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Business Statistics: A First Course: 6 Edition

This chapter discusses basic probability concepts including defining probability as the chance an uncertain event will occur between 0 and 1. It introduces the concepts of impossible, certain, and elementary events. Methods for assessing probability are discussed including a priori, empirical, and subjective probabilities. Examples are provided to illustrate each type. Key concepts of events, sample spaces, and simple probability are defined. Conditional probability and Bayes' theorem are mentioned as topics to be covered later in the chapter.

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158 views10 pages

Business Statistics: A First Course: 6 Edition

This chapter discusses basic probability concepts including defining probability as the chance an uncertain event will occur between 0 and 1. It introduces the concepts of impossible, certain, and elementary events. Methods for assessing probability are discussed including a priori, empirical, and subjective probabilities. Examples are provided to illustrate each type. Key concepts of events, sample spaces, and simple probability are defined. Conditional probability and Bayes' theorem are mentioned as topics to be covered later in the chapter.

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Peter
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Business Statistics: A First

Course
6th Edition

Chapter 4

Basic Probability

Chap 4-1
Learning Objectives

In this chapter, you learn:

 Basic probability concepts


 Conditional probability
 To use Bayes’ theorem to revise probabilities
 Various counting rules

Chap 4-2
Basic Probability Concepts

 Probability – the chance that an uncertain event


will occur (always between 0 and 1)

 Impossible Event – an event that has no


chance of occurring (probability = 0)

 Certain Event – an event that is sure to occur


(probability = 1)

Chap 4-3
Assessing Probability

There are three approaches to assessing the


probability of an uncertain event:
1. a priori -- based on prior knowledge of the process
X number of ways the event can occur
probability of occurrence  
Assuming
T total number of elementary outcomes
all
outcomes 2. empirical probability -- based on observed data
are equally
likely number of ways the event can occur
probability of occurrence 
total number of elementary outcomes
3. subjective probability

based on a combination of an individual’s past experience,


personal opinion, and analysis of a particular situation

Chap 4-4
Example of a priori probability

When randomly selecting a day from the year 2012


what is the probability the day is in January?

X number of days in January


Probabilit y of Day In January  
T total number of days in 2012

X 31 days in January 31
 
T 366 days in 2010 366
Chap 4-5
Example of empirical probability

Find the probability of selecting a male taking statistics


from the population described in the following table:

Taking Stats Not Taking Total


Stats
Male 84 145 229
Female 76 134 210
Total 160 279 439

number of males taking stats 84


Probability of male taking stats    0.191
total number of people 439

Chap 4-6
Events

Each possible outcome of a variable is an event.

 Simple event
 An event described by a single characteristic
 e.g., A day in January from all days in 2012
 Joint event
 An event described by two or more characteristics
 e.g. A day in January that is also a Wednesday from all days in 2012
 Complement of an event A (denoted A’)
 All events that are not part of event A
 e.g., All days from 2012 that are not in January

Chap 4-7
Sample Space
The Sample Space is the collection of all
possible events
e.g. All 6 faces of a die:

e.g. All 52 cards of a bridge deck:

Chap 4-8
Visualizing Events

 Contingency Tables -- For All Days in 2012


Jan. Not Jan. Total

Wed. 4 48 52
Not Wed. 27 287 314

Total 31 335 366

 Decision Trees Total


4 Number
Sample Of
Space 27 Sample
All Days Space
In 2012 Outcomes
48

287
Chap 4-9
Definition: Simple Probability

 Simple Probability refers to the probability of a


simple event.
 ex. P(Jan.)
 ex. P(Wed.)
Jan. Not Jan. Total
P(Wed.) = 52 / 366
Wed. 4 48 52
Not Wed. 27 287 314

Total 31 335 366

P(Jan.) = 31 / 366
Chap 4-10

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