Session 7

Basic Probability

Book Chapter 4

Dr. Preeti Sharma

IMT-Hyderabad

ALWAYS LEARNING Slide 1

PRE-READ

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Objectives

The objectives for this chapter are:

◼ To understand basic probability concepts.

◼ To understand conditional probability.
◼ Use Bayes’ theorem to revise probabilities.

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The Study of Odds and Ends

◼ Jacob Bernouli (1654–1705), Abraham de Moivre (1667–1754), the

Reverend Thomas Bayes (1702–61) and Joseph Laagrange (1736–1813)
developed probability formulae and techniques.

◼ Probability was successfully applied at the gambling tables, and more

relevant to social and economic problems.

◼ The mathematical theory of probability is the basis for statistical

applications in both social and decision-making research.

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Bridge Between Descriptive & Inferential Statistics

◼ Probability principles are the foundation for:

◼ Probability distributions.
◼ Mathematical expectation.
◼ Binomial and Poisson distributions.

◼ For example, probability can be used on intent-to-purchase

survey responses and associated follow-up responses to answer
many purchase behavior questions.

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Three Types of Probability

◼ There are three basic ways of classifying probability. These three

represent rather different conceptual approaches to the study of
probability theory.

Probability

A priori Empirical Subjective

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Three Types of Probability

1. a priori -- based on prior knowledge of the process

X number of ways in which the event occurs
probability of occurrence = =
Assuming T total number of possible outcomes
all
outcomes 2. empirical probability -- based on observed data
are
equally number of ways in which the event occurs
likely
probability of occurrence =
total number of possible outcomes

3. subjective probability

based on a combination of an individual’s past experience,

personal opinion, and analysis of a particular situation.

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Example of a priori probability

When randomly selecting a day from the year 2018

what is the probability the day is in January?

X number of days in January

Probability of Day In January = =
T total number of days in 2018

X 31 days in January 31
= =
T 365 days in 2018 365

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Example of Empirical Probability

Find the probability of selecting a male taking statistics

from the population described in the following table:

Taking Stats Not Taking Stats Total

Male 84 145 229

Female 76 134 210
Total 160 279 439

number of males taking stats 84

Probability of male taking stats = = = 0.191
total number of people 439

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Subjective Probability Differs From Person To Person

◼ What is the probability a new ad campaign is successful?

◼ A media development team assigns a 60% probability of success to its

new ad campaign.
◼ The chief media officer of the company is less optimistic and assigns a

40% of success to the same campaign.

◼ The assignment of a subjective probability is based on a person’s
experiences, opinions, and analysis of a particular situation.
◼ Subjective probability is useful in situations when an empirical or a priori
probability cannot be computed.

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Terminology in Probability

◼ Probability is the chance something will happen.

◼ Probability – the numerical value representing the
chance, likelihood, or possibility that a certain
event will occur (always between 0 and 1).
◼ In probability theory, an event is one or more of
the possible outcomes of doing something.
◼ Impossible Event – an event that has no chance
of occurring (probability = 0).
◼ Certain Event – an event that is sure to occur
(probability = 1).
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Basic Terminology in Probability

◼ Probability is the chance something will happen.

◼ Probability – the numerical value representing the chance,
likelihood, or possibility that a certain event will occur (always
between 0 and 1).
◼ In probability theory, an event is one or more of the possible
outcomes of doing something.
◼ Impossible Event – an event that has no chance of occurring
(probability = 0).
◼ Certain Event – an event that is sure to occur (probability = 1).

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Basic Terminology in Probability

◼ Event - Each Possible Outcome Of A Variable

◼ Simple event:
◼ An event described by a single characteristic.
◼ e.g., A day in January from all days in 2018.
◼ Joint event:
◼ An event described by two or more characteristics.
◼ e.g. A day in January that is also a Wednesday from all days in 2018.
◼ Complement of an event A (denoted A’):
◼ All events that are not part of event A.
◼ e.g., All days from 2018 that are not in January.

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Basic Terminology in Probability

The Sample Space Is The Collection Of All Possible Outcomes Of

A Variable

e.g. All 6 faces of a die:

e.g. All 52 cards of a bridge deck

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Sample Deck of Cards

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Basic Terminology in Probability

◼ The activity that produces such an event is referred to in probability theory

as an experiment.

◼ Events are said to be mutually exclusive, if one and only one of them can
take place at a time.

◼ When a list of the possible events that can result from an experiment
includes every possible outcome, the list is said to be collectively
exhaustive.

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Mutually Exclusive Events

◼ Mutually exclusive events:

◼ Events that cannot occur simultaneously.

Example: Randomly choosing a day from 2018

A = day in January; B = day in February

◼ Events A and B are mutually exclusive.

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Collectively Exhaustive Events

◼ Collectively exhaustive events:

◼ One of the events must occur.
◼ The set of events covers the entire sample space.
Example: Randomly choose a day from 2018.

A = Weekday; B = Weekend;
C = January; D = Spring;

◼ Events A, B, C and D are collectively exhaustive (but not mutually

exclusive – a weekday can be in January or in Spring).
◼ Events A and B are collectively exhaustive and also mutually exclusive.

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 Probability – Basic Concepts
Example 1
Example:
If a single fair coin is tossed, what is the probability that it will land
heads up?
Sample Space: S = {h, t}
Event of Interest: E = {h}
P(heads) = P(E) = 1/
2
The probability obtained is theoretical as no coin was actually
flipped
Theoretical Probability:
number of favorable outcomes n(E)
P(E) = =
total number of outcomes n(S)

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 Probability – Basic Concepts
Example 2
Example:

A cup is flipped 100 times. It lands on its side 84 times, on its

bottom 6 times, and on its top 10 times. What is the probability
that it lands on it top?
number of top outcomes 10 1
P(top) = = =
total number of flips 100 10
The probability obtained is experimental or empirical as the cup
was actually flipped.

Empirical or Experimental Probability:

number of times event E occurs
P(E) ͌ number of times the experiment was performed
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 Probability – Basic Concepts
Example 3
Example:

There are 2,598,960 possible five-card hand in poker. If there are

36 possible ways for a straight flush to occur, what is the
probability of being dealt a straight flush?
number of possible straight flushes
P(straight flush) =
total number of five-card hands

36
= = 0.0000139
2,598,960

This probability is theoretical as no cards were dealt.

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 Probability – Basic Concepts
Example 4
Example:
A school has 820 male students and 835 female students. If a
student is selected at random, what is the probability that the
student would be a female?
number of possible female students
P(female) =
total number of students

835 835 167

= = =
820 + 835 1655 331

P(female) = 0.505

This probability is theoretical as no experiment was performed.

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 Session 7

Basic Probability

Book Chapter 4

Dr. Preeti Sharma

IMT-Hyderabad

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BUSINESS CASE

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Summarizing Sample Spaces

Contingency Table -- M&R Survey Results.

Actually Purchased TV
Planned To Purchase TV Yes No Total
Yes 200 50 250
No 100 650 750
Total 300 700 1,000

Total Number
Of Sample
Space Outcomes.

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Summarizing Sample Spaces
Venn Diagram -- M&R Survey Results.
A = Planned to Purchase
A’ = Did not Plan To Purchase
B = Actually Purchased
B’ = Did not Purchase

Actually Purchased TV
Planned To Purchase TV Yes No Total
Yes 200 50 250
No 100 650 750
Total 300 700 1,000

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Simple Probability: Definition & Computing

◼ Simple Probability refers to the probability of a simple event.

◼ P(Planned to purchase)
◼ P(Actually purchased)

number of outcomes satisfying A P(Purchase) = 250 / 1000

P( A ) =
total number of outcomes

Actually Purchased TV
Planned To Purchase TV Yes No Total
Yes 200 50 250
No 100 650 750
Total 300 700 1,000

P(Actually Purchased) = 300 / 1000

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Joint Probability: Definition & Computing
◼ Joint Probability refers to the probability of an occurrence of two or more
events (joint event).
◼ ex. P(Plan to Purchase and Purchase).
◼ ex. P(No Plan and Purchase).

number of outcomes satisfying A and B

P( A and B ) =
total number of outcomes

P(Plan to Purchase and Purchase) = 200 / 1000

Actually Purchased TV
Planned To Purchase TV Yes No Total
Yes 200 50 250
No 100 650 750
Total 300 700 1,000

P(No Plan and Purchase) = 100 / 1000

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Computing A Marginal Probability Via Joint Probabilities

◼ Computing a marginal (or simple) probability:

P(A) = P(A and B1 ) + P(A and B2 ) +  + P(A and Bk )
◼ Where B1, B2, …, Bk are k mutually exclusive and collectively exhaustive events.

P(Planned) = P(Yes and Yes) + P(Yes and No) =

200 / 1000 + 50 / 1000 = 250 / 1000

Actually Purchased TV
Planned To Purchase TV Yes No Total
Yes 200 50 250
No 100 650 750
Total 300 700 1,000

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Marginal & Joint Probabilities
In A Contingency Table

Event
Event B1 B2 Total
A1 P(A1 and B1) P(A1 and B2) P(A1)

A2 P(A2 and B1) P(A2 and B2) P(A2)

Total P(B1) P(B2) 1

Joint Probabilities Marginal (Simple) Probabilities

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Probability Summary So Far

◼ Probability is the numerical measure of the likelihood that 1 Certain

an event will occur.
◼ The probability of any event must be between 0 and 1,
inclusively.
0 ≤ P(A) ≤ 1 For any event A
0.5
◼ The sum of the probabilities of all mutually exclusive and
collectively exhaustive events is 1.

P(A) + P(B) + P(C) = 1

If A, B, and C are mutually exclusive and
collectively exhaustive
0 Impossible

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General Addition Rule

General Addition Rule:

P(A or B) = P(A) + P(B) - P(A and B)

If A and B are mutually exclusive, then

P(A and B) = 0, so the rule can be simplified:

P(A or B) = P(A) + P(B)

For mutually exclusive events A and B

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General Addition Rule Example

P(Planned or Purchased) =
P(Planned) + P(Purchased) – P(Planned and Purchased) =
250 / 1000 + 300 / 1000 – 200 / 1000 = 350 / 1000

Actually Purchased TV
Planned To Purchase TV Yes No Total
Yes 200 50 250
No 100 650 750
Total 300 700 1,000

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