probability P(Ei|A) is considered as the posteriori probability of hypothesis Ei
Bayes’ theorem is also called the formula for the probability of “causes”. Since the E i‘s are a partition of the
sample space S, one and only one of the events Ei occurs (i.e. one of the events Ei must occur and the only one
can occur). Hence, the above formula gives us the probability of a particular E i (i.e. a “Cause”), given that the
event A has occurred.

If A and B are two events, then the formula for the Bayes theorem is given by:

Where P(A|B) is the probability of condition when event A is occurring while event B has already occurred.
 Bayes’ theorem Example
A bag I contains 4 white and 6 black balls while another Bag II contains 4 white and 3 black balls. One ball is
drawn at random from one of the bags, and it is found to be black. Find the probability that it was drawn from
Bag I.

Solution:

Let E1 be the event of choosing bag I, E2 the event of choosing bag II, and A be the event of drawing a black
ball. Then,

Also, P(A|E1) = P(drawing a black ball from Bag I) = 6/10 = 3/5

P(A|E2) = P(drawing a black ball from Bag II) = 3/7

By using Bayes’ theorem, the probability of drawing a black ball from bag I out of two bags,
 Total Probability Theorem
In Mathematics, probability is the likelihood of an event. The probability of an event going to happen is 1 and
for an impossible event is 0. In probability theory, there exists a fundamental rule that relates to the marginal
probability and the conditional probability, which is called the formula or the law of total probability. Through
several distinct events, it expresses the total probability of an event. Here, we are going to discuss the law of
total probability, its statement, proof along with its example.

 Law of Total Probability

For two events A and B associated with a sample space S, the sample space can be divided into a set A ∩ B′, A
∩ B, A′ ∩ B, A′ ∩ B′. This set is said to be mutually disjoint or pairwise disjoint because any pair of sets in it is
disjoint. Elements of this set are better known as a partition of sample space.

This can be represented by the Venn diagram as shown below. In cases where the probability of occurrence of
one event depends on the occurrence of other events, we use the law of total probability theorem.

 Law of Total Probability Statement

Let events C1, C2 . . . Cn form partitions of the sample space S, where all the events have a non-zero probability
of occurrence. For any event, A associated with S, according to the total probability theorem ,
 Total Probability Theorem Example

A person has undertaken a mining job. The probabilities of completion of the job on time with and without rain
are 0.42 and 0.90 respectively. If the probability that it will rain is 0.45, then determine the probability that the
mining job will be completed on time.

Solution:

Let A be the event that the mining job will be completed on time and B be the event that it rains. We have,

P(B) = 0.45,

P(no rain) = P(B′) = 1 − P(B) = 1 − 0.45 = 0.55

By multiplication law of probability,

P(A|B) = 0.42

P(A|B′) = 0.90

Since, events B and B′ form partitions of the sample space S, by total probability theorem, we have

P(A) = P(B) P(A|B) + P(B′) P(A|B′)

=0.45 × 0.42 + 0.55 × 0.9

= 0.189 + 0.495 = 0.684

So, the probability that the job will be completed on time is 0.684.
 Conclusion

As we have seen, conditional probability offers a powerful lens through which we can view and interpret the
dependencies between events. It allows us to make more accurate predictions by considering how the
occurrence of one event impacts the likelihood of another. This concept is crucial in various real-world
applications, from medical diagnostics, where the presence of symptoms affects the likelihood of a disease, to
financial markets, where past trends influence future stock prices.

The Total Probability Theorem, on the other hand, provides a comprehensive framework for assessing the
probability of an event by considering all possible pathways leading to it. This theorem is particularly useful in
complex scenarios where multiple factors contribute to the occurrence of an event. By breaking down these
factors and systematically analysing their contributions, we gain a deeper understanding of the probabilistic
landscape, enabling us to make well-informed decisions even in the face of uncertainty.

Bayes' Theorem epitomizes the dynamic nature of probability, emphasizing the importance of updating our
beliefs and probabilities in light of new evidence. This theorem is a cornerstone of modern statistical inference
and decision-making processes. Its applications are vast, ranging from improving the accuracy of spam filters in
email systems to enhancing the precision of medical tests and refining predictive models in machine learning.
By embracing a Bayesian perspective, we acknowledge that our knowledge is continually evolving, and we
remain open to adjusting our understanding as new data becomes available.

In conclusion, the study of Conditional Probability, Total Probability Theorem, and Bayes' Theorem not only
deepens our grasp of probability theory but also equips us with invaluable tools for navigating an uncertain
world. These concepts empower us to analyse complex systems, make informed decisions, and refine our
predictions based on empirical evidence. As we continue to explore and apply these principles, we enhance our
ability to understand and influence the myriad probabilistic processes that shape our lives.

INTRODUCTION

The transportation problem is a key topic in the field of operations research and logistics management. It
focuses on determining the optimal distribution of goods from multiple suppliers to multiple consumers while
minimizing the total transportation cost. This problem is fundamental in logistics, supply chain management,
and various industrial applications.

The objective of this project is to illustrate the application of the transportation problem, explain its formulation,
and solve it using suitable data. We will employ the Transportation Simplex Method to find the minimum cost
solution. By doing so, we aim to demonstrate how optimization techniques can lead to significant cost savings
and efficiency improvements in resource allocation and logistics.

What is the Transportation Problem?

A transportation problem is a Linear Programming Problem that deals with identifying an optimal solution for
transportation and allocating resources to various destinations and from one site to another while keeping the
expenditure to a minimum.

In simple words, the main objective of the Transportation problem is to deliver (from the source to the
destination) the resources at the minimum cost.

 It is also referred to as the Hitchcock Problem.

 It involves transporting a single product from ‘m’ source (origin) to ‘n’ destinations.

 Assumptions: The supply level of each source and the demand at each destination are known.

 Objective: To minimize the total Transportation Cost

Balanced Transportation Problems

The problem is considered as a balanced transportation problem when both supplies and demands are equal. In
other words, the sum of the supplies from all suppliers exactly matches the sum of the demands from all
consumers. This ensures that all goods are transported without any surplus or shortage.

Total Supply = Total Demand

The following is the basic framework of the balanced transportation problem:

The destinations D1, D2, D3, and D4 in the above table are where the products/goods will be transported from
various sources O1, O2, O3, and O4. The supply from the source Oi is represented by Si. The demand for the
destination Dj is dj. If a product is delivered from source Si to destination Dj, then the cost is called Cij.

Unbalanced Transportation Problems

An unbalanced transportation problem occurs when the total supply does not equal the total demand. This can
happen in two scenarios:

 Total Supply Exceeds Total Demand: In this case, there is excess supply.
 Total Demand Exceeds Total Supply: In this case, there is excess demand.

To solve an unbalanced transportation problem, it is first converted into a balanced one by introducing a dummy
row (for excess supply) or a dummy column (for excess demand).

Balancing the Problem

  Excess Supply: Add a dummy consumer with demand equal to the excess supply. The transportation
cost from any supplier to this dummy consumer is set to zero.

 Excess Demand: Add a dummy supplier with supply equal to the excess demand. The transportation
cost from this dummy supplier to any consumer is set to zero.

Solving the Transportation Problem

 Initial Feasible Solution: Use methods like the Northwest Corner Rule, Least Cost Method, or Vogel’s
Approximation Method to find an initial feasible solution.

 Optimality Check: Apply the MODI (Modified Distribution) Method or stepping-stone method to
check if the current solution is optimal.

 Iterative Improvement: If the solution is not optimal, improve it iteratively until the optimal solution is
reached.

EXAMPLE ONE
Data ---

Consider a scenario with 3 suppliers and 4 consumers. The supply, demand, and cost matrices
are as follows:

 Supply ( S ): [20, 30, 25]

 Demand ( D ): [10, 25, 15, 25]
 Cost Matrix ( C ):

Solution Using the Transportation Simplex Method

1. Initial Feasible Solution : We use the Northwest Corner Rule to find an initial
feasible solution.
2. Optimality Check and Improvement : We apply the MODI (Modified Distribution)
Method to check and improve the solution iteratively until optimality is achieved.
Step 1: Initial Solution

Using the Northwest Corner Rule:

Step 2: Optimality Check and Iterative Improvement

Using the MODI Method, we calculate the opportunity costs and adjust the initial solution
iteratively until no further cost reduction is possible. The final optimal solution is as follows:

Therefore, Calculation of Total Cost --

Z=10⋅8+10⋅6+15⋅12+15⋅7+10⋅5=80+60+180+105+50=475
The minimum transportation cost is 475.
 EXAMPLE TWO

Let's consider another example of a transportation problem with specific data. This example
involves 4 suppliers and 3 consumers.

Problem Data --

 Suppliers and Supply:

o Supplier 1: 50 units
o Supplier 2: 60 units
o Supplier 3: 50 units
o Supplier 4: 40 units

 Consumers and Demand:

o Consumer 1: 40 units
o Consumer 2: 70 units
o Consumer 3: 90 units

 Cost Matrix: The cost to transport one unit from each supplier to each consumer is
given in the table below:
Step-by-Step Solution

 Step 1: Check if the Problem is Balanced

Total supply = 50 + 60 + 50 + 40 = 200 units

Total demand = 40 + 70 + 90 = 200 units

Since total supply equals total demand, the problem is balanced.

 Step 2: Initial Feasible Solution Using the Northwest Corner Rule

 Step 3: Calculate the Total Cost for the Initial Solution

Total cost Z is calculated by multiplying the allocated units by their respective costs:

Z=(40⋅2)+(10⋅3)+(60⋅4)+(50⋅8)+(40⋅7)Z = (40 \cdot 2) + (10 \cdot 3) + (60 \cdot 4) + (50 \

cdot 8) + (40 \cdot 7)Z=(40⋅2)+(10⋅3)+(60⋅4)+(50⋅8)+(40⋅7)

Z=80+30+240+400+280Z = 80 + 30 + 240 + 400 + 280Z=80+30+240+400+280

Z=1030Z = 1030Z=1030

 Step 4: Optimality Check and Improvement Using the MODI Method

To check if this solution is optimal, we use the MODI (Modified Distribution) method or the
stepping-stone method. Here's a brief outline of the MODI method:

1. Calculate the dual variables (U's for suppliers and V's for consumers) based on the
current basic feasible solution.
2. Determine the opportunity cost for each empty cell.
 3. If all opportunity costs are non-negative, the current solution is optimal. If not, adjust
the solution to reduce the total cost.

Illustrating the process:

Calculate the dual variables (U's and V's):

Set U1 = 0 (we can set any U or V to zero).

From the initial feasible solution:

- For (1,1) : U1+V1 = 2 ⇒ V1 = 2

- For (1,2) : U1 + V2 = 3 ⇒ V2 = 3
- For (2,2) : U2 + V2 = 4 ⇒ U2 = 1
- For (3,3) : U3 + V3 = 8 ⇒ U3 + V3 = 8
- For (4,3) : U4 + V3 = 7 ⇒ U4 + V3 = 7

Determine the opportunity cost for each empty cell:

Calculate Cij−(Ui+Vj) for each empty cell:

- For (1,3) : 1 − (U1 + V3) = 1 − (0 + 8) = −7

- For (2,1) : 5 − (U2 + V1) = 5 − (1 + 2) = 2
- For (2,3) : 8 − (U2 + V3) = 8 − (1 + 7) = 0
- For (3,1) : 5 − (U3 + V1) = 5 − (1 + 2) = 2
- For (3,2) : 6 − (U3 + V2) = 6 − (1 + 3) = 2
- For (4,1) : 4 − (U4 + V1) = 4 − (1 + 2) = 1
- For (4,2) : 2 − (U4 + V2) = 2 − (1 + 3) = −1

Since we have a negative opportunity cost in cell (4,2)(4,2)(4,2), the current solution is not
optimal.

Iterative Improvement:

Identify the path (closed loop) to adjust the current solution. Adjust allocations along the path
to decrease the cost. Update the basic feasible solution and recalculate total cost.

Repeat the process of calculating dual variables and opportunity costs until all opportunity
costs are non-negative, indicating the optimal solution.
 CONCLUSION

The transportation problem is a critical model in optimizing logistics and supply

chain operations. By applying the Transportation Simplex Method, we
effectively minimized the transportation cost for the given data. The optimal
solution demonstrates significant cost savings and ensures that supply meets
demand efficiently. This project highlights the practical application of
mathematical optimization techniques in real-world scenarios, emphasizing
their importance in strategic decision-making and operational efficiency. The
approach used can be generalized to more complex and larger-scale
transportation problems, showcasing the robustness and versatility of the
methodology.