Basic Business Statistics
12th Edition
Chapter 4
Basic Probability
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 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
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 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)
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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 elementaryoutcomes
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 elementaryoutcomes
3. subjective probability
based on a combination of an individual’s past experience,
personal opinion, and analysis of a particular situation
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 4-4
Example of a priori probability
When randomly selecting a day from the year 2010
what is the probability the day is in January?
X number of days in January
Probability of Day In January
T total number of days in 2010
X 31 days in January 31
T 365 days in 2010 365
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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
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 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 2010
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 2010
Complement of an event A (denoted A’)
All events that are not part of event A
e.g., All days from 2010 that are not in January
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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:
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Visualizing Events
Contingency Tables -- For All Days in 2010
Jan. Not Jan. Total
Wed. 4 48 52
Not Wed. 27 286 313
Total 31 334 365
Decision Trees Total
Sample
Wed. 4 Number
Of
Jan.
Space Sample
All Days Not Wed. 27
Space
In 2010 Wed. 48
Outcomes
No t J a
n.
Not W 286
ed.
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 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 / 365
Wed. 4 48 52
Not Wed. 27 286 313
Total 31 334 365
P(Jan.) = 31 / 365
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 4-10
Definition: Joint Probability
Joint Probability refers to the probability of an
occurrence of two or more events (joint event).
ex. P(Jan. and Wed.)
ex. P(Not Jan. and Not Wed.)
Jan. Not Jan. Total
P(Not Jan. and Not Wed.)
Wed. 4 48 52
= 286 / 365
Not Wed. 27 286 313
Total 31 334 365
P(Jan. and Wed.) = 4 / 365
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Mutually Exclusive Events
Mutually exclusive events
Events that cannot occur simultaneously
Example: Randomly choosing a day from 2010
A = day in January; B = day in February
Events A and B are mutually exclusive
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 4-12
Collectively Exhaustive Events
Collectively exhaustive events
One of the events must occur
The set of events covers the entire sample space
Example: Randomly choose a day from 2010
A = Weekday; B = Weekend;
C = January; D = Spring;
Events A, B, C and D are collectively exhaustive
(but not mutually exclusive – a weekday can be in
January or in Spring)
Events A and B are collectively exhaustive and
also mutually exclusive
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 4-13
Computing Joint and
Marginal Probabilities
The probability of a joint event, A and B:
number of outcomes satisfying A and B
P( A and B)
total number of elementary outcomes
Computing a marginal (or simple) probability:
P(A) P(A and B1 ) P(A and B 2 ) P(A and Bk )
Where B1, B2, …, Bk are k mutually exclusive and collectively
exhaustive events
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Joint Probability Example
P(Jan. and Wed.)
number of days that are in Jan. and are Wed. 4
total number of days in 2010 365
Jan. Not Jan. Total
Wed. 4 48 52
Not Wed. 27 286 313
Total 31 334 365
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 4-15
Marginal Probability Example
P(Wed.)
4 48 52
P(Jan. and Wed.) P(Not Jan. and Wed.)
365 365 365
Jan. Not Jan. Total
Wed. 4 48 52
Not Wed. 27 286 313
Total 31 334 365
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Marginal & Joint Probabilities In A
Contingency Table
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Probability Summary So Far
Probability is the numerical measure
of the likelihood that an event will 1 Certain
occur
The probability of any event must be
between 0 and 1, inclusively
0 ≤ P(A) ≤ 1 For any event A 0.5
The sum of the probabilities of all
mutually exclusive and collectively
exhaustive events is 1
P(A) P(B) P(C) 1
0 Impossible
If A, B, and C are mutually exclusive and
collectively exhaustive
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General Addition Rule
General Addition Rule:
P(A or B) = P(A) + P(B) - P(A and B)
If A and B are mutually exclusive, then
P(A and B) = 0, so the rule can be simplified:
P(A or B) = P(A) + P(B)
For mutually exclusive events A and B
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 4-19
General Addition Rule Example
P(Jan. or Wed.) = P(Jan.) + P(Wed.) - P(Jan. and Wed.)
= 31/365 + 52/365 - 4/365 = 79/365
Don’t count
the four
Wednesdays
in January
Jan. Not Jan. Total twice!
Wed. 4 48 52
Not Wed. 27 286 313
Total 31 334 365
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 4-20
Computing Conditional
Probabilities
A conditional probability is the probability of one
event, given that another event has occurred:
P(A and B) The conditional
P(A | B) probability of A given
P(B) that B has occurred
P(A and B) The conditional
P(B | A) probability of B given
P(A) that A has occurred
Where P(A and B) = joint probability of A and B
P(A) = marginal or simple probability of A
P(B) = marginal or simple probability of B
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 4-21
Conditional Probability Example
Of the cars on a used car lot, 90% have air
conditioning (AC) and 40% have a GPS. 35% of
the cars have both.
What is the probability that a car has a GPS
given that it has AC ?
i.e., we want to find P(GPS | AC)
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 4-22
Conditional Probability Example
(continued)
Of the cars on a used car lot, 90% have air conditioning
(AC) and 40% have a GPS.
35% of the cars have both.
GPS No GPS Total
AC 0.35 0.55 0.90
No AC 0.05 0.05 0.10
Total 0.40 0.60 1.00
P(GPS and AC) 0.35
P(GPS | AC) 0.3889
P(AC) 0.90
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 4-23
Conditional Probability Example
(continued)
Given AC, we only consider the top row (90% of the cars). Of these,
35% have a GPS. 35% of 90% is about 38.89%.
GPS No GPS Total
AC 0.35 0.55 0.90
No AC 0.05 0.05 0.10
Total 0.40 0.60 1.00
P(GPS and AC) 0.35
P(GPS | AC) 0.3889
P(AC) 0.90
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 4-24
Using Decision Trees
.35
S .90 P(AC and GPS) = 0.35
Given AC or G P
Has
no AC: 0.9
C)= D oe
P( A s
have not P(AC and GPS’) = 0.55
AC GPS .55
s
Ha .90
All Conditional
Probabilities
Cars
Doe .05
hav s not .10 P(AC’ and GPS) = 0.05
eA P(A PS
C G
C’) Has
=0
.1
Doe
s
have not
GPS .05 P(AC’ and GPS’) = 0.05
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
.10 Chap 4-25
Using Decision Trees
(continued)
.35
C
.40 P(GPS and AC) = 0.35
Given GPS Has
A
or no GPS: 0.4
S) =
( G P D oe
P s
have not .05 P(GPS and AC’) = 0.05
GPS AC
s
Ha .40
All Conditional
Probabilities
Cars
Doe .55
hav s not
eG C
.60 P(GPS’ and AC) = 0.55
PS P(G A
PS Has
’) =0
.6
Doe
s
have not .05 P(GPS’ and AC’) = 0.05
AC
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
.60 Chap 4-26
Independence
Two events are independent if and only
if:
P(A | B) P(A)
Events A and B are independent when the probability
of one event is not affected by the fact that the other
event has occurred
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Multiplication Rules
Multiplication rule for two events A and B:
P(A and B) P(A | B) P(B)
Note: If A and B are independent, then P(A | B) P(A)
and the multiplication rule simplifies to
P(A and B) P(A) P(B)
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 4-28
Marginal Probability
Marginal probability for event A:
P(A) P(A | B1 ) P(B1 ) P(A | B2 ) P(B2 ) P(A | Bk ) P(Bk )
Where B1, B2, …, Bk are k mutually exclusive and
collectively exhaustive events
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Counting Rules
Rules for counting the number of possible
outcomes
Counting Rule 1:
If any one of k different mutually exclusive and
collectively exhaustive events can occur on each of
n trials, the number of possible outcomes is equal to
kn
Example
If you roll a fair die 3 times then there are 63 = 216 possible
outcomes
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Counting Rules
(continued)
Counting Rule 2:
If there are k1 events on the first trial, k2 events on
the second trial, … and kn events on the nth trial, the
number of possible outcomes is
(k1)(k2)…(kn)
Example:
You want to go to a park, eat at a restaurant, and see a
movie. There are 3 parks, 4 restaurants, and 6 movie
choices. How many different possible combinations are
there?
Answer: (3)(4)(6) = 72 different possibilities
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Counting Rules
(continued)
Counting Rule 3:
The number of ways that n items can be arranged in
order is
n! = (n)(n – 1)…(1)
Example:
You have five books to put on a bookshelf. How many
different ways can these books be placed on the shelf?
Answer: 5! = (5)(4)(3)(2)(1) = 120 different possibilities
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Counting Rules
(continued)
Counting Rule 4:
Permutations: The number of ways of arranging X
objects selected from n objects in order is
n!
n Px
(n X)!
Example:
You have five books and are going to put three on a
bookshelf. How many different ways can the books be
ordered on the bookshelf?
n! 5! 120
n Px 60
Answer: (n X)! (5 3)! 2 possibilities
different
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Counting Rules
(continued)
Counting Rule 5:
Combinations: The number of ways of selecting X
objects from n objects, irrespective of order, is
n!
n Cx
X!(n X)!
Example:
You have five books and are going to randomly select three
to read. How many different combinations of books might
you select? n! 5! 120
n Cx 10
X!(n X)! 3!(5 3)! (6)(2)
Answer: different possibilities
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 4-34
Chapter Summary
Discussed basic probability concepts
Sample spaces and events, contingency tables, simple
probability, and joint probability
Examined basic probability rules
General addition rule, addition rule for mutually exclusive events,
rule for collectively exhaustive events
Defined conditional probability
Statistical independence, marginal probability, decision trees,
and the multiplication rule
Discussed Bayes’ theorem
Discussed various counting rules
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 4-35
