LECTURE 5

5.1 The Basics of Probability

• Probability
• The chance that a particular event will occur
• The probability value will be in the range 0 to 1.
• Experiment
• A process that produces a single outcome whose result
cannot be predicted with certainty
• Sample Space
• The collection of all outcomes that can result from a
selection, decision, or experiment
Types of Events
• Mutually Exclusive Events
• Two events are mutually exclusive if the occurrence of one
event precludes the occurrence of the other event.
• Independent Events
• Two events are independent if the occurrence of one event in
no way influences the probability of the occurrence of the
other event.
• Dependent Events
• Two events are dependent if the occurrence of one
event impacts the probability of the other event
occurring.
Types of Events - Example
• Independent Events
• Two events are independent if the occurrence of one event in
no way influences the probability of the occurrence of the
other event.

Event A – Business is started by a person in North Carolina

Event B – Business is started by a person in Oregon

Whether or not the business in Oregon (Event B) is successful is in

no way influenced by whether the North Carolina business (Event
A) is successful. – Events are Independent
Types of Events - Example
• Dependent Events
• Two events are dependent if the occurrence of one
event impacts the probability of the other event
occurring.

A Company has 10 employees – 3 male and 7 female. Two

employees are selected at random to attend a conference.

Event A – First person selected is female.

Event B – Second person selected is male.

Events A and B are dependent because the chance of a male

selected second depends on whether a male or female is selected
first.
5.2 The Rules of Probability
Probability Rules

Possible Values Addition Rule for Any

Conditional Probability
Two Events
for Independent Events
Summation of
Possible Values Multiplication Rule for
Addition Rule for
Mutually Exclusive Any Two Events
Events
Addition Rule for
Individual Outcomes Multiplication Rule for
Independent Events
Conditional Probability
Complement Rule for Any Two Events Bayes’ Theorem
Possible Values and Summation Rules
Probability Rule 1 Probability Rule 2

Probability of event occurring Sum of the probabilities of all

is always between 0 and 1. possible outcomes is 1.

For any event Ei

0 ≤ P(Ei) ≤ 1 for all i

0 = no chance of occurring k - Number of outcomes in the

1 = 100% chance of occurring sample
ei - ith outcome
Probability Rules 1 and 2 - Example

A sales manager has placed three products on display in a store.

The following shows the probabilities associated with the
number of these products that sell in the first 30 minutes on
display.

Rule 1: For any event Ei

0 ≤ P(Ei) ≤ 1 for all i

 P( x )  1.00
i 1
i
Rule 2: Sum of
probabilities is 1.00.
Rule 3: Addition Rule for Individual Outcomes

The probability of an event Ei is equal to the sum

of the probabilities of the individual outcomes
forming Ei .

For example, if Ei = {e1, e2, e3} then

P(Ei) = P(e1) + P(e2) + P(e3).
Addition Rule for Individual Outcomes -
Examples
Roll a 6 sided die. What is the probability that the value will
be an odd number? E = (1,3,5)
P(E) = 1/6 + 1/6 + 1/6 = 3/6=1/2
A sales manager has placed three products on display in a store. The
following shows the probabilities associated with the number of these
products that sell in the first 30 minutes on display. What is the probability
that 2 or more products will sell?

E = (2,3)
P(E) = 0.4 + 0.1 = 0.5
Addition Rule for Individual Outcomes -
Example
Real Estate Investment

x = Return P(x)

-$100,000 0.10
$0 0.20
+$20,000 0.50
+$500,000 0.20

What is the probability of making at least $20,000?

E = [$20,000, $500,000] P(E) =0.50 + 0.20

P(E) = 0.70
Complement Rule
• The complement of an event E is the collection of all
possible outcomes not contained in event E.

The probability of the complement of event E

is 1 minus the probability of event E.

P(E) = 1 - P(E)

• This rule is corollary to Probability Rules 1 and 2.

Complement Rule - Example
An inspector checks 7 products to see if they are
defective. The possible number of defects and their
probabilities are given. What is the probability of 1 or
more defects?
P( x  1)  P( x  1)  P( x  2)  P( x  3)  .....  P( x  7)
P( x  1)  0.12  0.23  0.27  0.20  0.10  0.04  0.01
P( x  1)  0.97

Using the Complement Rule

P( x  1)  1  P( x  0)
P( x  1)  1  0.03
P( x  1)  0.97
Rule 4: Addition Rule for Any Two Events –
Keyword “or” Means Addition

P(E1 or E2) = P(E1) + P(E2) - P(E1 and E2)

Addition Rule for Any Two Events - Example
Drawing Cards from a Deck of 52 Cards

P(Red or Ace) = P(Red) + P(Ace) - P(Red and Ace)

P(Red or Ace) = 26/52 + 4/52 - 2/52 = 28/52= 7/13

Color Don’t count

Type Total the two red
Red Black aces twice!
Ace 2 2 4
Non-Ace 24 24 48
Total 26 26 52
Rule 5: Addition Rule for Mutually Exclusive Events
– No Overlap

P(E1 or E2) = P(E1) + P(E2)

Both events cannot occur at the same time: P(E1 and E2) = 0
Addition Rule for Mutually Exclusive Events
– Example
A retail clothing store has three styles of work boots. They
currently have 6 pairs of style A, 12 pairs of style B and 2
pairs of style C. If a store clerk randomly picks one pair to
put on display, what is the probability that boot is style A or
style C?
6 Because if one style boot is selected,
P ( A)   0.30
20 another style cannot also be selected,
12 the events are mutually exclusive.
P( B)   0.60
20
2 P( A or C )  P( A)  P(C )
P (C )   0.10
20 P( A or C )  P ( A)  P(C )  0.30  0.10  0.40
Rule 6: Conditional Probability for Any Two Events
• Conditional Probability
• The probability that an event will occur given that some other event has
already happened

Probability Rule 6

Given that
Conditional Probability Example

CD No CD Total
AC 0.2 0.5 0.7
No AC 0.2 0.1 0.3
Total 0.4 0.6 1.0
Rule 7: Conditional Probability for Independent
Events
Probability Rule 7

For independent events E1, E2

P(E1|E2) = P(E1) P(E2) > 0

P(E2|E1) = P(E2) P(E1) > 0

The conditional probability of one event occurring,

given a second independent event has already occurred,
is simply the probability of the first event occurring.
Conditional Probability for Independent
Events - Example
The time an employee is with the company is independent of
the employee’s gender.

P( Male 1  3 Years)  P( Male)  0.25

Check for Independence:

10
P( Male and 1  3 Years) 10
P( Male 1  3 Years )   200   0.25  P( Male)
P(1  3 Years) 40 40
200
Rule 8: Multiplication Rule for Any Two Events
• If we do not know the joint relative frequencies, the multiplication
rule for two events can be used.

Probability Rule 8

For two events E1 and E2

P(E1 and E2) = P(E1) P(E2|E1)

Multiplication Rule for Any Two Events-
Example
A small boutique hotel has 20 rooms. Five of the rooms are
suites with a living room and bedroom while the other 15
are traditional hotel rooms. What is the probability that
first two rooms booked during the week of October 13-19
are both suites if the bookings are assumed to be random?

Event: S = Suite T = Traditional

5 4
P( S1 and S2 )  P( S1 ) P( S2 S1 )    0.053
20 19
Rule 9: Multiplication Rule for Independent Events
• The joint probability of two independent events is simply the product
of the probabilities of the two events.

Probability Rule 9

For independent events E1, E2

P(E1 and E2) = P(E1) P(E2)

Multiplication Rule for Independent Events
- Example
A small mid-western city has three major airlines that
serve the airport. Suppose that 60% of the passengers fly
United Airlines, 30% fly Delta, and 10% fly Southwest.
Further, suppose that 70% of the fliers are flying for
pleasure and 30% fly for business. Assuming type of trip
and the airline used are independent, what is the
probability that a flier uses United and fly Delta is a
business traveler?

P(United and Business)  P(United) P(Business)  (0.60)(0.30)  0.18