Topic 6

PROBABILITY THEORY
Basic probability (Definition)

  It a decision making tool under uncertain environment.

 It express the chance that an event will occur
 It is the number between 0 and 1 which express the chance
that an event will occur.
 .
Basic probability
(Terminology)
Experiment
 It an activity or measurement that results in an outcome e.g
writing an examination.
Sample Space
 These are all possible outcomes of an experiment e. g pass/fail.
Event
 It is one or more of the possible outcomes of an experiment. e. g
pass or fail
 It is a subset of a sample space.
 It is anything of interest to the observer.
Basic probability
(Terminology)
Mutually exclusive events
 These are events that cannot occur at the same time.
Statistically independent events
 Are events that can occur together but they do not influence each other.
Exhaustive events
 includes all possible outcomes of an experiment.
 If events with a set are both mutually exclusive and exhaustive, the sum
of their probabilities is 1.
 One of them must occur.
Basic probability
(Terminology)

Intersection of events,
 two or more events occur at the same time intersection is
A&B.
Union of events-
 At least one of the possible events occurs. Union is A or B.
Basic probability (Types of
probabilities)
Subjective probability
 It is based on intelligent guess or plain intuition.
 It cannot be verified statistically.
 It is judgemental and it represent to which one happens to
believe that an event will or will not happen.
 It is an educated guess.
Basic probability (Types of
probabilities)
Objective
   Probability
 This is the probability of an event occurring, which can be
verifies statistically through surveys.
 where A is an Event, r is number of outcomes of event A, n
is total number of all possible outcomes (sample space) and
P(A) is the probability of event A occurring.
Basic probability (properties of
probability)
  
 Probability values lies between 0 and 1.
 If an event A cannot occur, then the probability is zero.
 If an event A is certain to occur, then the probability is one ,
 The sum of probabilities of all collectively exhaustive set of
events is 1
Basic probability (properties of
probability)
  
 The sum of probabilities of all collectively exhaustive set of
events is
1,,
 The probability of either A or B occurring is
 Complementary probability, if the probability that event A
will not occur is
 =1-P(A)
Basic probability (Probability
Rules)
Addition
   Rule
 It relates to the union of events.
 It is used to find the probability of either event A or event B
or both occurring simultaneously in a single trial of a
random experiment.
 For non-mutually exclusive events
 and
 1;2;3;4;5;6
 For mutually exclusive events

Basic probability (Probability
Rules)
Multiplication
   rule
 It relates to the intersection of events.
 It is used to find the probability of event A and event B
occurring at the same time in a single random experiment.
 For statistically dependent events
Basic probability (Probability
Rules)
Multiplication
   rule
 It relates to the intersection of events.
 For statistically independent events

 Multiplication rule can be illustrated with a probability tree

diagram.
 A probability tree diagram is visually summarised
occurrences or non-occurrence of two or more events.
 It summaries events that occurs in a sequence.
Basic probability (Probability
Rules)
Multiplication rule
Example
 Tossing a coin three times and assume that the events are
independent
Basic probability (Probability
Rules)
Multiplication rule
Basic probability (Probability
Rules)
  
Conditional Probability
 It is probability that an event will occur given that another
event has already happened.
 only if P(B)>0.

Basic probability (Calculating
objective probability)

 Objective probabilities are classified into three

Marginal Probability
 It is the probability of a single event occurring only,
 that is an outcome of one random variable P(A).
Basic probability (Calculating
objective probability)
  
Marginal Probability
Example
 If one tosses a coin once, the probability of a head is .
 This is the marginal probability of a single event , head.
Basic probability (Calculating
objective probability)
  
Joint Probability {}
 This implies that both events will occur at the same time
(simultaneously) on a single trial of random experiment.
 It is the same as the intersection of two events.
 Cross tabulation can be used to show joint probabilities.
Basic probability (Calculating
objective probability)
  
Conditional Probability
 It is the probability of event A happening given that B has
already occurred.
 .
 Prior event can change the likelihood of event A occurring.
Probability Distributions

 Probability distribution is a list of all the possible outcomes

of a random variable and their associated probability
occurrences.
 Distributions are discrete and continuous
Probability Distributions (Discrete
distribution)

 A discrete random distribution is a variable which can take

individual values, each with a given probability.
 They are usually outcomes of an experiment.
For example,
 A dice is rolled once (1,2,3,4,5,6).
 The probability that X takes a certain figure is P(X=x).
Probability Distributions (Discrete
distribution)
  

X 1 2 3 4 5 6
Probability Distributions (Discrete
distribution)

Binomial distribution
 A distribution follows binomial if;
 Random variable is observed n times.
 There are only two mutually exclusive and collectively exhaustive
outcomes associated with a random variable.
 (Outcomes: success or failure).
 Each outcome has an associated probability; P(success) =P and
P(failure) = 1-P.
Probability Distributions (Discrete
distribution)
  
Binomial distribution
 The probability of an outcome is the same for each trial.

 Where
 n is the sample size,
 x is number of successes,
 P is probability of success and
 1-P is the probability of failure.
Probability Distributions (Discrete
distribution)

Binomial distribution
Example
 A supermarket’s 60% of customers pay using a credit card.
 Find the probability in a randomly selected 12 customers
that;
 Exactly 7 customers pay using a credit card.
 At least three but fewer than five customers pay using a
credit card.
Probability Distributions (Discrete
distribution)
  
Binomial distribution
Example
 n=12, P=0.6, 1-P = 0.4

 Or
Probability Distributions (Discrete
distribution)

Binomial Distribution
 Mean and variance of the binomial distribution;

μ=Ex=nP and
variance=E[(x-μ)2]
Probability Distributions (Discrete
distribution)
Poisson distribution
 It is a discrete distribution just like the binomial
distribution.
 It measures the number of occurrences of a particular
outcome in a predetermined;
 time,
 space or
 volume interval for which an average number of
occurrences of the outcome is known or can be
determined.
Probability Distributions (Discrete
distribution)

Poisson distribution
 For example number of customers saved within a given
time.
 The distribution is used in queuing theories.
Probability Distributions (Discrete
distribution)
  

Poisson distribution
Probability Distributions (Discrete
distribution)
Poisson distribution
Example
A computer system experienced three component failures in
100 days.
a. What is the probability of no failure?
b. What is the probability of one or more component failure
per week?
c. What is the probability that at least two failures will occur
in a three day period?
Probability Distributions (Discrete
distribution)
  
Poisson distribution
Expected number of failures
a.

b.
Probability Distributions (Discrete
distribution)
  
Poisson distribution
c.

Mean and variance

 The expected value is E(x)=a
 and variance =a.
Probability Distribution(Continuous
Distribution)

Normal Distribution
 It is the most important continuous distribution in statistics.
 Many natural and economic phenomena tend to be
approximating normally distributed situation.
 It can be used to approximate other distributions.
 Normal distribution, the mean, mode and median are all the
same.
Probability Distribution(Continuous
Distribution)

Normal
   Distribution
Properties of normal distribution

 The mean is equal to zero (

 The standard deviation is =1 (
 Probability Distribution(Continuous
Distribution)
  
Normal Distribution

Estimating probabilities
 The standard normal tables can be used to read probabilities based on the
standard normal distribution.
 The probability limits are calculated using the Z-values, thus standardizing
the value.

 After finding the value of Z, we then use the tables to find the corresponding
probability from the normal distribution tables.
 Thus finding the area under the curve.
 Probability Distribution(Continuous
Distribution)
Normal Distribution

Estimating probabilities

Z value measures how far in standard deviation forms an X value lies from the mean
 Probability Distribution(Continuous
Distribution)
  
Normal Distribution

Estimating probabilities
Example
 If X=14, then the value of Z is

This means that X lies 1.5 standard deviations below the mean.
 Probability Distribution(Continuous Distribution)

Normal Distribution
Example
An IT Company has discovered that clients’ complaints are normally distributed
with the mean of 45 complaints and the standard deviation of 8.
a. a. What is the probability that the company is likely to receive 45 to 50
complaints?

b. What is the probability that the company will receive less than 48 complaints?
 Probability Distribution(Continuous
Distribution)
Normal Distribution
Answer
 Probability Distribution(Continuous Distribution)

  
Normal Distribution
Answer
a.

P(x=45)

P(X=51)

 Probability Distribution(Continuous Distribution)

 
Normal Distribution


Answer
a.

We then add the probabilities which is 0.2754 +0=0.2754

b .
 Probability Distribution(Continuous Distribution)

Normal Distribution
Answer

 The Z value only calculates the Z area above zero.

 Thus the area below zero is 0.5 but 48 is above zero, then
the probability P(X< 48) = 0.5 + 0.1480 = 0.6480.