Quantitative Techniques

COQTA1

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 What will be covered
in today’s lesson?
Week 2
Lesson 1 Types of probabilities

Deriving objective probabilities

Basic concepts and properties of

probability

Objectives of probability

Probability concepts
Week 2: Lesson 1

Introduction

In this lesson, we will

• Highlight important aspects of Basic Probability Concepts (BPC)
• Go through some examples and do activities
 A probability is the chance, or likelihood, that a particular event will occur.

Basic There are two broad types of probabilities: subjective or objective.

probability • Subjective probability enables the observer to gain insight by referring to

the information they have observed and their own experience.
concepts • Objective probability is the probability that an event will occur based on
an analysis in which each measure is based on a reported observation or a
long history of the data gathered.
 • Mathematically, a probability is defined as the ratio of two
numbers:
• P(A) = r / n
• Where:
• A = event of a specific type (or with specific properties)
Basic • r = number of outcomes of event A
Probability • n= total number of all possible outcomes (called the
sample space)
Concepts • P(A) = probability of event A occurring
 Class example

Assume that 355 Ford car owners (n = 355) were randomly selected and asked
the following question: ‘When you buy your next car, will you buy another Ford
product?’ (event A).

The outcome is either ‘Yes’ or ‘No’. Assume that 76 respondents answered ‘Yes’
(r = 76). Then P(A) = 76/355 = 0.214.

There is a 21.4% chance that a current Ford owner will remain loyal to the Ford
brand name and purchase another Ford on his or her next car purchase.
Alternatively stated, one in five Ford car owners is brand loyal.
 Deriving There are three ways in which objective probabilities can be derived:
Objective
Probabilities 1.
2.
A Priori probability
Empirical probability
3. Mathematical probability
 There are five basic properties that apply to every probability - The
probability of an event A is defined as:
P(A) = Number of favourable outcomes (of A) / Total number of outcomes possible (of A)

• A probability value lies only between 0 and 1 inclusive (i.e. 0 ≤ P(A) ≤ 1).
• The probability of an event A is a number P(A) such that 0 ≤ P(A) ≤ 1. Probability is
always a positive number.
• The probability of a sure event or certain event is 1.
Properties of a • The probability of an impossible event is 0.

Probability • If an event A cannot occur (i.e. an impossible event), then P(A) = 0.

• If an event A is certain to occur (i.e. a certain event), then P(A) = 1.
• The sum of the probabilities of all possible events (i.e. the collectively exhaustive
set of events) equals one, i.e. P(A1) + P(A2) + P(A3) + … + P(Ak) = 1, for k possible
events.
Complementary probability: If P(A) is the probability of event A occurring, then the
probability of event A not occurring is defined as P(Ā) = 1 − P(A).
• For example, if there is a 7% chance that a part is defective, then P (a
defective part) = 0.07; and P (not a defective part) = 1 − 0.07 = 0.93.
Class example
Table 4.1 shows the percentage frequency table for the petrol brand most
preferred by 50 motorists who live in George.

Table 4.1 Petrol brand preference – frequency counts and percentages

a) What is the likelihood that a randomly selected motorist prefers Engen?

b) What is the chance that a randomly selected motorist does not prefer Shell?
c) What is the probability of finding a motorist who prefers either the BP,
Caltex, Engen or Shell brand of petrol?
Class example memo
a) Let A = event (motorist who prefers Engen petrol). Then P(A) = 6 /50 = 0.12.
Thus, there is only a 12% chance of finding a motorist who prefers Engen.

b) Let A = event (motorist who prefers Shell petrol). Then P(A) = 22/50 = 0.44.
Let (Ā) = event (motorist who does not prefer Shell petrol).
Then P(Ā) = 1 − P(A) = 1 – 0.44 = 0.56.

Thus, there is a 56% chance of finding a motorist who does not prefer Shell
petrol. This means that more than half the motorists surveyed (56%) prefer
another brand of petrol.

c) Let A1 = event (motorist who prefers the BP brand of petrol).

Let A2 = event (motorist who prefers the Caltex brand of petrol).
Let A3 = event (motorist who prefers the Engen brand of petrol).
Let A4 = event (motorist who prefers the Shell brand of petrol).
These four events represent the collectively exhaustive set of events for the variable
‘petrol brand preferred’. It is called the sample space.
Then P(A1) + P(A2 ) + P(A3 ) + P(A4) = 13/50 + 9/ 50 + 6/50 + 22/50 = 1.
Thus, there is complete certainty that a randomly chosen motorist will prefer one of
these four petrol brands.
 Group activity
Consider Table 5.1, showing the percentage frequency table for the
microscope brand most preferred by 50 scientists at the Council for Scientific
and Industrial Research (CSIR).
Table 5.1 Microscope brand preference – frequency counts and percentage
Nikon 10 20%
Leica 16 32%
Zeiss 13 26%
Olympus 11 22%
Total 50 100%

a) What is the likelihood that a randomly selected scientist prefers Zeiss?

b) What is the chance that a randomly selected scientist does not prefer
Olympus?
c) What is the probability of finding a scientist who prefers either the Nikon,
Leica, Zeiss or Olympus microscope?
 Group activity memo
a) Let A = event (scientists who prefer Zeiss microscope).
Then P(A)= 10/50 = 20%
Thus, there is only a 20% chance of finding a scientist who prefers Zeiss.

b) Let A = event (scientists who prefer Olympus microscope).

Let Ā = event (scientists who do not prefer Olympus microscope).
Since P(A)=11/50 =0.22 , then P(Ā)=1–P(A)=1–0.22= 0.78.
Thus, there is a 78% chance of finding a scientist who does not prefer
Olympus microscopes. This means that more than half the scientists
surveyed (78%) prefer another brand of microscope.

c) Let A1 = event (scientists who prefer the Nikon microscope).

Let A2 = event (scientists who prefer the Leica microscope).
Let A3 = event (scientists who prefer the Zeiss microscope).
Let A4 = event (scientists who prefer the Olympus microscope).
These four events represent the collectively exhaustive set of events for
the variable ‘microscope brand preferred’. It is called the sample space.
Then P(A1) + P(A2) + P(A3) + P(A4) = 10/50 + 16/50 + 13/50 + 11/50 = 1
Thus, there is complete certainty that a randomly chosen scientist will
prefer one of these four microscope brands
 The following concepts are relevant when
calculating probabilities associated with
Basic Probability two or more events occurring:
• The intersection of events
Concepts: • The union of events
• Mutually exclusive events
• Collectively exhaustive events
• Statistically independent events
• Basic Probability Concepts
 • The intersection of two events A and B is the set of all outcomes that belong to both A and B simultaneously.
It is written as A ∩ B (i.e. A and B), and the keyword is ‘and’. Note that B∩A is equivalent to A∩B.
• Consider two events, A and B. The shaded section of the Venn diagram below is the outcomes shared by
events A and B.

Basic Probability Concepts:

Intersection of Two Events (A ∩ B)
 Class example
What is the probability that a randomly selected JSE company will be
small and operate in the service sector?

Solution
Let A = event (small company).
Let B = event (service sector company).
Then (A ∩ B) is the set of all small and service sector companies.
From Table 4.2, there are 10 companies that are both small and operate in
the service sector, out of 170 JSE companies surveyed. This is shown
graphically in the Venn diagram in Figure 4.2.
Thus P(A ∩ B) = P(small ∩ service) = 10/ 170 = 0.0588. There is only a
5.9% chance of selecting a small service sector JSE company.
 Basic Probability Concepts: • The union of two events A and B is the set of all outcomes that belong to
either event A or B or both. It is written as A ∪ B (i.e. either A or B or
Union of Two Events (A ∪ B) both) and the key word is ‘or’.
• Consider two events, A and B. The shaded section of the Venn
diagram above is the union of events A and B, denoted by A∪B, which
consists of all outcomes that are in A or in B or in both A and B.
 Class example
What is the probability that a randomly selected JSE company will be either a
small company or a service sector company, or both?
Solution

Let A = event (small company).

Let B = event (service sector company).
Then (A ∪ B) is the set of all small or service sector or both (small and service
sector) companies.
As seen in Table 4.2, there are 36 small companies (includes 10 service sector
companies), 24 service sector companies (includes 10 small companies) and 10 small
and service sector companies.
Therefore, there are 50 separate companies (36 + 24 − 10) that are either small
or service sector, or both.
Note that the intersection (joint) event is subtracted once to avoid double
counting.
Thus P(A ∪ B) = P(small ∪ service) = (36 + 24 – 10)/170 = 50/170 = 0.294.
There is a 29.4% chance of selecting either a small or a service JSE company, or both.
Events are mutually exclusive if they cannot occur together on a single trial of a random
experiment (i.e. not at the same point in time). It is written as A ∩ B = ∅ (empty set).

Basic Probability Concepts: Mutually Exclusive Events

 Class example
(a) What is the probability of a randomly selected JSE company being both a small
and a medium-sized company?

Solution:
Let A = event (small company).
Let B = event (medium company).
Events A and B are mutually exclusive, since a randomly selected company cannot
be both small and medium at the same time.
Thus, P(A ∩ B) = P(small ∩ medium) = 0 (i.e. the joint event set is empty).
There is no chance of selecting a small-and medium-sized JSE company
simultaneously. It is therefore an impossible event.
Example (a) above illustrates probability calculations for events that are mutually
exclusive.
[Events are non-mutually exclusive if they can occur together on a single trial of a
random experiment (i.e. at the same point in time) such as Figure 4.1 which graphically
shows events that are non-mutually exclusive (i.e. there is an intersection)]
 Basic Probability Concepts:
Collectively Exhaustive Events

• Events are collectively exhaustive when the union of all

possible events is equal to the sample space.
• This means that in a single trial of a random experiment, at
least one of these events is certain to occur. It is written as
• P (A ∪ B ∪ C) = 1
 Class example
(a) What is the probability of selecting a small, medium or large JSE
company from the sample of 170 companies surveyed?

Solution:
Let A = event (small company).
Let B = event (medium company).
Let C = event (large company).
Since (A ∪ B ∪ C) = (the sample space of all JSE companies), then P(A ∪ B
∪ C) = P(small) + P(medium) + P(large) = 36/170 + 48/170 + 86/170 =
0.212 + 0.282 + 0.506 = 1
Since the events comprise the collectively exhaustive set for all company
sizes, the event of selecting either a small or medium or large JSE company is
certain to occur.
 • Events are collectively exhaustive when the union of all
Basic possible events is equal to the sample space.

Probability • This means, that in a single trial of a random experiment, at

least one of these events is certain to occur. It is written
Concepts: as P (A ∪ B ∪ C) = 1
• Two events, A and B, are statistically independent if the
Statistically occurrence of event A has no effect on the outcome of
event B, and vice versa.
Independent • For example, if the proportion of male clients of Nedbank
who use internet banking is the same as the proportion of
Events Nedbank’s female clients who use internet banking, then
‘gender’ and ‘preference for internet banking’ at Nedbank
are statistically independent events.
 • Objective probabilities can be classified into three types: marginal
probability, joint probability and conditional probability.
• A marginal probability is the probability of a single event A occurring only. A
single event refers to the outcomes of only one random variable. Since a
frequency table describes the outcomes of only one random variable, it is
used to calculate marginal probabilities

Calculating • A joint probability is the probability that both event A and event B will occur
simultaneously on a single trial of a random experiment. A joint event refers
Objective to the outcomes of two or more random variables occurring together as
illustrated in Figure 4.1. It is the same as the intersection of two events in a
Venn diagram
Probabilities • A conditional probability is the probability of event A occurring, given that
event B has already occurred. It is written as P(A|B). In formula terms, a
conditional probability is defined as follows: P(A|B) = P(A ∩ B) / P(B)
• The essential feature of the conditional probability is that the sample space is
reduced to the set of outcomes associated with the given prior event B only.
The prior information (i.e. event B) can change the likelihood of event A
occurring.
Basic Probability Rules

• Addition Rule
• Permutation Rule
• Combinations Rule
 Probability rules have been developed to calculate
probabilities of compound or multiple events occurring
simultaneously. There are two basic probability rules:
1 The addition rule
– for non-mutually exclusive events
P(A ∪ B) = P(A) + P(B) − P(A ∩ B), and
Probability – for mutually exclusive events
Rules P(A ∪ B)=P(A)+P(B).
The addition rule relates to the union of events. It is used
to find the probability of either event A or event B, or
both events occurring simultaneously in a single trial of a
random experiment.
Class examples: Addition rule

In a Biology class of 30 students, 17 are boys and 13 are girls. On a unit

test, 4 boys and 5 girls made an A grade. If a student is chosen at random
from the class, what is the probability of choosing a girl or an A student?

P(girl ∪ A) = P(girl) + P(A) − P(girl∩ A) = (13/30) + (9/30) − (5/30) = 0.57

For mutually exclusive events:

P(A ∪ B) = P(A) + P(B)

A spinner has 4 equal sectors coloured yellow, blue, green, and red. What
is the probability of landing on red or blue after spinning this spinner?

P(Red)= ¼ = 0.25
P(Blue)= ¼ = 0.25
P(Red ∪ Blue)= 0.25 + 0.25 = 0.5
 Probability rules have been developed to calculate probabilities of
compound or multiple events occurring simultaneously. There are
two basic probability rules:

2 The multiplication rule

Probability – for statistically dependent events

P(A ∩ B) = P(A/B) × P(B), and
Rules – for statistically independent events
P(A ∩ B) = P(A) × P(B).
The multiplication rule relates to the intersection of events. It is used to
find the probability of event A and event B occurring together in a single
trial of a random experiment.
NB: Two events are statistically independent if the following
relationship is true: P(A/B) = P(A)
Class examples: Multiplication rule
Suppose you take out two cards from a standard pack of cards one after
another, without replacing the first card. What is the probability that the
first card is the ace of spades, and the second card is a heart?
The two events are dependent events because the first card is not
replaced.

There is only one ace of spades in a deck of 52 cards. So:

P(1st card is the ace of spades)=1/52=0.019
If the ace of spaces is drawn first, then there are 51 cards left in the deck,
of which 13 are hearts:
P(2nd card is a heart | 1st card is the ace of spades)=13/51=0.254

So, by the multiplication rule of probability, we have:

P(ace of spades, then a heart)=0.019×0.254=0.005
 • Before we explore permutations, we are going to look at what
combination and permutation means.
• A Greek salad is a mix of tomatoes, feta cheese, olives, cucumbers
and onions. It does not matter in what order we add our
ingredients, but if we have a 2-8-7 variation of our padlock, then
the order is very important.
• If the order does not matter, we have a combination; if the order
does matter, we have a permutation. One could say that a
permutation is an ordered combination.
Counting Permutation rule
• The number of permutations of n objects taken r at a time is
Rules determined by the following formula:
• P(n,r) = n!/(n−r)! [For n ≥ r ≥ 0]
Where: n! is read n factorial and means all numbers from 1 to n
multiplied.
• e.g. 6! = 6×5×4×3×2×1 = 720. This is read six factorial.
• 0! Is defined as 1.
• 0! = 1
• e.g. P(10,4) = 10!/(10-4)! = 5040
 Combinations rule
• In our example the order of the digits was
important, if the order didn't matter, we
would have what is the definition of a
combination. The number of combinations of n
objects taken r at a time is determined by
the following formula:
• C(n,r) = n!/[(n−r)!r!] [For n ≥ r ≥ 0]
Counting Rules • Therefore:
• C(10,4) = 10!/[(10−4)!4!] = 210
Class examples: Permutation rule
A code has 4 digits in a specific order, the digits are between 0-9. How
many different permutations are there if one digit may only be used
once?

A four-digit code could be anything between 0000 to 9999, hence there

are 10,000 combinations if every digit could be used more than one time
but since we are told in the question that one digit only may be used once
it limits our number of combinations. In order to determine the correct
number of permutations we simply plug in our values into our formula:

P(n,r) = 10!/(10−4)! = 10×9×8×7×6×5×4×3×2×1 / 6×5×4×3×2×1 = 5040

 Activity: Data analysis
• From a group of 5-6 individuals and each
group will be provided with a dataset. Based on the
dataset provided each group should calculate :

• Joint Probability
• Marginal Probability
• Conditional Probability
• Addition Rule for Non-mutually Exclusive Events
• Addition Rule for Mutually Exclusive Events
• Multiplication Rule for Statistically Dependent Events
Activity
Activity