Course Material ( B.

Com )
Business Statistics ( SMTX1016 )
UNIT -IV
PROBABILITY AND DISTRUBUTIONS
PROBABILITY

Introduction to Probability
Probabilities are associated with experiments where the outcome is not known in advance or
cannot be predicted. For example, if you toss a coin, will you obtain a head or tail? If you roll
a die will obtain 1, 2, 3, 4, 5 or 6? Probability measures and quantifies "how likely" an event,
related to these types of experiment, will happen. The value of a probability is a number
between 0 and 1 inclusive. An event that cannot occur has a probability (of happening) equal
to 0 and the probability of an event that is certain to occur has a probability equal to 1.(see
probability scale below).
In order to quantify probabilities, we need to define the sample space of an experiment and
the events that may be associated with that experiment.

Sample space and Events

The sample space is the set of all possible outcomes in an experiment. We define an event as
some specific outcome of an experiment. An event is a subset of the sample space.
Examples :

(i) If a die is rolled, the sample space S is given by S = {1,2,3,4,5,6}.

(ii) If two coins are tossed, the sample space S is given by S = {HH,HT,TH,TT} , where
H = head and T = tail.

(iii) If two dice are rolled, the sample space S is given by

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) }

Probability theory is based on some axioms that act as the foundation for the theory, so let us
state and explain these axioms.

Axioms of Probability:
Axiom 1: For any event A, P(A) ≥ 0.
Axiom 2: Probability of the sample space S is P(S) = 1.
Axiom 3: If A1, A2, A3, ⋯ are disjoint events, then
P (A1∪A2∪A3⋯) = P(A1) + P(A2) + P(A3) + ⋯

Mutually Exclusive Events

Two events are mutually exclusive if they cannot occur at the same time. Example, A die is
rolled. The event of getting an even number on the face of the die and the event of getting an
odd number are mutually exclusive events.

Independent events
Two events A and B are independent if P(A∩B) = P(A)P(B).

Example 1:
Two coins are tossed, find the probability that two heads are obtained.

Solution:
The sample space S is given by S = {(H,T),(H,H),(T,H),(T,T)}
Let E be the event "two heads are obtained" E = {(H,H)}
P(E) = = .
A card is drawn at random from a deck of cards. Find the probability of getting the 3 of
diamond.

Example 2:
A card is drawn at random from a deck of cards. Find the probability of getting the 3 of
diamond.

Solution:
Let E be the event "getting the 3 of diamond". An examination of the sample space shows
that there is one "3 of diamond" so that n(E) = 1 and n(S) = 52. Hence the probability of
event E occurring is given by P(E) = .

Example 3:
A jar contains 3 red marbles, 7 green marbles and 10 white marbles. If a marble is drawn
from the jar at random, what is the probability that this marble is white?

Solution:
Total number of marbles in the jar is n(S) = 20
Let E be the event "getting a white marble” is n(E) = 10.
P(E) = .

Example 4:

Two dice are rolled, find the probability that the sum is equal to 5.
Solution:
Two dice are rolled, the sample space S is given by

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) }

Let E be the event "getting a sum equal to 5”. Then n(E) = 4 and Then n(S) = 36.
P(E) = .

Example 5:
A committee of 5 people is to be formed randomly from a group of 10 women and 6 men.
Find the probability that the committee has
a) 3 women and 2 men.
b) 4 women and 1men.
c) 5 women.
d) at least 3 women

Solution:
There are 16C5 ways to select 5 people (committee members) out of a total of 16 people (men
and women). There are 10C3 ways to select 3 women out of 10. There are 6C2 ways to select
2 men out of 6. There are ways to select 3 women out of 10 and 2 men out of 6.
(a) P(3 women AND 2 men) = = 0.412087

(b) P(4 women AND 1 men) = = 0.288461

(c) P(5 women ) = = 0.0576923

(d) P(at least 3 women) = P(3 women or 4 women or 5 women).
Since the events "3 women", "4 women" and "5 women" are all mutually exclusive, then P(at
least 3 women) = P(3 women or 4 women or 5 women) = P(3 women) + P(4 women) + P(5
women) = 0.412087 + 0.288461 + 0.0576923 = 0.758240

Example 6:
In a presidential election, there are four candidates. Call them A, B, C, and D. Based on our
polling analysis, we estimate that A has a 2020 percent chance of winning the election, while
B has a 4040 percent chance of winning. What is the probability that A or B win the election?

Solution:
The events that {A wins}, {B wins}, {C wins}, and {D wins} are disjoint since more than
one of them cannot occur at the same time. For example, if A wins, then B cannot win. From
the third axiom of probability, the probability of the union of two disjoint events is the
summation of individual probabilities. Therefore,
P(A wins or B wins) = P({A wins}∪{B wins})
= P({A wins})+P({B wins})=P({A wins})+P({B wins})
= 0.2+0.4=0.2+0.4
= 0.6

Conditional Probability
In this section, we discuss one of the most fundamental concepts in probability theory. Here
is the question: as you obtain additional information, how should you update probabilities of
events? For example, suppose that in a certain city, 23 percent of the days are rainy. Thus, if
you pick a random day, the probability that it rains that day is 23 percent:
P(R) = 0.23, where R is the event that it rains on the randomly chosen day.
Now suppose that we pick a random day, but we also tell that it is cloudy on the chosen day.
Now that we have this extra piece of information, how do we update the chance that it rains
on that day? In other words, what is the probability that it rains given that it is cloudy?
If C is the event that it is cloudy, then we write this as P(R|C), the conditional probability of
R given that C has occurred. It is reasonable to assume that in this example, P(R|C) should be
larger than the original P(R), which is called the prior probability of R. For calculating
P(R|C) we have a general formula which is given below.
If A and B are two events in a sample space S, then the conditional probability of A given B
is defined as P(A|B) = , when P(B) > 0.

Example 7:
A fair die is rolled. Let A be the event that the outcome is an odd number and let B be the
event that the outcome is less than or equal to 3. What is P(A) and P(A|B)?

Solution
Given that S = { 1,2,3,4,5,6}, A = {1,3,5} and B ={1,2,3}.
P(A) = = .

P(A|B) = = .

Example 8:
In a factory there are 100 units of a certain product, 5 of which are defective. We pick three
units from the 100 units at random. What is the probability that none of them are defective?

Solution
Let us define Ai as the event that the ith chosen unit is not defective, for i=1,2,3. We are
interested in P(A1∩A2∩A3). Note that P(A1) =
Given that the first chosen item was good, the second item will be chosen from 94 good units
and 5 defective units, thus P(A2|A1) = .
Given that the first and second chosen items were okay, the third item will be chosen from 93
good units and 5 defective units, thus P(A3|A2, A1) = .
Thus, we have P(A1∩A2∩A3) = P(A1) P(A2|A1) P(A3|A2,A1) = = 0.8560

BAYE’S THEOREM

Let S be a sample space.

Let A1, A2, ... An be disjoint events in S and B be any arbitrary event in S with

P(B) 0. Then Baye’s theorem says

EXAMPLE :1
EXAMPLE: 2
EXAMPLE:3
EXERCISE PROBLEMS

1. There are 3 boxes containing respectively 1 white, 2 red, 3 black balls;

2white, 3 red, 1 black ball : 2 white, 1 red, 2 black balls. A box is

chosen at random and from it two balls are drawn at random. The two

balls are 1 red and 1 white. What is the probability that they come

from the second box?

2. In a company there are three machines A1, A2 and A3. They produce 20%,

35% and 45% of the total output respectively. Previous experience shows

that 2% of the products produced by machines A1 are defective. Similarly

defective percentage for machine A2 and A3 are 3% and 5% respectively. A

product is chosen at random and is found to be defective. Find the probability

that it would have been produced by machine A3?

3. Let U1, U2, U3 be 3 urns with 2 red and 1 black, 3 red and 2 black, 1 red and

1 black ball respectively. One of the urns is chosen at random and a ball is

drawn from it. The colour of the ball is found to be black. What is the

probability that it has been chosen from U3?