Chapter 4

Probability and Probability Models

Chapter
Outline
LO4-1: Define a
probability, a sample
space, and a probability
model. 4.1 Probability, Sample Spaces, and
Probability Models

An experiment is any process of observation with an uncertain outcome

The possible outcomes for an experiment are called the experimental

outcomes

Probability is a measure of the chance that an experimental outcome will

occur when an experiment is carried out

The sample space of an experiment is the set of all possible experimental

outcomes

The experimental outcomes in the sample space are called sample space
outcomes

4-3
LO4-1

Probability

If E is an experimental outcome, then P(E) denotes the

probability that E will occur and:
Conditions
1. 0 £ P(E) £ 1 such that:
• If E can never occur, then P(E) = 0
• If E is certain to occur, then P(E) = 1
2. The probabilities of all the experimental outcomes must sum to 1

4-4
LO4-1
Assigning Probabilities to Sample Space
Outcomes

1. Classical method
• For equally likely outcomes
2. Relative frequency method
• Using the long run relative frequency
3. Subjective method
• Assessment based on experience, expertise or intuition

4-5
LO4-1

Probability Models

• Probability model: a mathematical representation of a random

phenomenon
• Random variable: a variable whose value is numeric and is
determined by the outcome of an experiment
• Probability distribution: A probability model describing a random
variable
1. Discrete probability distributions (Chapter 6)
2. Continuous probability distributions (Chapter 7)

4-6
LO4-1

Some Important Probability Distributions

• Discrete probability distributions

1. Binomial distribution
2. Poisson distribution

• Continuous probability distributions

1. Normal distribution
2. Exponential distribution

4-7
LO4-2: List the
outcomes in a sample
space and use the list to

4.2 Probability and Events

compute probabilities.

• An event is a set of sample space outcomes

• The probability of an event is the sum of the probabilities of the

sample space outcomes

• If all outcomes equally likely, the probability of an event is just the

ratio of the number of outcomes that correspond to the event
divided by the total number of outcomes

4-8
LO4-2

Classical Method

• A newly married couple plans to have two children

• Would like to know all possible outcomes

• BB BG GB GG

• Want to know probabilities

• Assuming all equal
• P(BB) = P(BG) = P(GB) = P(GG) = ¼

4-9
Example 4.1
LO4-2

Subjective

• A company is choosing a new CEO

• There are four candidates
• Adams (A)
• Chung (C)
• Hill (H)
• Rankin (R)
• An industry analysts feels the probabilities are:
• P(A) = 0.1
• P(C) = 0.2
• P(H) = 0.5
• P(R) = 0.2

4-10
Example 4.3
Classical Approach to Probability

• If N(A) possible elementary outcomes are favorable to event A,

mutually exclusive, then the probability that event A will occur is

4-11
Extra

Example

• In a well-shuffled deck of cards which contains 4 Aces and 48 other

cards, the probability of an ace (A) being obtained on a single draw
is:

4-12
 Frequency Approach

• The probability is determined in the basis of proportion of times that a

favorable outcome occurs in a number of observations or experiments.
• We do not have any prior assumptions of equal likelihood. Because the
probability value is based on observation and collection of data. This approach
is called empirical approach.

4-13
 Example

• Before including coverage for certain types of dental problems in health

insurance policies for employed adults, an insurance company wishes
to determine the probability of occurrence of such problems, so that
the insurance rate can be set accordingly. Therefore, the statistician
collects data for 10,000 adults in the appropriate age categories and
finds that 100 people have experienced the particular dental problem
during the past year. The probability of occurrence is thus

4-14
Extra

EXPRESSING PROBABILITY

• The symbol P is used to designate the probability of an event. Thus

P(A) denotes the probability that event A will occur in a single
observation or experiment.
• The smallest value that a probability statement can have is 0
(indicating the event is impossible) and the largest value it can have
is 1 (indicating the event is certain to occur).

4-15
LO4-3: Use elementary
profitability rules to
compute probabilities.

4.3 Some Elementary Probability Rules

1. Complement
2. Union
3. Intersection
4. Addition
5. Conditional probability
6. Multiplication

4-16
LO4-3

Complement

• The complement (")̅ of an event A is the set of all sample space

outcomes not in A
• P(")̅ = 1 – P(A)

4-17
Figure 4.3
Extra

ODDS

• As an alternative to probability values, probabilities can also be expressed in terms of

odds.
• The odds ratio favoring the occurrence of an event is the ratio of the relative number of
outcomes, designated by a, that are favorable to A, to the relative number of outcomes,
designated by b, that are not favorable to A:
• Odds a : b (read ‘‘a to b’)

• Example:
• Odds of 5:2

4-18
LO4-3

Union and Intersection

• The union of A and B are elementary events that belong to either A

or B or both
• Written as A È B

• The intersection of A and B are elementary events that belong to

both A and B
• Written as A ∩ B

4-19
 d

MUTUALLY EXCLUSIVE AND NONEXCLUSIVE EVENTS

• Two or more events are mutually exclusive, or disjoint, if they cannot

occur together.
• Two or more events are nonexclusive when it is possible for them to
occur together.

• Ex: A card is drawn from a deck of 52 cards: Consider the

two possible events “ace” and “spade.”

• These events are not mutually exclusive, because a given card can be
both an ace and a spade

4-20
Example

• In a study of consumer behavior, an analyst classifies the people

who enter a clothing store according to sex (“male” or “female”)
and according to age (“under 30” or “30 and over”).
• The two events, or classifications, “male” and “female” are
mutually exclusive, since any given person would be classified in
one category or the other.
• Similarly, the events “under 30” and “30 and over” are also
mutually exclusive. However, the events “male” and “under 30”
are not mutually exclusive, because a randomly chosen person
could have both characteristics.

4-21
LO4-3

Mutually Exclusive

• A and B are mutually exclusive if they have no sample space

outcomes in common
• In other words:

P(A ∩ B) = 0

4-22
Figure 4.5
LO4-3

Some Elementary Probability Rules

4-23
Figure 4.4
THE RULES OF ADDITION

• Used when we wish to determine the probability of one event or

another (or both) occurring in a single observation
• We can represent the probability of event A or event B occurring by
P(A or B).
• In the language of set theory this is called the union of A and B and
the probability is designated by P(A È B) (read “probability of A union B”).

4-24
Addition Rule

Example:
When drawing a card from a deck of playing cards, the
events “ace” (A) and “king” (K) are mutually exclusive.
The probability of drawing either an ace or a king in a
single draw is:

4-25
LO4-3

The Addition Rule

• If A and B are mutually exclusive, then the probability that A or B (the

union of A and B) will occur is
P(A È B) = P(A) + P(B)

• If A and B are not mutually exclusive:

P(A È B) = P(A) + P(B) – P(A ∩ B)
where P(A ∩ B) is the joint probability of A and B both occurring
together

4-26
Example

• When drawing a card from a deck of playing cards, the events “ace”
and “spade” are not mutually exclusive. The probability of drawing an
ace (A) or spade (S) (or both) in a single draw is:

4-27
 INDEPENDENT EVENTS
DEPENDENT EVENTS
CONDITIONAL PROBABILITY

• Two events are independent when the occurrence or non-

occurrence of one event has no effect on the probability of
occurrence of the other event.
• Two events are dependent when the occurrence or non-occurrence
of one event does affect the probability of occurrence of the other
event.

4-28
Example

• Q1-The outcomes associated with tossing a fair coin twice in

succession are considered to be independent events. why?
• Because the outcome of the first toss has no effect on the
respective probabilities of a head or tail occurring on the
second toss.
• Q2- The drawing of two cards without replacement from a
deck of playing cards are dependent events. Why?
• Because the probabilities associated with the second draw
are dependent on the outcome of the first draw.

4-29
Dependent- Independent -Conditional

• When two events are dependent, the concept of conditional

probability is used to designate the probability of occurrence of the
related event.
• P(B|A) indicates the probability of event B occurring given that event
A has occurred.

4-30
THE RULES OF MULTIPLICATION

• Concerned with determining the probability of the joint

occurrence of A and B
• the intersection of A and B: P(A ∩ B).
• There are two variations of the rule of multiplication
• 1- If two events are independent
• 2- If two events are dependent.

4-31
Example

• If a fair coin is tossed twice the probability that both outcomes will
be “heads” is:
•

p Atty e

4-32
Dependent Events

• For dependent events the probability of the joint occurrence of A and

B is the probability of A multiplied by the conditional probability of B
given A.

4-33
Example
• A set of 10 spare parts is known to contain 8 good parts (G) and 2 defective
parts (D).
• Two parts are selected randomly without replacement, the sequence of
possible outcomes and the probabilities are portrayed in the diagram.
• Based on the multiplication rule for dependent events, the probability that the
two parts selected are both good is

4-34
Example

• By our knowledge of a playing deck of 52 cards, we know that only one

card is both an ace(A) and a spade(S), and so P(A and S)= 1/52.
• We also know that the probability of drawing any ace is 4/52 and the
probability of drawing any spade is 13/52.
• We thus can verify that the events “ace” and “spade” are independent
events, as follows:
•

4-35
LO4-4: Compute
conditional probabilities
and assess
independence. 4.4 Conditional Probability and
Independence

• The probability of an event A, given that the event B has occurred, is

called the conditional probability of A given B
• Denoted as P(A|B)

• Further, P(A|B) = P(A ∩ B) / P(B)

• P(B) ≠ 0

4-36
LO4-4

The General Multiplication Rule

• There are two ways to calculate P(A ∩ B)

• Given any two events A and B

1. P(A ∩ B) = P(A) P(B|A) and
2. P(A ∩ B) = P(B) P(A|B)

4-37
LO4-4

Interpretation

• Restrict sample space to just event B

• The conditional probability P(A|B) is the chance of event A occurring

in this new sample space

• In other words, if B occurred, then what is the chance of A occurring

4-38
LO4-4

Independence of Events
• Two events A and B are said to be independent if and only if:

P(A|B) = P(A)

• This is equivalent to

P(B|A) = P(B)

• Assumes P(A) and P(B) greater than zero

4-39
Joint Probability Tables

• A joint probability table is a table in which all possible events

(or outcomes) for one variable are listed as row headings, all
possible events for a second variable are listed as column
headings, and the value entered in each cell of the table is
the probability of each joint occurrence.

• The table of joint-occurrence frequencies which can serve as

the basis for constructing a joint probability table is called a
contingency table.

4-40
Example
First Table is a contingency table which describes 200 people who entered a
clothing store according to sex and age, while the second Table is the associated
joint probability table. The frequency reported in each cell of the contingency
table is converted into a probability value by dividing by the total number of
observations, in this case, 200.

42.9575L 4-41
 PLUM
Question Plum PIM and V 0.3 0.429
0.7
37

• What is the probability that a randomly chosen person is under 30

given that he is a male?

4-42
LO4-4

The Multiplication Rule

• The joint probability that A and B (the intersection of A and B) will

occur is

P(A ∩ B) = P(A) • P(B|A) = P(B) • P(A|B)

• If A and B are independent, then the probability that A and B will

occur is:

P(A ∩ B) = P(A) • P(B) = P(B) • P(A)

4-43
Question from Book

4-44
4-45
LO4-5: Use Bayes’
Theorem to update prior
probabilities to posterior

4.5 Bayes’ Theorem (Optional)

probabilities (Optional).

• S1, S2, …, Sk represents k mutually exclusive possible states of nature,

one of which must be true
• P(S1), P(S2), …, P(Sk) represents the prior probabilities of the k
possible states of nature
• If E is a particular outcome of an experiment designed to determine
which is the true state of nature, then the posterior (or revised)
probability of a state Si, given the experimental outcome E, is
calculated using the formula on the next slide
plsi PlE
plsif E Plsiphffey
p E

4-46
LO4-5

Bayes’ Theorem Continued

P(S i Ç E) P(S i )P(E|S i )

P(S i|E) = =
P(E)
0
P(E)
P(S i )P(E|S i )
=
P(S1 )P(E|S 1 )+P(S 2 )P(E|S 2 )+ ...+P(S k )P(E|S k )
in case
sfs.eoentsg.TT
4-47
Bay’s Theorem Example

Example

Suppose that there are two Urns U1 and U2. Urn 1 has eight red balls and
two green balls, while urn 2 has four red balls and six green balls. An urn is
selected randomly, and a ball is then selected randomly from that urn.
Draw the diagram of probabilities.
Suppose we observe a green ball from step 2 without knowing which urn was
selected in step1. what is the probability that urn 1 was selected in step 1?

4-48

y
LO4-6: Use some
elementary counting 5
5
z
rules to compute

4.6 Counting Rules (Optional)

probabilities (Optional).

8 4 31
• A counting rule for multiple-step experiments
20
(n1)(n2)…(nk)
o l
l L
• A counting rule for combinations
#! 51 5 413
2
1
#
$
= I
$! (# − $)!
00
Example: Suppose that three members from a small social organization containing
a total of 10 members are to be chosen to form a committee. The number of
different groups of three people which can be chosen, without regard to the
different orders in which each group might be chosen, is

5 C
31.133
3,9 39FI jYII9 7f
4-49
LO4-6
3 N 3 XX 3 2 1 6
A Tree Diagram of Answering Three True–
False Questions 1203

c
e
i
r

r
I l

f
t
L
4-50
Figure 4.6
x x
2 2
2
I