Statistics for Management Unit 5

Unit 5 Theory of Probability

Structure:
5.1 Introduction
Objectives
Relevance
Statistics in practise
Definition of Probability
Basic terminology used in Probability Theory
Approaches to define Probability
5.2 Rules of Probability
Addition rule
Multiplication rule
5.3 Conditional Probability
5.4 Steps Involved in Solving Problems on Probability
5.5 Bayes’ Theorem
5.6 Random Variable
Mathematical expectation and variance of a Random Variable
5.7 Summary
5.8 Glossary
5.9 Terminal Questions
5.10 Answers
5.11 Case Study

5.1 Introduction
In the previous unit, you have studied about the measures of Central
tendency and measures of Dispersion. In this unit, you will study about
measure of uncertainty involved in our day to day lives by using probability
theory.
Every human activity has an element of uncertainty. Uncertainty affects the
decision making process. In your daily life, you very often use the word
‘probably’, like, probably it may rain today; probably the share price may go
up in the next week. Therefore, there is a need to handle uncertainty
systematically and scientifically.

Manipal University Jaipur Page No. 213

Statistics for Management Unit 5

Mathematicians and statisticians developed a separate field of mathematics

and named it as ‘probability theory’. The theory of probability helps us to
make wiser decisions by understanding the degree of uncertainty.
Objectives:
After studying this unit, you should be able to:
 define Probability
 recognise the approaches to Probability
 apply the rules of probability for calculating different kinds of probabilities
 apply the Bayes’ probability theorem
 apply the concept of Random Variables to real life situations
5.1.1 Relevance
The partner of a consulting company joined as CEO of “Progressive
Enterprise“ which deals with manufacturing, imports and exports of
consumer electronics products. Soon after joining, he called for a meeting of
the top-level executives from the head office, regional offices and
manufacturing units, to deliberate on the next year’s prospects for the
company. He invited presentations from each of them about their areas of
operation and control. Somehow, he felt that the presentations were hazy,
and used lots of phrases like “quite likely”, “expected to”, “almost certain”,
”may not”, etc. After carefully listening to each of them, he announced that
another meeting would be convened after two weeks but in that meeting, he
would expect one of them to express confidence in their statements in
quantitative terms like “90%” as he believed that if one could not measure
what one is taking about in numbers, one’s knowledge and understanding
was not adequate. He also hired the services of a consultant well versed in
the area of statistics in order to help the executives to arrive at quantitative
assessment of uncertainties associated with their areas of operation. This
initiative taken by the CEO, forced the executives to gather more information
and subject it to more sophisticated analysis. At next meeting, the CEO
noted that the executives were pleased to experience that they had become
much more informed and analytical in their approach.
(Source: TN Srivastava and Shailaja Rejo (2008) Statistics for Management 5th ed.,
TMH)

Manipal University Jaipur Page No. 214

Statistics for Management Unit 5

5.1.2 Statistics in practise

Morton International
Chicago
Morton International deals with various businesses like salt, household
products, rocket motors and specialty chemicals. Carstab Corporation, a
subsidiary of Morton International, specifically deals with chemicals and
offers a variety of chemicals designed to meet the unique specification of its
customers. For one particular customer, Carstab produced an expensive
catalyst used in chemical processing. Some, but not all, of the lots produced
by Carstab met the customer’s specification for the product. Carstab’s
customer agreed to test each lot after receiving it and to determine whether
the catalyst would perform the desired function. After trying a lot they did not
pass the customer’s test and decided to returned to Carstab. Over a period
of time, Carstab found that the customers were accepting 60% of the lot and
returning 40%. In probability terms each Carstab shipment to the customer
had a 60% probability of being accepted and a 40% probability of being
returned.
Neither Carstab nor its customers were pleased with the results. In an effort
to improve service, Carstab explored the possibility of duplicating the
customer’s test prior to shipment. However, the high cost of the special
testing equipment made the alternative infeasible. Carstab chemists then
proposed a new relatively low-cost test designed to indicate whether a lot
would pass the customer’s test or not. What is the probability that a lot will
pass customer’s test if it has passed new Carstab test?
A sample of lots was produced and subjected to the new Carstab test. Only
lots that passed the new test were sent to the customer. Probability analysis
of the data indicated that if a lot passed the Carstab’s test, it had a 0.909
probability of passing the customer’s test and being accepted. Alternatively,
if a lot passed the Carstab test, it had only a 0.091 probability of being
returned. The probability analysis provided key supporting evidence for the
adoption and implementation of the new testing procedure at Carstab. The
new test resulted in an immediate solution for customer service and a
substantial reduction in shipping and handling costs for returned lots.
(Source: David R Anderson, Dennis J Sweeney and Thomas A Williams, 5th ed.,
Thomson Business Information Pvt. Ltd.)

Manipal University Jaipur Page No. 215

Statistics for Management Unit 5

5.1.3 Definition of Probability

Probability is a numerical measure which indicates the chance of
occurrence of an event ‘A’. It is denoted by P(A). It is the ratio between the
favourable outcomes of an event ‘A’ (m) to the total outcomes of the
experiment (n). In other words:
m
P(A) =
n
Where, ‘m’ is the number of favourable outcomes of an event ‘A’ and ‘n’ is
the total number of outcomes of the experiment.
Probability is a numerical measure which indicates the chance of
occurrence.

Key statistic
The probability of event A [denoted P(A)], must lie within the interval from
0 to 1.

5.1.4 Basic terminology used in probability theory

a) Experiment
An operation that results in a definite outcome is called an experiment.
Tossing a coin is an experiment, if it shows head (H) or tail (T) on falling. In
anticipation of outcome of either H or T and nothing else, tossing a coin
which is likely to stand on its edge (figure 5.1) over a typical surface is not
an experiment. For a normal thin coin, while tossing that coin on the hard
plane surface, having coin on its edge is impossible event. In other words, it
is an event with probability zero.

Fig. 5.1: A Coin Standing on its Edge

Manipal University Jaipur Page No. 216

Statistics for Management Unit 5

b) Random experiment
When the outcome of an experiment cannot be predicted with certainty, then
it is called random experiment or stochastic experiment.
There are two types of experiments. They are –
(i) Deterministic experiment and (ii) Random experiment.
A deterministic experiment, when repeated under the same conditions,
results in the same outcome. It has a unique outcome.
Random experiment is an experiment which may not result in the same
outcome when repeated under the same conditions. It is an experiment
which does not have a unique outcome.

Example 1
The experiment of 'toss of a coin' is a random experiment. It is so
because when a coin is tossed the result may be 'Head' or it may be
'Tail'.
Example 2
The experiment of 'drawing a card randomly from a pack of playing
cards' is a random experiment. Here, the result of the draw may be any
one of the 52 cards.

c) Sample space
The set of all possible outcomes of a random experiment is the sample
space. The sample space is denoted by S. The outcomes of the random
experiment (elements of the sample space) are called sample points or
outcomes or cases.
A sample space with finite number of outcomes is a finite sample space. A
sample space with infinite number of outcomes is an infinite sample space.

Example 3
In tossing of a coin, the outcomes are head and tail. In tossing a coin the
sample space ‘S’ is given by: S = Η, Τ . The head is denoted as ‘H’
and the tail as ‘T’. In tossing two coins, the sample space ‘S’ is given by:
S = ΗΗ, ΗΤ, ΤΗ, ΤΤ

Manipal University Jaipur Page No. 217

Statistics for Management Unit 5

Example 4
While throwing a die, the sample space is S = {1, 2, 3, 4, 5, 6}. This is a
finite sample space
Example 5
Consider the toss of a coin successively until a head is obtained. Let the
number of tosses be noted. Here, the sample space is S= {1, 2, 3, 4....}.
This is an infinite sample space

Key statistic
If the number of outcomes is finite then it is called as finite sample space,
otherwise it is called as an infinite sample space.

d) Event
Event is a subset of the sample space. Events are denoted by A, B, C, etc.
An event which does not contain any outcome is a null event (impossible
event). It is denoted by Φ. An event which has only one outcome is an
elementary event or simple event. An event which has more than one
outcome is a compound event. An event which contains all the outcomes is
equal to the sample and it is called sure event or certain event.

Example 6
While throwing a die, A= {2, 4, 6} is an event. It is the event that the throw
results in an even number. Here, A is a compound event.
Example 7
While tossing two coins, A= {TT} is an event. It is the event that the toss
results in two tails. Here, A is a simple event.
The outcomes which belong to an event are said to be favourable to that
event. The event happens whenever the experiment results in a favourable
outcome. Otherwise, the event does not happen
While throwing a die, the event A = {2, 4, 6} has three favourable
outcomes, namely, 2, 4 and 6 where the throw results in 2, 4 or 6, event A
occurs.

Manipal University Jaipur Page No. 218

Statistics for Management Unit 5

e) Equally likely events (equiprobable events)

Two or more events are equally likely if they have equal chance of
occurrence. That is, equally likely events are such that none of them have
greater chance of occurrence than the others.

Example 8
While tossing a fair coin, the outcomes 'Head' and 'Tail' are equally likely.
Example 9
While throwing a fair die, the events A={2,4,6}, B = {1,3, 5} and C={ 1,2, 3}
are equally likely.
A sample space is called an equiprobable space if the outcomes are
equally likely. For instance, the sample space S = {1, 2, 3, 4, 5, 6} of throw
of a fair die is equiprobable space because the six outcomes are equally
likely.
Example 10
In tossing an unbiased coin, getting head and tail are equally likely.

f) Mutually exclusive events (disjoint events)

Two or more events are mutually exclusive if only one of them can occur at
a time. That is, the occurrence of any of these events totally excludes the
occurrence of the other events. Mutually exclusive events cannot occur
together.
Example 11
While tossing a coin, the outcomes 'Head’ and 'Tail' are mutually
exclusive because when the coin is tossed once, the result cannot be
head as well as tail. While tossing a coin, if head falls, it prevents the
occurrence of tail and vice versa.
Example 12
While throwing a die, the events A = {2, 4, 6}, B= {3, 5} and C = {1} are
mutually exclusive.
If A is an event, A and A' are mutually exclusive. It should be noted that
intersection of mutually exclusive events is a null event.
Example 13
Consider an experiment of drawing a card and the following events are:

Manipal University Jaipur Page No. 219

Statistics for Management Unit 5

A: The card is a spade

B: the card is a heart
These two events are mutually exclusive as the card drawn cannot be
both a spade and a heart.
g) Exhaustive set of events
A set of events is exhaustive if one or the other of the events in the set
occurs whenever the experiment is conducted, i.e., the set of events
exhausts all the outcomes of the experiment.
The union of exhaustive events is equal to the sample space.
A set of events is exhaustive if each of the possible outcomes of an
experiment occurs in one or the other events in the set. Also, it can be
defined as the set whose sum of sample points forms the total sample
points of the experiment.

Example 14
While throwing a die, the six outcomes together are exhaustive. But here,
if any one of these outcomes is left out, the remaining five outcomes are
not exhaustive.
Example 15
While throwing a die, events A = {2, 4, 6}, B = {3, 6} and C = {1, 5, 6}
together are exhaustive.

h) Complementation of an event
Let A be an event. Then, complement of A is the event of non-occurrence of
A. It is the event constituted by the outcomes which are not favourable to A.
The complement of A is denoted by A or Ā or Ac.
The complement of an event is an event that consists of those possible
outcomes that are different from those outcomes of given event.
While throwing a die, if A = {2, 4, 6}, its complement is A = {1, 3, 5}. Here, A
is the event that the throw results in an even number. A is the event that the
throw does not result in an even number, i.e., A is the event that the throw
results in an odd number.

Manipal University Jaipur Page No. 220

Statistics for Management Unit 5

i) Independent events
Two events are said to be independent of each other if the occurrence of
one is not affected by the occurrence of other or the occurrence of one does
not affect the occurrence of the other.
Example 16
Consider tossing of three fair coins as shown in figure 5.2. Then,
S = { HHH, HHT, HTH, THH, TTH, THT, HTT, TTT}
Let:
A be the event of getting three heads
B be the event of getting two heads
C be the event of getting one head
D be the event of not getting a head

Fig. 5.2: Tossing Three Fair Coins

Then, the outcomes for events A, B, C, and D are: A = {HHH}; B = {HHT,

HTH, THH}; C = {HTT, THT, TTH}; D = {TTT}. Events A, B, C and D are
mutually exclusive and exhaustive but not equally likely.
j) Union of events
Union of two or more events is the event of occurrence of at least one of
these events. Thus, union of two events A and B is the event of occurrence
of at least one of them. The union of A and B is denoted by A  B or A+B or
(A or B).

Example 17
While tossing two coins simultaneously, let A = {HH} and B = {TT} be two
events. Then, their union is A  B = {HH, TT}. Here, A is the event of
occurrence of two heads and B is the event of occurrence of two tails.
Example 18
While throwing a die, let A = {2, 4, 6}, B = {3, 6} and C = {4, 5, 6} be three
events. Then, their union is A  B  C = {2, 3, 4, 5, 6}.

Manipal University Jaipur Page No. 221

Statistics for Management Unit 5

l) Intersection of events
Intersection of two or more events is the event of simultaneous occurrence
of all these events. Thus, intersection of two events A and B is the event of
occurrence of both of them. The intersection of A and B is denoted by A∩B
or AB or (A and B).
Example 19
While tossing two coins, let A = {HH, TT}, B = {HH, HT, TH} be two
events. Then, their intersection is A∩B = {HH}.
Example 20
While throwing a die, let A = {2, 4, 6}, B = {3, 6} and C = {4, 5, 6} be three
events. Then, their intersection is A∩B∩C = {6}.

5.1.5 Approaches to define Probability

There are four approaches to define Probability. They are as follows:
1) Classical / mathematical / priori approach
2) Statistical / relative frequency / empirical / posteriori approach
3) Subjective approach
4) Axiomatic approach
1) Classical / mathematical / priori approach
Under this approach the probability of an event is known before conducting
the experiment. In this case, each of possible outcomes is associated with
equal probability of occurrence and number of outcomes favourable to the
concerned event is known.
Let a random experiment have n equally likely, mutually exclusive and
exhaustive outcomes. Let m of these outcomes be favourable to an event A.
Then, probability of A is –

P(A) = Number of favourable outcomes

Total number of outcomes
m
P(A) =
n
Where, ‘m’ is the number of favourable outcomes, ‘n’ is the total number of
outcomes of the experiments.
The following are some of the examples of events, where the probabilities of
those events are obtained by classical approach:

Manipal University Jaipur Page No. 222

Statistics for Management Unit 5

a) Getting a head in a toss of a coin

b) Drawing a king from a well shuffled pack of cards
c) Getting a ‘6’ in a throw of a die
This definition is applicable only when
(i) The outcomes are equally likely, mutually exclusive and exhaustive.
(ii) The number of outcomes n is finite.
Solved problem 1
Find the probability of ‘head’ in the toss of a fair coin.
Solution
The sample space is S = {H, T}. There are n = 2 equally likely, mutually
exclusive and exhaustive outcomes. One outcome, namely H is favourable
to the event A: toss results in head.
Thus, m = 1.
∴ P[head] = P(A) = m/n = ½
Solved Problem 2
Find the probability that a throw of an unbiased die results in (i) an ace
(number 1) (ii) an even number (iii) a multiple of 3.
Solution
The sample space is S = {1, 2, 3, 4, 5, 6]. There are n = 6 equally likely,
mutually exclusive and exhaustive outcomes. Let events A, B and C be —
A: throw results in an ace (number 1)
B: throw results in an even number
C: throw results in a multiple of 3
(i) Event A has one favourable outcome
∴P[ace] = P(A) = m/n = 1/6
(ii) Event B has 3 favourable outcomes, namely, 2, 4 and 6.
∴P [even number] = P(B) = m/n = 3/6= 1/2
(iii) Event C has 2 favourable outcomes, namely, 3 and 6
P [multiple of 3] = P(C) = m/n = 2/6 = 1/3
Solved Problem 3
A bag contains 3 white, 4 red and 2 green balls. One ball is selected at
random from the bag. Find the probability that the selected ball is
(i) white (ii) non-white (iii) white or green

Manipal University Jaipur Page No. 223

Statistics for Management Unit 5

Solution
The bag has a total of 9 balls. Since the ball drawn can be any one of them,
there are 9 equally likely, mutually exclusive and exhaustive outcomes. Let
events A, B and C be
A: selected ball is white
B: selected ball is non-white
C: selected ball is white or green
(i) There are 3 white balls in the bag. Therefore, out of the 9 outcomes, 3
are favourable to event A.
∴P [white ball] = P (A) = 3/9 = 1/3
(ii) Event B is the complement of event A. Therefore,
∴ P[non-white ball] = P(B) = 1 - P(A) = 1 – 1/3 = 2/3
(iii) There are 3 white balls and 2 green balls in the bag. Therefore, out of
9 outcomes, 5 are either white or green.
∴ P[white ball or green ball] = P(C) = 5/9
Solved Problem 4
One card is drawn from a well-shuffled pack of playing cards. Find the
probability that the card drawn (i) is a heart (ii) is a king (iii) belongs to red
suit (iv) is a king or a queen (v) is a king or a heart.
Solution
A pack of playing cards has 52 cards. There are four suits, namely, spade,
club, heart and diamond (dice). In each suit, there are thirteen
denominations - ace (1), 2, 3,…, 10, jack (knave), queen and king.
A card selected at random may be any one of the 52 cards. Therefore, there
are 52 equally likely, mutually exclusive and exhaustive outcomes. Let
events A, B, C, D and E be —
A: selected card is a heart
B: selected card is a king
C: selected card belongs to a red suit
D: selected card is a king or a queen
E: selected card is a king or a heart
(i) There are 13 hearts in a pack. Therefore, 13 outcomes are favourable
to event A.
∴ P [Heart] = P(A) =13/52 = 1/4

Manipal University Jaipur Page No. 224

Statistics for Management Unit 5

(ii) There are 4 kings in a pack. Therefore, 4 outcomes are favourable to

event B.
∴P[King] = P(B)=4/52 =1/13
(iii) There are 13 hearts and 13 diamonds in a pack. Therefore, 26
outcomes are favourable to event C.
∴ P [Red card] = P(C) =26/52 = 1/2
(iv) There are 4 kings and 4 queens in a pack. Therefore, 8 outcomes are
favourable to event D.
∴ P[King or Queen] = P(D) = 8/52 = 2/13
(v) There are 4 kings and 13 hearts in a pack. Among these, one card is
heart-king. Therefore, (4+13-1) = 16 outcomes are favourable to
event E.
∴ P[King or Heart] = P(E) =16/52 = 4/13
Solved Problem 5
A bag contains 8 tickets which are marked with the numbers 1, 2, 3,.. 8.
Find the probability that a ticket drawn at random from the bag is marked
with (i) an even number (ii) a multiple of 3.

Solution
A: selected number is even
B: selected number is a multiple of 3
(i) Four of the selections, namely, 2, 4, 6 and 8 are favourable to event A
∴ P [even number] = P(A) = 4/8 = 1/2
(ii) Two of the selections, namely, 3 and 6 are favourable to event B
∴ P[multiple of 3] = P(B) = 2/8 = 1/4
2) Statistical / relative frequency / empirical / posteriori approach
Under this approach the probability of an event is arrived at after conducting
an experiment. If we want to know the probability that a particular household
in an area will have two earning members, then we have to gather data on
all households in that area and then arrive at the probability. Greater the
number of households surveyed, greater will be the accuracy in the
probability, arrived.

Manipal University Jaipur Page No. 225

Statistics for Management Unit 5

The probability of an event ‘A’ in this case is defined as,

m
P(A) = Lim
n  n
In real life, it is not possible to conduct experiments because of high cost or
of destructive type experiments or of vast area to be covered.
3) Subjective approach
Under this approach the investigator or researcher assigns probability to the
events either from his experience or from past records. It is more suitable
when the sample size is ten or less than ten. The investigator has full
knowledge about the characteristics of each and every individual. However,
there is a chance of personal bias being introduced in such probability.
4) Axiomatic approach
Let S be a sample space consisting of all events of a random experiment
and A  S , then the probability of an event A is a set function satisfying the
following axioms:
i) Axioms of positivity, P(A)  0
ii) Axiom of certainty, P(S) = 1

n  n
iii) Axiom of addition, 
P 
i
Ai
1 

i
1
P
(Ai)where A , A ,...A are
1 2 n

sequence of disjoint events of the sample space.

iv)
Self Assessment Questions
1. To which approach does the following probability estimates belong:
i. Probability that India will win the game
ii. Probability that Mr. Ram will resign from the post
iii. Probability of drawing a red card
iv. Probability that you will go to America this year

5.2 Rules of Probability

In this section, we will discuss the rules of probability. Managers very often
come across with situations where they have to take decisions about
implementing either course of action A or course of action B or course of

Manipal University Jaipur Page No. 226

Statistics for Management Unit 5

action C. Sometimes, they have to take decisions regarding the

implementation of both A and B.

Example 19
A sales manager may like to know the probability that he will exceed the
target for product A or product B. Sometimes, he would like to know the
probability that the sales of product A and B will exceed the target. The
first type of probability is answered by addition rule. The second type of
probability is answered by multiplication rule.
5.2.1 Addition rule
The addition rule of probability states that:
i) If ‘A’ and ‘B’ are any two events then the probability of the occurrence
of either ‘A’ or ‘B’ is given by:
ΡΑ  Β = ΡΑ  + ΡΒ  ΡΑ  Β
ii) If ‘A’ and ‘B’ are two mutually exclusive events then the probability of
occurrence of either ‘A’ or ‘B’ is given by:
ΡΑ  Β = ΡΑ  + ΡΒ
iii) If ‘A’, ‘B’ and ‘C’ are any three events then the probability of occurrence
of either ‘A’ or ‘B’ or ‘C’ is given by:
ΡΑ  Β  C  = ΡΑ  + ΡΒ + ΡC   ΡΑ  Β  ΡΒ  C   ΡΑ  C  + ΡΑ  Β  C 

In terms of Venn diagram, from the figure 5.3, we can calculate the
probability of occurrence of either event ‘A’ or event ‘B’, given that event ‘A’
and event ‘B’ are dependent events. From the figure 5.4, we can calculate
the probability of occurrence of either ‘A’ or ‘B’, given that, events ‘A’ and ‘B’
are independent events. From the figure 5.5, we can calculate the
probability of occurrence of either ‘A’ or ‘B’ or ‘C’, given that, events ‘A’, ‘B’
and ‘C’ are dependent events.

Fig. 5.3: A  B for Two Fig. 5.4: AB for Two Fig. 5.5: ABC for
Dependent Events Independent Events Three Dependent
A and B A or B Events A, B and C

Manipal University Jaipur Page No. 227

Statistics for Management Unit 5

iv) If A1, A2, A3………, An are ‘n’ mutually exclusive and exhaustive events
then the probability of occurrence of at least one of them is given by:
ΡΑ 1  Α 2  .......  Α n  = ΡΑ 1  + ΡΑ 2  + ........ + ΡΑ n .

5.2.2 Multiplication rule

If ‘A’ and ‘B’ are two independent events then the probability of occurrence
of ‘A’ and ‘B’ is given by:
ΡΑ  Β = ΡΑ ΡΒ
Solved Problem 6
i) Show that P(A) = 1 – P(A')
ii) Show that probability is a value between 0 and 1.
iii) Show that P(Ф) = 0 where Ф is null event.
Solution
(i) If A and A' are complementary events, AA' = S
By the axiom 2, P(S) = 1. And so, P (A  A') =1 .... Result 1
But A and A' are mutually exclusive events. Therefore, by the axiom 3,
P(A  A') = P(A) + P(A') …Result 2
By the results 1 and 2, P(A) + P(A') = 1
That is, P(A) = 1- P(A')
(ii) Let A be an event. Then, by the axiom 1,
P(A) ≥0 ....Result 1
If A' is the complementary event of A,
P(A') = 1 – P(A)
But, by axiom 1, P(A') ≥0
Therefore, 1 - P(A) ≥ 0
Hence, P(A) ≤ 1 …Result 2
By the results 1 and 2, 0 ≤ P(A) ≤ 1, i.e., the probability is a value between 0
and 1.
(iii) If A is an event and if Φ is a null event, AΦ = A
∴P(A  φ) = P(A) ….. Result 1
But, A and Φ are mutually exclusive. Therefore,
P(A  φ) = P(A) + P(φ) ….. Result 2

Manipal University Jaipur Page No. 228

Statistics for Management Unit 5

By the result 1 and 2 , P(A) + P(Φ) = P(A)

That is, P(Φ) = P(A) – P(A) = 0
Solved Problem 7
Write down the sample space for each of the following random experiments.
(i) A coin is tossed three times and the result of each throw is noted,
(ii) A coin is tossed three times and the number of heads obtained is
noted,
(iii) A tetrahedron (a solid with four triangular surfaces) whose sides are
painted red, red, blue and green is thrown. The colour of the side
which touches the ground is noted.
(iv) Blood of husband and wife are tested and the blood group (whether
O, A, B or AB) in each case is identified.
(v) A person is randomly selected and his religion is noted.
Solution
(i) S= {HHH, HHT, HTH, THH, HTT, THT, TTH, TTT)
(ii) S= {0, 1, 2, 3}
(iii) S = {red, blue, green}
(iv) S = {(O,O), (O, A), (O, B), (O, AB), (A, O), (A, A), (A, B), (A, AB), (B,
O), (B, A), (B, B), (B, AB), (AB, O), (AB,A), (AB,B), (AB,AB)}
(v) S = {Hindu, Christian, Muslim, Jain, Sikh, Jew, ....}
Solved problem 8
i. Given the equiprobable sample space S = {1, 2, 3, 4, 5, 6} and the
event A = {1, 3, 5}, find P (A)
ii. Given the sample space S = {1, 2, 3, 4, 5, 6} and the events A = {1, 3,
5} and B = {2, 4, 6}. If P(A) = 1/3 find P(B)
iii. If S = {E1, E2) is the sample space and if P(E1) = 0.3, find P(E2)
Solution
(i) Since the sample space is equiprobable, mathematical definition
can be used for finding probability.
= Number of favourable outcomes = 3 = 1
∴ P(A)
Total number of outcomes 6 2

(ii) Here, A and B are complementary events

∴ P(B) = 1 – P(A) = 1 – 1/3 = 2/3
Manipal University Jaipur Page No. 229
Statistics for Management Unit 5

(iii) Here, E1, E2 are complementary events.

∴ P(E2) = 1 – P(E1) = 1 – 0.3 = 0.7

5.3 Conditional Probability

In this section, we will discuss the conditional probability. Sometimes, we
wish to know the probability that the price of a particular petroleum product
will rise, given that the finance minister has increased the petrol price. Such
probabilities are known as conditional probabilities.
Thus the conditional probability of occurrence of an event ‘A’ given that the
event ‘B’ has already occurred is denoted by P (A / B). Here, ‘A’ and ‘B’ are
dependent events. Therefore, we have the following rules.
If ‘A’ and ‘B’ are dependent events, then the probability of occurrence of ‘A
and B’ is given by:
ΡΑ  Β = ΡΑ   Ρ B  A = ΡΒ  ΡA B
It follows that:

ΡA B = P(AP(B)
 B)

ΡB A  = P(AP(A)
 B)

For any bivariate distribution, there exists two marginal distributions and
‘m + n’ conditional distributions, where ‘m’ and ‘n’ are the number of
classifications/characteristics studied on two variables.
Example 20
Consider the example of a librarian who analysed the type of visitors and
their choice of library section. The data is represented in table 5.1
Table 5.1: Bivariate Distribution
Type of visitors Sections
Level of News Magazine Novel Subject Total
education Paper (story)
Under Graduates 50 100 120 50 320
Graduates 70 90 50 100 310
Post Graduates 100 60 30 150 340
Total 220 250 200 300 970

Manipal University Jaipur Page No. 230

Statistics for Management Unit 5

We can get the following distributions:

i) The table 5.1a represents the distribution of level of education
irrespective of their sections. Therefore, it is called marginal
distribution.
Table 5.1a: Marginal Distribution of Level of Education Irrespective of
their Sections
Type of Visitors Total
Undergraduates 320
Graduates 310
Post graduates 340
Total 970

ii) The table 5.1b represents the distribution of people in sections

irrespective of their educational levels. It is another marginal
distribution. Thus, there are two marginal distributions for bivariate
data, variables being sections and level of education.
Table 5.1b: Marginal Distribution of People Irrespective of their
Educational Levels
Sectors News paper Magazine Novels Subjects Total
Total 220 250 200 300 970

iii) The table 5.1c represents the distribution of people in sections given that
they are under graduate. Therefore, it is a conditional distribution.
Table 5.1c: Conditional Distribution
Level of News
Magazine Novels Subjects Total
education paper
Under
50 100 120 50 320
graduate

Thus, for any bivariate distributions having ‘m’ and ‘n’ classifications there
exist two marginal distributions and ‘m + n’ conditional distributions. In this
case there are 3 + 4 = 7 conditional distributions.

5.4 Steps Involved in Solving Problems on Probability

In this section, we will discuss the steps involved in solving problems on
probability. The figure 5.6 gives the explanation of steps involved in solving
problems on probability.

Manipal University Jaipur Page No. 231

Statistics for Management Unit 5

Figure 5.6: Steps Involved in Solving Problems on Probability

Solved problem 9
Calculation of n C r for the following values of ‘n’ and ‘r’:
i. n = 10 and r = 2
ii. n =16 and r = 3
Solution
10 10  9
i. C2 = = 45
1 2
16 16  15  14
ii. C3 = = 560
1 2  3
Key statistic
n
C r = n C n -r
n
C0 = nCn = 1
0! = 1

Manipal University Jaipur Page No. 232

Statistics for Management Unit 5

Solved Problem 10
Calculate 16C13.
Solution
16
C13 = 16C16-3 = 16C3 = 560
16
The value of C13 is 560.

Solved Problem 11
Find the probability of getting a head when a coin is tossed?
Solution
Let ‘A’ be the event of getting a head.

S = Η, Τ  n(S) = 2

n(A) = 1
n(A) 1
∴ P(A) = =
n(S) 2

Therefore, the probability of getting a head when a coin is tossed is 0.5.

Solved Problem 12
What is the probability of getting two heads when 3 coins are tossed and
what is the probability of getting at least one head?
Solution
i) Let ‘A’ be the event of getting two heads.
S = ΗΗΗ, ΗΗΤ, ΗΤΗ , ΤΗΗ , ΤΤΗ , ΤΗΤ , ΗΤΤ , ΤΤΤ   nS = 8
Α = ΗΗΤ, ΗΤΗ , ΤΗΗ   nΑ  = 3
n(A) 3
∴ P(A) = =
n(S) 8
Therefore, the probability of getting two heads when three coins are
tossed is 3/8.
ii) Let ‘A’ be the event of getting at least two heads.
Α = ΗΗΗ, ΗΗΤ, ΗΤΗ , ΤΗΗ   nΑ  = 4
n(A) 4 1
∴ P(A) = = =
n(S) 8 2

Manipal University Jaipur Page No. 233

Statistics for Management Unit 5

Therefore, the probability of getting at least two heads when three coins are
tossed is 1/2.
Solved Problem 13
What is the probability of getting a sum of ‘nine’ when two dice are thrown?
Solution
Let ‘A’ be the probability of getting a sum ‘nine’.
S={ (1 1),(1 2),(1 3),(1 4),(1 5),(1 6)
(2 1),(2 2),(2 3),(2 4),(2 5),(2 6)
(3 1),(3 2),(3 3),(3 4),(3 5),(3 6)
(4 1),(4 2),(4 3),(4 4),(4 5),(4 6)
(5 1),(5 2),(5 3),(5 4),(5 5),(5 6)
(6 1),(6 2),(6 3),(6 4),(6 5),(6 6) }

nS = 62 = 36

Α = 6,3, 3,6 , 4,5, 5,4 

nΑ  = 4
n(A) 4 1
∴ P(A) = = =
n(S) 36 9
Therefore, the probability of getting a sum of ‘nine’ when two dice are
thrown is 1/9.
Solved Problem 14
What is the probability of getting at least a sum of ‘nine’ when two dice are
thrown?
Solution
Let ‘A’ be the probability of getting at least a sum of nine.

nS = 62 = 36
A is the event of combination of mutually exclusive events of getting a sum 9
or 10 or 11 or 12.

Α = 6,3, 3,6 , 5,4 , 4,5, 6,4 , 4,6 , 5,5, 6,5, 5,6 , 6,6   n Α  = 10
n(A) 10 5
∴ P(A) =  =
n(S) 36 18
Manipal University Jaipur Page No. 234
Statistics for Management Unit 5

Therefore, the probability of getting at least a sum of ‘nine’ when two dice
are thrown is 5/18.
Solved Problem 15
A number is selected at random from the numbers 1 to 30. What is the
probability that:
i. It is divisible by either 3 or 7
ii. It is divisible by 5 or 13
Solution
i) Let ‘A’ be the event of selecting a number divisible by 3. Let ‘B’ be the
event of selecting a number divisible by 7.
n S= 30 C1 = 30
Α = 3,6,9,12,15,18,21,24,27,30
nΑ  = 10

Β = 7,14,21,28
nΒ = 4

Α  Β = 21 nΑ  Β = 1

A and B are not mutually exclusive.

ΡΑ  Β = ΡΑ  + ΡΒ  ΡΑ  Β
10 4 1 13
= +  =
30 30 30 30
Therefore, the probability that a number is divisible by 3 or 7 is 13/30.
ii) Let ‘A’ be the event of selecting a number divisible by 5. Let ‘B’ be the
event of selecting a number divisible by 13.
n S= 30 C1 = 30
Α = 5,10,15,20,25,30  n Α  = 6
Β = 13,26  n Β = 2

A and B are mutually exclusive.

∴ΡΑ  Β = ΡΑ  + ΡΒ

Manipal University Jaipur Page No. 235

Statistics for Management Unit 5

6 2 8 4
= + = =
30 30 30 15
Therefore, the probability that a number is divisible by 5 or 13 is 4/15.
Solved Problem 16
The Board of Directors of a company wants to form a quality management
committee to monitor quality of their products. The company has 5
scientists, 4 engineers and 6 accountants. Find the probability that the
committee will contain 2 scientists, 1 engineer and 2 accountants?

Solution
Let ‘A’ be the event of selecting 2 scientists, 1 engineer and 2 accountants.
Then,


1515 
14
13
1211
 
n(S)
C
5 
3003
1
2
3
4
5

n(A)= 5C2 x 4C1 x 6C2

5 4 65
n(A) =  4 = 10  4  15 = 600
1 2 1 2

n(A) 600
∴ P(A) = 
n(S) 3003
Therefore, the probability that the committee will contain 2 scientists,
1 engineer and 2 accountants is 600/3003.

Solved Problem 17
The odds favouring the event of a person hitting a target are 3 to 5. The
odds against the event of another person hitting the target are 3 to 2. If each
of them fire once at the target, find the probability that:
i) Both of them hit the target
ii) At least one of them hit the target
Solution
i) Let ‘A’ be event of first person hitting a target. Odds in favour means,
3 3
∴P(A) = = (1st ratio)
3+ 5 8
Let ‘B’ be event of Second person hitting a target. Odds against means,

Manipal University Jaipur Page No. 236

Statistics for Management Unit 5

2 2
∴ P(B) = = (2nd ratio)
3+2 5
Both hitting the target mean A  B and A and B are independent
3 2 6 3
∴ P(A  B) = P(A)P(B) =  = 
8 5 40 20
Therefore, the probability that both persons hit the target is 3/20.
ii) Let ‘A’ be the probability of hitting the target. Therefore,
3
P(A) =
8
2
Let ‘B’ be the probability of hitting the target. Therefore, P(B) =
5
ΡΑ  Β = ΡΑ  + ΡΒ  ΡΑ  Β

3 2 3 15  16  6 25 5
ΡΑ  Β      
8 5 20 20 40 8
Therefore, the probability that at least one of the persons hit the target
is 5/8.

Solved Problem 18
The probabilities that drivers A, B and C will drive home safely after
consuming liquor are 2/5, 3/7 and 3/4, respectively. What is the probability
that they will drive home safely after consuming liquor?
Solution
Let ‘A’ be the event of driver ‘A’ driving safely after consuming liquor. Let ‘B’
be the event of driver ‘B’ driving safely after consuming liquor. Let ‘C’ be the
event of driver ‘C’ driving safely after consuming liquor.
2 3 3
Given P(A) = , P(B) = , P(C) =
5 7 4
The events A, B, and C are independent. Therefore,
ΡA  B  C  = ΡA   ΡB  ΡC 

ΡA  B  C =
2 3 3 18 9
  = 
5 7 4 140 70
Therefore, the probability that all the drivers will drive home safely after
consuming liquor is 9/70.

Manipal University Jaipur Page No. 237

Statistics for Management Unit 5

Solved Problem 19
The probabilities that ‘A’ and ‘B’ will tell the truth are 2/3 and 4/5
respectively. What is the probability that:
i) They agree with each other
ii) They contradict each other while giving a testimony in the court.
Solution
i) Let ‘A’ be the event of A telling truth. Let ‘B’ be the event of B telling
truth.
2 2 1
Given P(A) =  P( Α c ) = 1  P(A) = 1  
3 3 3
4 4 1
P(B) =  P(Bc )  1  P(B) = 1  
5 5 5
Both will agree if they say truth or they together lie, that is,
Α  Β or Α c  Β c
They are mutually exclusive. Therefore,
     
ΡΑ  Β + Ρ Α c  Β c = ΡΑ   ΡΒ + Ρ Α c  Ρ Β c
2 4 1 1 9 3
=  +  = =
3 5 3 5 15 5
The events A and B are independent.
Therefore, the probability that both A and B agree with each other is 3/5.
ii) They will contradict if A tells truth and B tells lies or B tells truth and A
tells lies.
  
 Α  Βc or Α c  Β 
Since, they are mutually exclusive.
       
Ρ Α  Βc + Ρ Α c  Β = ΡΑ   Ρ Βc + Ρ Α c  ΡΒ
2 1 1 4 6 2
=  +  = =
3 5 3 5 15 5
They are independent. Therefore, the probability that A and B contradict
each other is 2/5.
Solved Problem 20
A box contains five red and four blue similar shaped balls. Two balls are
drawn at random from the box. Find the probability that both of them are red
if:
Manipal University Jaipur Page No. 238
Statistics for Management Unit 5

i. the balls are drawn together

ii. the balls are drawn one after the other, with replacement
iii. the balls are drawn one after the other, without replacement
Solution
i) Let ‘A’ be the event of drawing two balls together.
9 8
n(S)= 9 C 2 = = 36
1 2
5 4
n(A)=5 C 2 = = 10
1 2
n(A) 10 5
∴ P(A) =  =
n(S) 36 18
Therefore, the probability that both of them are red if the balls are
drawn together is 5/18.
ii) Let ‘A’ be the event of drawing a red ball in the first draw. Let ‘B’ be the
event of drawing a red ball in the second draw. The required probability
is given by:

ΡΑ  Β = ΡΑ   ΡΒ =  =

5 5 25
9 9 81
The sample space does not change.
Therefore, the probability that both of them are red if the balls are drawn
one after the other, with replacement, is 25/81.
iii) Let ‘A’ be the event of drawing red ball in the first draw. Let ‘B’ be the
event of drawing red ball in the second draw. Since the first ball is not
replaced, the sample space changes for second draw. Therefore the
required probability is given by:

ΡΑ  Β  = ΡΑ   Ρ B
A

5 4 20 5
=  = 
9 8 72 18
Therefore, the probability that both of them are red if the balls are drawn
one after the other, without replacement, is 5/18.
Solved Problem 21
Box I contains 5 red and 6 blue balls. Box II contains 6 red and 4 blue balls.
A ball is drawn at random from box I and is transferred to box II. Now from
box II a ball is drawn at random. What is the probability that it is red?
Manipal University Jaipur Page No. 239
Statistics for Management Unit 5

Solution
A ball drawn from box I and transferred to box II could be either red or blue.
Let ‘A’ be the event of drawing a red ball from box I. Let ‘B’ be the event of
drawing a blue ball from box I. Let ‘C’ be the event of drawing red ball from
box II.
 The required events are Α  C or Β  C .

The events are mutually exclusive. Therefore,

ΡΑ  C   Β  C  = ΡΑ  C  + ΡΒ  C  = Ρ( A )  P (C
A
 B
) + ΡΒ  Ρ C
5 7 6 6 35 + 36 71
=  +  = =
11 11 11 11 121 121
Therefore, the required probability is 71/121.
Solved Problem 22
The probabilities that component A and component B of a machine will fail
are 0.09 and 0.06 respectively. The machine will fail if any one of them fails.
Find the probability that it will fail?
Solution
Given that:

ΡΑ  = 0.09 ΡΒ = 0.06

ΡΑ  Β = ΡΑ   ΡΒ = 0.09  0.06 = 0.0054

ΡΑ  Β = ΡΑ  + ΡΒ  ΡΑ  Β = 0.09 + 0.06  0.0054 = 0.1446

Therefore, the probability that the machine will fail is 14.46%.

Solved Problem 23
What is the probability of getting 53 Mondays in a leap year?
Solution
There are 366 days in a leap year. Hence, in a leap year, there are 52
weeks and 2 days. It has 52 Mondays.
For one more Monday we select from the following combination of the
remaining 2 days.
1. Sunday and Monday 3. Tuesday and Wednesday
2. Monday and Tuesday 4. Wednesday and Thursday

Manipal University Jaipur Page No. 240

Statistics for Management Unit 5

5. Thursday and Friday 7. Saturday and Sunday

6. Friday and Saturday
∴nS = 7 and nΑ  = 2
n(A) 2
∴ P(A) = 
n(S) 7
where, A is the event of getting 53 Mondays.
Therefore, the probability of getting 53 Mondays in a leap year is 2/7.
Self Assessment Questions
2. Find the probabilities in the following cases:
i. Getting an even number when a die is thrown
ii. Getting 53 Mondays in ordinary year
3. Given P(A) = 0.6, P(B) = 0.7, and P(A  B) = 0.5. Find P(A U B)?

5.5 Bayes’ Theorem

In this section, we will discuss the Bayes’ theorem. Let A1, A2, A3, A4 be
mutually exclusive and exhaustive events of a random experiment. Let ‘B’
be a common event. The figure 5.7 is the representation of Bayes’ theorem
in Venn diagram.

Fig. 5.7: Bayes’ Theorem

The event ‘B’ is made up of four mutually exclusive and exhaustive events.







1




2



3



4
=  ΡΑ i  Β …….(1) [by using the law of marginal probability]
Manipal University Jaipur Page No. 241
Statistics for Management Unit 5

We know that:

ΡΑ1  Β = ΡΒ.  Ρ 1  ..….. (2) [by the law of conditional

A
 B
probability for dependent events]

= ΡΑ1   Ρ B  …………………… (3)

 A1 
Consider:
ΡΑ1  Β
Ρ 1  =
A …. from above equation (2)
 B ΡΒ

= ΡΑ1   Ρ B 
Ρ 1  =
A  A1 
 B  ΡΑ i  Β
(by substituting (1) in the denominator and (3) in the numerator)
In general, the Bayes’ theorem states that if A1, A2………….., An are ‘n’
mutually exclusive and exhaustive events with prior probabilities
P(A1 ),P(A 2 ),...P(A n ) respectively and ‘B’ be an event for which the
conditional probabilities of the probability of occurrence of B given A1 , B
given A 2 ,… B given A n are P(B / A 1 ), P(B / A 2 ),...P(B / A n ) respectively,
then the posterior probability of occurrence of A1 given that given that ‘B’
has already occurred is given by:
P(A1 ). P(B / A1 )
P(A1 /B) = n

 P(A )  P(B / A )
i =1
i i

Bayes’ probability is also a type of conditional probability. The table 5.2

displays the differences between Conditional probability and Bayes’
probability:
Table 5.2: Differences between Conditional Probability and Bayes’ Probability
Bayes’ Probability General Conditional Probability
1. Finds the probability of population 1. Finds the probability of getting a
value, given the sample value. sample value given the population
value.
2. It is possible to incorporate 2. It is not possible to do so.
latest information.
3. It is possible to incorporate cost 3. It is not possible in this case.
aspects.

Manipal University Jaipur Page No. 242

Statistics for Management Unit 5

Whenever there are two probabilities connected with an event, then we

have to apply Bayes’ approach to solve it.
Solved Problem 24
The probabilities that Mr. Aravind, Mr. Anand and Mr. Akil will become vice-
president of a company are 0.40, 0.35 and 0.25 respectively. The
probabilities that they will introduce new product are 0.10, 0.15 and 0.20,
respectively. What is the probability that Mr. Anand introduces a new
product by becoming vice-president?
Solution
Let us assume the following:
 Let ‘A1’ be the event that Mr. Aravind became vice-president
 Let ‘A2’ be the event that Mr. Anand became vice-president
 Let ‘A3’ be the event that Mr. Akil became vice-president
 Let ‘B’ be the event that a new product was introduced
We are given that:
ΡΑ 1  = 0.40, ΡΑ 2  = 0.35, ΡΑ 3  = 0.25

ΡΒ / Α 1  = 0.10, ΡΒ / Α 2  = 0.15, ΡΒ / Α 3  = 0.20.

The required probabilities are calculated and represented in the table 5.3.
Table 5.3: Required Probabilities for the Data in Solved Problem 24
Event Prior Conditional Joint Posterior
Ai Probability Probability Probability Probability
P(Ai) P(B/Ai) P(Ai ∩ B) P(Ai/B)

0
.0400
A1 0.4 0.10 0.0400 0.2807
0
.1425

0.0525
A2 0.35 0.15 0.0525
0.3684
0.1425

0.0500
A3 0.25 0.20 0.0500
0.3509
0.1425

Total 1.00 0.45 0.1425 1.0000

Therefore, the required probability is ΡΑ 2 / Β  = 0.3684 .

Manipal University Jaipur Page No. 243

Statistics for Management Unit 5

The probability that Mr Anand introduces new product by becoming the Vice
president is 0.3684.
Solved problem 25
A factory has three machines M1, M2 and M3. They produce 4000, 10,000
and 6,000 products per day. From past records, it is known that M1, M2, and
M3 produce 5%, 4%, and 8% defectives. A product is selected at random
from the day’s production and is found to be defective. What is the
probability that it was not produced by machine M3?
Solution
Let us consider the following:
 Let ‘A1’ be the event that the product was produced by M1
 Let ‘A2’ be the event that the product was produced by M2
 Let ‘A3’ be the event that the product was produced by M3
 Let ‘B’ be the event that the product is defective
Then, we are given:


 14000
0
.20
20000


 210000
0.5
2000


3 6000
0.3
20000
P(B/A1) = 0.05 P(B/A2) = 0.04 P(B/A3) = 0.08
The above information is represented in table 5.4.
Table 5.4: Required Probabilities for the Data in Solved Problem 25
Event Prior Conditional Joint Posterior
Ai Probability Probability Probability Probability
P(Ai) P(B/Ai) P(Ai ∩ B) P(Ai/B)
0.010
A1 0.2 0.05 0.010 = 0.1852
0.054
0.020
A2 0.5 0.04 0.020 = 0.3704
0.054
0.054
A3 0.3 0.08 0.024 = 0.4444
1.0000
Total 1.00 P(B) 0.054 1.0000

Manipal University Jaipur Page No. 244

Statistics for Management Unit 5

Required probability 1 

 3
 = 1 – 0.4444 = 0.5556


  
Hence, the required probability is 0.5556.
The probability that the product was not produced by Machine M3 is 0.5556.

Self Assessment Questions

4. State whether the following questions are true or false:
i. Bayes’ probability estimates sample value
ii. Conditional probability can incorporate costs
iii. Bayes’ probability gives up to date information

5.6 Random Variable

In this section, we will discuss the random variable. A real valued function
that associates result or outcome of an experiment with a real number is
known as random variable. In general, a random variable X may take any
value on the real line (i.e., any number between   and  ). We can
assign probability that X would take a value in any specified interval such as
Xa, a  X  b, a  X  b, a  X  b, a  X  b, a  X , X  b
etc. A random variable may be discrete or continuous. It is discrete, if the
set of possible values is either finite or infinite. It is continuous, if it is
capable of taking all values in an interval.
By introducing the concept of random variable, the events are now replaced
by appropriate subset of real numbers and the probability function in the
case of discrete random variable satisfies the following conditions:
(i) ΡΧ i  = ΡΧ = Χ i  for all values of i
(ii) ΡΧ i   0 for all values of i

(iii)  ΡΧ  = 1
i

In case of continuous random variable, the probability is defined over a

range of values of random variable and the summation in (iii) is replaced by
integration over the entire range of random variable (domain of probability
distribution function).

Manipal University Jaipur Page No. 245

Statistics for Management Unit 5

If ‘X’ is a discrete random variable then P(X) is known as probability mass

function of ‘X’. If ‘X’ is a continuous random variable then P(X) is called
probability density function and is denoted by f(X).

Example 22
Let ‘X’ denote the number of heads obtained, while tossing two fair coins.
Then, X is a random variable which takes the values 0,1 and 2 wit
respective probabilities ¼, ½ and ¼ . Here, X is a discrete random variable.
Example 23
Let ‘X’ denote the number obtained while throwing a fair die. Then, ‘X’ is a
discrete random variable taking values 1, 2, 3, 4, 5 and 6 with probability 1/6
each
Example 24
Let ‘X’ denote the weight of apples. Then, ‘X’ is a continuous random
variable.
For example, let us consider the tossing of three coins. The table 5.5
displays the probabilities of getting heads when three coins are tossed.
Table 5.5: Probabilities of Getting Heads when Three Coins are Tossed

No. of Heads
P(X)
(X)
3 ⅛
2 ⅜
1 ⅜
0 ⅛
Total 1

For every Xi, we are able to assign a P(Xi) such that:

 ΡΧ  = 1
i

Probability of the number of heads forms a probability distribution. A

systematic representation of random variable with its value and probabilities
is called a probability distribution of that random variable. The distribution
will have its mean and standard deviation.

Manipal University Jaipur Page No. 246

Statistics for Management Unit 5

5.6.1 Mathematical expectation and variance of a Random Variable

Mathematical expectation of a random variable is denoted by E(X) and is
defined as:
EΧ  =  Χ i ΡΧ i 

Its variance is given by:

Var Χ  = EΧ  E(X)  = E(Χ 2 )  EΧ 
2 2

 
Where, E Χ 2 =  Χ i2 ΡΧ i 
Its standard deviation is:

 
S.DΧ  = Var Χ  = E Χ 2  EΧ 
2

Solved Problem 26
A random variable takes the values -3, -2, 1, 0, 4, 6 with probabilities 1/12,
2/12, 3/12, 4/12, 1/12, 1/12 respectively. Find its mean or expected value
and variance?
Solution
The table 5.6 represents the values required to calculate expectation and
variance for the data in solved problem 26.
Table 5.6: Required Values for Calculating Mean and Variance for the Data
XI P(Xi) Xi P(Xi) Xi2 P(Xi)
-3 1/12 -3/12 9/12
-2 2/12 -4/12 8/12
1 3/12 3/12 3/12
0 4/12 0 0
4 1/12 4/12 16/12
6 1/12 6/12 36/12
Total 6/12 72/12 = 6

∴ EΧ  =  Χ i ΡΧ i  = 6 / 12 = 1 / 2

 
Var Χ = E Χ 2  EΧ = 6  1 / 4 = 23 / 4
2

Manipal University Jaipur Page No. 247

Statistics for Management Unit 5

 
Where, E Χ 2 =  Χ i2 ΡΧ i 
72
12
6

S.DΧ  = 23 / 4  2.4

Hence, the mean, variance and standard deviation are 0.5, 5.75 and 2.4.
Solved Problem 27
Mr. Arun and Mr. Bandari play a game. If Mr. Arun picks up an even number
from 1 to 6, Mr. Bandari will pay him double the amount equal to picked up
number. If Mr. Arun picks up an odd number then he has to pay amount
equal to double the picked up number. What is Mr. Arun’s expectation?
Solution
Let Xi be the random variable and P(Xi) be its probability. The probabilities
are indicated in table 5.7.
Table 5.7: Required Values for Calculating Mean and Variance for the Data

No. (Xi) P(Xi) Xi P(Xi)

1 -2 1/6 -2/6
2 4 1/6 4/6
3 -6 1/6 -1
4 8 1/6 8/6
5 -10 1/6 -10/6
6 12 1/6 12/6
Total 1 1

 Expectation of Mr. Arun is EΧ  =  Χ ΡΧ  = 1.

i i

Solved Problem 28
The table 5.8 displays the distribution of random variable X. Find the
following probabilities:
i) P(Xi) 3
ii) P(Xi = 0)
iii) P(1  Xi  3)
iv) P(Xi)  4

Manipal University Jaipur Page No. 248

Statistics for Management Unit 5

Table 5.8: Distribution of a Random Variable X

Xi -3 -2 0 1 2 3 4 5
P(Xi) K 2K 2K 3K 3K 2K K K

Solution
Since Xi is a random variable  ΡΧ  = 1
i

 K + 2K + 2K + 3K + 3K + 2K + K + K = 1
 15K = 1 ∴ K = 1/15
i) ΡΧ i  3 = ΡΧ i = 3 + ΡΧ i = 4 + ΡΧ i = 5
= 2K + K + K = 4K = 4 / 15
ii) ΡΧ i = 0  = 2K = 2 / 15

iii) Ρ1  Χ i  3
= ΡΧ i = 1 + ΡΧ i = 2  + ΡΧ i = 3
= 3K + 3K + 2K = 8K = 8 / 15
iv) ΡΧ i  4  = ΡΧ i = 4  + ΡΧ i = 5
= K + K = 2K = 2 / 15
Solved Problem 29
Two fair coins are tossed once. Find the mathematical expectation of the
number of heads obtained.

Solution
Let Xi denote the number of heads obtained. Then, Xi is a random variable
which takes the values 0, 1 and 2 with respective probabilities ¼ ½ and ¼
and that is,
Table 5.9
Xi 0 1 2

P(Xi) ¼ ½ ¼

The mathematical expectation of the number of head is

∴ EΧ  =  Χ i ΡΧ i  = 0 
1 1 1
+ 1 + 2  = 1
4 2 4

Manipal University Jaipur Page No. 249

Statistics for Management Unit 5

Key Statistics
1. For a random variable Xi, the arithmetic mean is EΧ  =  Χ ΡΧ 
i i

2. For a random variable Xi, the variance is

Var Χ = EΧ  E(X) = E(Χ 2 )  EΧ

2 2

 
Where, E Χ 2 =  Χ i2 ΡΧ i 
The standard deviation is the square root of the variance.
Solved Problem 30
A bag has 3 white and 4 red balls. Two balls are randomly drawn from the
bag. Find the expected number of white balls in the draw.
Solution
Let ‘Xi’ denote the number of white balls obtained in the draw. Then, X i is a
random variable which takes the values 0, 1 and 2 with respective
probabilities –

4
P(0) = P[both red] = C2 6 2
7
= 
C 2 21 7
3
C 2  4 C1 12 4
P(1) = P[one white and one red] = 7
 =
C2 21 7
3
C2 3 1
P(2) = P[both white] = 7
= 
C 2 21 7
The probability distribution of X is –
Table 5.10
Xi 0 1 2
P(Xi) 2/7 4/7 1/7

∴ EΧ  =  Χ i ΡΧ i  0 
2 4 1 6
+ 1 + 2  =
7 7 7 7
 1 (approximately)

Thus, one white ball is expected in the draw.

Manipal University Jaipur Page No. 250

Statistics for Management Unit 5

Self Assessment Questions

5. Fill in the blanks:
i. For a random variable  P(Xi) = ___________.
ii. Expectation of a random variable is same as ________ of the
probability distribution of that variable.
iii. Var (X) = E (X2) - ___________.

5.7 Summary
Let us recapitulate the important concepts discussed in this unit:
 Probability plays an important role in decision making process.
Probability is a numerical measure which indicates the chance of
occurrence of an event ‘A’. It is denoted by P(A). It is the ratio between
the favourable outcomes of an event ‘A’ (m) to the total outcomes of the
experiment (n).
 When multiple events are involved in an experiment, the concerned
probabilities are calculated using addition and multiplication rules of
probability.
 Bayes’ theorem deals with the probability of the occurrence of an event
to the occurrence or non-occurrence of an associated event. This is an
important theorem helpful for managers in business decisions.
 Random variable is a not a variable. It is a function. It can be discrete or
continuous.

5.8 Glossary
Equally likely events (equiprobable events): Two or more events are
equally likely if they have equal chance of occurrence.
Event: Even is a subset of the sample space.
Exhaustive set of events: A set of events is exhaustive if one or the other
of the events in the set occurs whenever the experiment is conducted.
Experiment: An operation that results in a definite outcome is called an
experiment.
Mutually exclusive events (disjoint events): Two or more events are
mutually exclusive if only one of them can occur at a time.

Manipal University Jaipur Page No. 251

Statistics for Management Unit 5

Probability: It is a numerical measure which indicates the chance of

occurrence.
Random Experiment: When the outcome of an experiment cannot be
predicted with certainty, then it is called random experiment or stochastic
experiment.
Sample Space: The set of all possible outcomes of a random experiment is
the sample space.

5.9 Terminal Questions

1. Define independent events.
2. The probability of Mr. Sunil solving a problem is ¾. The probability of
Mr. Anish solving is ¼. What is the probability that a given problem will
be solved?
3. The probability that a contractor will get an electrical job is 0.8, he will
get a plumbing job is 0.6 and he will get both 0.48. What is the
probability that he gets at least one job? Are the probabilities of getting
electrical job and plumbing job independent?
4. A box contains 4 red and 5 blue similar rings. What is the probability of
selecting at random two rings:
i. having same colour
ii. having different colours
5. If P(A  B) = 1/2 and P(B) = 2/3, find P(A/B)?
6. The probability that a company A will survive for 20 years is 0.6. The
probability that its sister concern will survive for 20 years is 0.8. What is
the probability that at least one of them will survive for 20 years?
7. A recently developed car has two important components A and B. The
probability of failure of A and B are 0.2 and 0.1. What is the probability
that the car will fail?
8. The probability that a football player will play on ordinary ground is 0.6
and on green turf is 0.4. The probability that he will get knee injury
when playing an ordinary ground is 0.07 and that on green turf is 0.04.
What is the probability that he got a knee-injury due to the play on
ordinary ground?

Manipal University Jaipur Page No. 252

Statistics for Management Unit 5

Activity
Problem 1
The probability that a contractor will get a plumbing contract is 2/3 and
probability that he will not get an electrical contract is 5/9. If the probability
of getting at least one of these contracts is 4/5, what is the probability that
he will get both?
Problem 2
A can solve 90 percent of the problems given in a book and B can solve
70 percent. What is the probability that at least one of them will solve a
problem selected at random.
Problem 3
The probability that a trainee will remain with a company 0.6, The
probability that an employee earns more ten Rs.10,000 per year 0.5. The
probability an employee is trainee who remained with the company or who
earns more than Rs.10,000 per year is 0.7. What is the probability of a
trainee who earns more than Rs.10,000 per year given that he is a trainee
who stayed with the company.
Problem 4
Suppose that one of the three men, a politician, a bureaucrat and an
educationist will be appointed as VC of the university. The probabilities of
their appointment are respectively 0.3, 0.25 and 0.45. The probability that
these people will promote research activities if they are appointed is 0.4,
0.7 and 0.8 respectively. What is the probability that research will be
promoted by the new VC.
Problem 5
A box contains 4 green and 6 white balls another box contains 7 green
and 8 white balls. Two balls are transferred from box 1 to box 2 and then
a ball is drawn from box 2. What is the probability that it is white?
event A: transferred balls are green
event B: transferred balls are white
event C: Among transferred balls one green and 1 white
event D: selection of a white ball from box 2

Manipal University Jaipur Page No. 253

Statistics for Management Unit 5

5.10 Answers

Self Assessment Questions

1. i) Relative frequency
ii) Subjective
iii) Classical
iv) Subjective
2. i) 1/2 ii) 1/7
3. 0.8
4. i) False ii) False iii) True
5. i) 1 ii) Mean iii) [E(X)]2

Terminal Questions
1. Refer section 5.1.4
2. 13/16
3. 0.92, Yes
4. i) 4/9, ii) 5/9
5. 3/4
6. 0.92
7. 0.28
8. 21/29

Activity Solution
Solution 1
Let, A: Contractor gets a plumbing contract
B: Contractor gets an electrical contract
Then, P(A) = 2/3 P(B) = 5/9 and P(A  B) = 4/5
Therefore, P(B) = 1-P(Bc) = 4/9
By addition theorem we have,
P(A  B) = P(A) +P(B) – P(A  B)
That is, P(A  B) = P(A) +P(B) – P(A  B)
Therefore, P [he gets both plumbing and electrical contract] =
P(A  B) = P(A) +P(B) – P(A  B)
= 2 / 3 + 4 / 9  4 / 5 = 14 / 45

Manipal University Jaipur Page No. 254

Statistics for Management Unit 5

Solution 2
Event A: Student A solves the problem
Event B: Student B solves the problem.
P(at least one solve the problem) = 1-P(none solve the problem)

 1 P A  B 
 1  P(A ).P(B)
 1  (0.10)(0.30)
 0.97
Solution 3
Event A: a trainee will remain with the company
Event B: a trainee earns more than Rs. 10,000.
Given P(A) = 0.6, P(B) = 0.5, P(A  B) = 0.7
We need to find probability of a trainee who ears more than Rs.10000 per
year given that he is a trainee who stayed with the company:
P(A  B) P(A) + P(B)  P(A  B) 0.6  0.5  0.7 0.4
P(B / A) = =  = = 0.67
P(A) P(A) 0 .6 0.6

Solution 4
Event A: politician appointed as VC
Event B: bureaucrat appointed as VC
Event C: educationist appointed as VC
Event D: promotion of research activities
Probability that the research will be promoted by the new VC:
 P(A  D) + P(B  D) + P(C  D).
= P(D / A).P(A) + P(D / B).P(B) + P(D / C).P(C)
 (0.3)(0.4) + (0.25)(0.7) + (0.45)(0.8) = 0.655

Solution 5
Event A: transferred balls are green
Event B: transferred balls are white
Event C: among transferred balls one green and 1 white
Event D: selection of a white ball from box 2

Manipal University Jaipur Page No. 255

Statistics for Management Unit 5

Probability that the ball is white is:

= P(A  D) + P(B  D) + P(C  D)
= P(D / A).P(A) + P(D / B).P(B) + P(D / C).P(C)
4
C2 8 6
C 2 10 4 C1  6 C1 9
 10
 +  + 10 
C 2 17 10 C 2 17 C2 17
 0.5412

5.11 Case Study

Silver Jubilee of Sun Enterprise
Sun enterprise has been consistently doing well for the last 25 years. As a
part of silver jubilee celebration, the new CEO of the company, Ms Rashmi,
wanted to announce certain welfare and incentive schemes. However,
before that, she wanted to have an idea of the level of satisfaction among
the employees with varying experience in the company. Since the time was
short, she asked the HRD department to conduct a quick survey and
present the findings within 3 days. Accordingly, the HRD department
conducted a survey of 100 randomly selected employees and found the
following results.
Table 5.11
Experience ( in years)
1 to 5 6 to 15 16 and more
Level of Low 11 07 04
Satisfaction Medium 15 24 14
High 08 17 18

As the head of human resource department, do the following:

(a) Present the findings of the survey, and answer the following questions:
(i) What is the probability that an employee selected at random will
have high level of satisfaction?
(ii) What is the probability that an employee with more than 16 years
of experience is highly satisfied?
(iii) What is the probability that an employee with medium level of
satisfaction will have experience from 6 to 15 years?
(b) Suggest suitable format for collecting data to access the level of
performances among the employees with varying experience.

Manipal University Jaipur Page No. 256

Statistics for Management Unit 5

Assuming hypothetical figures, analyse the same and present the findings to
the CEO
(Source: T N Srivastava and Shailaja Rejo (2008) Statistics for Management, 5th
ed., TMH)

References:
 Agarwal, B. L. (2006), Basic Statistics, Fourth Edition, New Age
International Publishers.
 Anderson, David R. Sweeney, Dennis J. & Williams, Thomas A. 5th ed.,
Thomson Business Information Pvt. Ltd.
 Bowerman, B. L. & R.T. O Connel, (1996), Applied Statistics: Improving
Business Processes, Irwin.
 Freedman, D., Pisani, R. and Purves, R.(1997), Statistics, 3rd ed., W. W.
Norton.
 Levin, Richard I. & Rubin, David S. (2008), Statistics for Management,
Seventh Edition, PHI Learning Private Limited.
 Srivastava, T. N. & Rejo, Shailaja (2008), Statistics for Management, 5th
ed., TMH.
 Tanur, J. M. (2002), Statistics: A Guide to the Unknown, 4th ed., Brooks
/Cole..
 Tukey J.W ,Exploratory Data Analysis, Addison –Wesley, 1977.
 Wilcox, Rand R. (2009), Basic Statistics – Understanding Conventional
Methods and Modern Insights, Oxford University Press

E-References:
 http://www.textbooksonline.tn.nic.in/Books/11/Stat-EM/Chapter-1.pdf

Manipal University Jaipur Page No. 257