Probability Concepts and Applications
Definitions
Random
Experiment
An experiment which when repeated under identical conditions does not produce the same outcome every time, but the outcome in a given trial is one of several possible outcomes.
Elementary
Events
Each of the possible outcomes of a Random Experiment is called an Elementary Event
Sample
Space
The set of all possible outcomes of a random experiment constitutes the Sample Space
Definitions
Event
A subset of the Sample Space associated with a Random Experiment
Mutually
Exclusive Events
Two or more events associated with a Random Experiment are Mutually Exclusive if no two or more of them can occur simultaneously in the same trial
Mutually Exclusive Events
Events are said to be mutually exclusive if only one of the events can occur on any one trial
Tossing a coin will result in either a head or a tail Rolling a die will result in only one of six possible outcomes
Fundamental Concepts
The probability, P, of any event or state of nature occurring is greater than or equal to 0 and less than or equal to 1. That is:
0 P (event) 1
The sum of the simple probabilities for all possible outcomes of an activity must equal 1
Probability
P (event) =
Number of occurrences of the event Total number of trials or outcomes
Diversey Paint Example
Demand for white latex paint at Diversey Paint and Supply has always been either 0, 1, 2, 3, or 4 gallons per day Over the past 200 days, the owner has observed the following frequencies of demand
QUANTITY DEMANDED 0 1 2 3 4
NUMBER OF DAYS 40 80 50 20 10 Total 200 Total
PROBABILITY 0.20 (= 40/200) 0.40 (= 80/200) 0.25 (= 50/200) 0.10 (= 20/200) 0.05 (= 10/200) 1.00 (= 200/200)
Diversey Paint Example
Demand for white latex paint at Diversey Paint and Supply has always been either 0,probabilities 1, 2, 3, or 4 gallons per day Notice the individual
are all between 0 and 1
Over the past 200 days, the owner has observed the following frequencies of (event) demand 1 0P
And the total of all event QUANTITY probabilities equals 1 NUMBER OF DAYS DEMANDED
0 1 2 3 4 Total 40 P (event) = 1.00 80 50 20 10 200 Total
PROBABILITY 0.20 (= 40/200) 0.40 (= 80/200) 0.25 (= 50/200) 0.10 (= 20/200) 0.05 (= 10/200) 1.00 (= 200/200)
Exhaustive Events
Events are said to be exhaustive if the list of outcomes includes every possible outcome
Both heads and tails as possible outcomes of coin flips All six possible outcomes of the roll of a die
OUTCOME OF ROLL 1 2 3
PROBABILITY
1/ 6 1/ 6 1/ 6 1/ 6 1/ 6 1/ 6
4
5 6
Total 1
Drawing a Card
Draw one card from a deck of 52 playing cards
P (drawing a 7) = 4/52 = 1/13 P (drawing a heart) = 13/52 = 1/4
These two events are not mutually exclusive
since a 7 of hearts can be drawn These two events are not collectively exhaustive since there are other cards in the deck besides 7s and hearts
Table of Differences
DRAWS 1. Draws a spade and a club 2. Draw a face card and a number card MUTUALLY EXCLUSIVE COLLECTIVELY EXHAUSTIVE
3. Draw an ace and a 3
4. Draw a club and a nonclub
5. Draw a 5 and a diamond
6. Draw a red card and a diamond
Table of Differences
DRAWS 1. Draws a spade and a club 2. Draw a face card and a number card MUTUALLY EXCLUSIVE Yes Yes COLLECTIVELY EXHAUSTIVE No Yes
3. Draw an ace and a 3
4. Draw a club and a nonclub
Yes
Yes
No
Yes
5. Draw a 5 and a diamond
6. Draw a red card and a diamond
No
No
No
No
Adding Mutually Exclusive Events
We often want to know whether one or a second event will occur When two events are mutually exclusive, the law of addition is
P (event A or event B) = P (event A) + P (event B) P (spade or club) = P (spade) + P (club) = 13/52 + 13/52
= 26/52 = 1/2 = 0.50 = 50%
Adding Not Mutually Exclusive Events
The equation must be modified to account for double counting The probability is reduced by subtracting the chance of both events occurring together
P (event A or event B) = P (event A) + P (event B) P (event A and event B both occurring)
P (A or B) = P (A) + P (B) P (A and B)
P(five or diamond) = P(five) + P(diamond) P(five and diamond)
= 4/52 + 13/52 1/52
= 16/52 = 4/13
Venn Diagrams
P (A and B)
P (A)
P (B)
P (A)
P (B)
Events that are mutually exclusive
Events that are not mutually exclusive
P (A or B) = P (A) + P (B) P (A or B) = P (A) + P (B) P (A and B)
Three Types of Probabilities
Marginal (or simple) probability is just the probability of an event occurring P (A)
Joint probability is the probability of two or more events occurring and is the product of their marginal probabilities for independent events P (AB) = P (A) x P (B)
Conditional probability is the probability of event B given that event A has occurred P (B | A) = P (AB) / P (A)
Or the probability of event A given that event B has occurred P (A | B) = P (AB) / P (B)
An Example:
Men Promoted Not Promoted Totals 288 672 960 Women 36 204 240 Totals 324 876 1200
Let
M: event an employee is a man
W: event an employee is a woman
A: event an employee is promoted
A: event an employee is not promoted
Example Contd..
Men (M) Promoted (A) Not Promoted (A) 0.24 0.56 Women (W) 0.03 0.17 Totals 0.27 0.73
Totals
0.80
0.20
1.00
Joint Probabilities (AB) Conditional Probability:
Marginal Probabilities P(A)
P(AM) = P (AM) = 288/1200 = 0.24 = 0.30 P(M)
960/1200
0.80
Statistically Independent Events
Events may be either independent or dependent
For independent events, the occurrence of one event has no effect on the probability of occurrence of the second event Two events A and B are independent if, P(AB) = P(A) or P(BA) = P(B)
Independent Events
A bucket contains 3 black balls and 7 green balls We draw a ball from the bucket, replace it, and draw a second ball
1.
A black ball drawn on first draw P (B) = 0.30 (a marginal probability)
1.
Two green balls drawn
P (GG) = P (G) x P (G) = 0.7 x 0.7 = 0.49 (a joint probability for two independent events)
Independent Events
A bucket contains 3 black balls and 7 green balls We draw a ball from the bucket, replace it, and draw a second ball
1.
A black ball drawn on second draw if the first draw is green P (B | G) = P (B) = 0.30 (a conditional probability but equal to the marginal because the two draws are independent events)
1.
A green ball is drawn on the second if the first draw was green P (G | G) = P (G) = 0.70 (a conditional probability as in event 3)
When Events Are Dependent
Assume that we have an urn containing 10 balls of the following descriptions 4 are white (W) and lettered (L) 2 are white (W) and numbered (N) 3 are yellow (Y) and lettered (L) 1 is yellow (Y) and numbered (N) P (WL) = 4/10 = 0.4 P (WN) = 2/10 = 0.2 P (W) = 6/10 = 0.6 P (Y) = 4/10 = 0.4 P (YL) = 3/10 = 0.3 P (YN) = 1/10 = 0.1 P (L) = 7/10 = 0.7 P (N) = 3/10 = 0.3
When Events Are Dependent
4 balls White (W) and Lettered (L)
Probability (WL) =
4 10
Urn contains 10 balls
2 balls White (W) and Numbered (N) 3 balls Yellow (Y) and Lettered (L) 1 ball Yellow (Y) and Numbered (N)
Probability (WN) =
2 10
Probability (YL) =
3 10
Probability (YN) =
1 10
When Events Are Dependent
The conditional probability that the ball drawn is lettered, given that it is yellow, is
P (YL) 0.3
P (L | Y) =
P (Y)
0.4
= 0.75
Verify P (YL) using the joint probability formula P (YL) = P (L | Y) x P (Y) = (0.75)(0.4) = 0.3
Joint Probabilities for Dependent Events
If the stock market reaches 12,500 point by January, there is a 70% probability that Tubeless Electronics will go up There is a 40% chance the stock market will reach 12,500 Let M represent the event of the stock market reaching 12,500 and let T be the event that Tubeless goes up in value
P (MT) = P (T | M) x P (M) = (0.70)(0.40) = 0.28
Revising Probabilities with Bayes Theorem
Bayes theorem is used to incorporate additional information and help create posterior probabilities
Prior Probabilities Bayes Process New Information Posterior Probabilities
Posterior Probabilities
A cup contains two dice identical in appearance but one is fair (unbiased), the other is loaded (biased) The probability of rolling a 3 on the fair die is 1/6 or 0.166 The probability of tossing the same number on the loaded die is 0.60 We select one by chance, toss it, and get a result of a 3 What is the probability that the die rolled was fair? What is the probability that the loaded die was rolled?
Posterior Probabilities
We know the probability of the die being fair or loaded is P (fair) = 0.50 And that P (3 | fair) = 0.166 P (3 | loaded) = 0.60 P (loaded) = 0.50
We compute the probabilities of P (3 and fair) and P (3 and loaded)
P (3 and fair)= P (3 | fair) x P (fair) = (0.166)(0.50) = 0.083
P (3 and loaded)= P (3 | loaded) x P (loaded) = (0.60)(0.50) = 0.300
Posterior Probabilities
We know the probabilityThe of the die being fair or loaded is sum of these probabilities
gives us the unconditional P (fair) = 0.50 P (loaded) = 0.50 probability of tossing a 3
And that P (3 | fair) = 0.166
P (3) = 0.083 + 0.300 = 0.383
P (3 | loaded) = 0.60
We compute the probabilities of P (3 and fair) and P (3 and loaded)
P (3 and fair)= P (3 | fair) x P (fair) = (0.166)(0.50) = 0.083
P (3 and loaded)= P (3 | loaded) x P (loaded) = (0.60)(0.50) = 0.300
Posterior Probabilities
If a 3 does occur, the probability that the die rolled was the fair one is 0.083 P (fair and 3)
P (fair | 3) = P (3) =
0.383
= 0.22
The probability that the die was loaded is
P (loaded | 3) =
P (loaded and 3) P (3)
0.300
0.383
= 0.78
These are the revised or posterior probabilities for the next
roll of the die We use these to revise our prior probability estimates
Bayes Calculations
Given event B has occurred
STATE OF NATURE A A P (B | STATE OF NATURE) P(B | A) P(B | A) PRIOR PROBABILITY x P(A) x P(A) JOINT PROBABILITY = P(B and A) = P(B and A) P(B) POSTERIOR PROBABILITY P(B and A)/P(B) = P(A|B) P(B and A)/P(B) = P(A|B)
Given a 3 was rolled
STATE OF NATURE Fair die Loaded die P (B | STATE OF NATURE) 0.166 0.600 PRIOR PROBABILITY x 0.5 x 0.5 JOINT PROBABILITY = 0.083 = 0.300 P(3) = 0.383
Table 2.2
POSTERIOR PROBABILITY 0.083 / 0.383 = 0.22 0.300 / 0.383 = 0.78
Table 2.3
General Form of Bayes Theorem
We can compute revised probabilities more directly by using
P ( B A ) P ( A ) P ( A B )= P ( B A ) P ( A )+ P ( B A ' ) P ( A ' )
where A the complement of the event ; A for example, if A is the event fair die, then A' is loaded die
General Form of Bayes Theorem
This is basically what we did in the previous example If we replace A with fair die Replace A' with loaded die Replace B with 3 rolled We get
P ( fair die 3 rolled )
P ( 3 fair ) P ( fair ) P ( 3 fair ) P ( fair )+ P ( 3 loaded ) P ( loaded )
( 0 .166 )( 0 . 50 ) 0 . 083 = = 0 . 22 ( 0 . 166 )( 0 .50 )+( 0 . 60 )( 0 .50 ) 0 . 383
