Professional Documents
Culture Documents
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 2
or duplicated, or posted to a publicly accessible website, in whole or in part.
Uncertainties
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 3
or duplicated, or posted to a publicly accessible website, in whole or in part.
Probability
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 4
or duplicated, or posted to a publicly accessible website, in whole or in part.
Probability as a Numerical Measure
of the Likelihood of Occurrence
0 .5 1
Probability:
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 5
or duplicated, or posted to a publicly accessible website, in whole or in part.
Statistical Experiments
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 7
or duplicated, or posted to a publicly accessible website, in whole or in part.
An Experiment and Its Sample Space
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 8
or duplicated, or posted to a publicly accessible website, in whole or in part.
An Experiment and Its Sample Space
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 9
or duplicated, or posted to a publicly accessible website, in whole or in part.
A Counting Rule for
Multiple-Step Experiments
n If an experiment consists of a sequence of k steps
in which there are n1 possible results for the first step,
n2 possible results for the second step, and so on,
then the total number of experimental outcomes is
given by (n1)(n2) . . . (nk).
n A helpful graphical representation of a multiple-step
experiment is a tree diagram.
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 10
or duplicated, or posted to a publicly accessible website, in whole or in part.
A Counting Rule for
Multiple-Step Experiments
n Example: Bradley Investments
Bradley Investments can be viewed as a two-step
experiment. It involves two stocks, each with a set of
experimental outcomes.
Markley Oil: n1 = 4
Collins Mining: n2 = 2
Total Number of
Experimental Outcomes: n1n2 = (4)(2) = 8
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 11
or duplicated, or posted to a publicly accessible website, in whole or in part.
Tree Diagram
æ Nö N!
CnN =ç ÷ =
è n ø n !(N - n )!
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 13
or duplicated, or posted to a publicly accessible website, in whole or in part.
Counting Rule for Permutations
æ Nö N!
PnN = n !ç ÷ =
è n ø (N - n )!
where:
Ei is the ith experimental outcome
and P(Ei) is its probability
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 15
or duplicated, or posted to a publicly accessible website, in whole or in part.
Assigning Probabilities
where:
n is the number of experimental outcomes
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 16
or duplicated, or posted to a publicly accessible website, in whole or in part.
Assigning Probabilities
Classical Method
Assigning probabilities based on the assumption
of equally likely outcomes
Subjective Method
Assigning probabilities based on judgment
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 17
or duplicated, or posted to a publicly accessible website, in whole or in part.
Classical Method
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 18
or duplicated, or posted to a publicly accessible website, in whole or in part.
Relative Frequency Method
Number of Number
Polishers Rented of Days Probability
0 4 .10
1 6 .15
2 18 .45 4/40
3 10 .25
4 2 .05
40 1.00
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 20
or duplicated, or posted to a publicly accessible website, in whole or in part.
Subjective Method
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 21
or duplicated, or posted to a publicly accessible website, in whole or in part.
Subjective Method
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 22
or duplicated, or posted to a publicly accessible website, in whole or in part.
Events and Their Probabilities
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 23
or duplicated, or posted to a publicly accessible website, in whole or in part.
Events and Their Probabilities
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 24
or duplicated, or posted to a publicly accessible website, in whole or in part.
Events and Their Probabilities
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 25
or duplicated, or posted to a publicly accessible website, in whole or in part.
Some Basic Relationships of Probability
Complement of an Event
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 26
or duplicated, or posted to a publicly accessible website, in whole or in part.
Complement of an Event
Sample
Event A Ac Space S
Venn
Diagram
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 27
or duplicated, or posted to a publicly accessible website, in whole or in part.
Union of Two Events
Sample
Event A Event B Space S
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 28
or duplicated, or posted to a publicly accessible website, in whole or in part.
Union of Two Events
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 29
or duplicated, or posted to a publicly accessible website, in whole or in part.
Intersection of Two Events
Sample
Event A Event B Space S
Intersection of A and B
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 30
or duplicated, or posted to a publicly accessible website, in whole or in part.
Intersection of Two Events
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 31
or duplicated, or posted to a publicly accessible website, in whole or in part.
Addition Law
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 32
or duplicated, or posted to a publicly accessible website, in whole or in part.
Addition Law
Sample
Event A Event B Space S
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 34
or duplicated, or posted to a publicly accessible website, in whole or in part.
Mutually Exclusive Events
There is no need to
include “- P(A Ç B)”
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 35
or duplicated, or posted to a publicly accessible website, in whole or in part.
Conditional Probability
P( A Ç B)
P( A|B) =
P( B)
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 36
or duplicated, or posted to a publicly accessible website, in whole or in part.
Conditional Probability
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 37
or duplicated, or posted to a publicly accessible website, in whole or in part.
Multiplication Law
P(A Ç B) = P(B)P(A|B)
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 38
or duplicated, or posted to a publicly accessible website, in whole or in part.
Multiplication Law
Collins Mining
Markley Oil Profitable (C) Not Profitable (Cc) Total
Joint Probabilities
(appear in the body
Marginal Probabilities
of the table)
(appear in the margins
of the table)
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 40
or duplicated, or posted to a publicly accessible website, in whole or in part.
Independent Events
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 41
or duplicated, or posted to a publicly accessible website, in whole or in part.
Multiplication Law
for Independent Events
The multiplication law also can be used as a test to see
if two events are independent.
P(A Ç B) = P(A)P(B)
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 42
or duplicated, or posted to a publicly accessible website, in whole or in part.
Multiplication Law
for Independent Events
n Example: Bradley Investments
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 43
or duplicated, or posted to a publicly accessible website, in whole or in part.
Mutual Exclusiveness and Independence
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 45
or duplicated, or posted to a publicly accessible website, in whole or in part.
Bayes’ Theorem
n Example: L. S. Clothiers
A proposed shopping center will provide strong
competition for downtown businesses like L. S.
Clothiers. If the shopping center is built, the owner
of L. S. Clothiers feels it would be best to relocate to
the shopping center.
The shopping center cannot be built unless a
zoning change is approved by the town council.
The planning board must first make a
recommendation, for or against the zoning change,
to the council.
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 46
or duplicated, or posted to a publicly accessible website, in whole or in part.
Prior Probabilities
n Example: L. S. Clothiers
Let:
A1 = town council approves the zoning change
A2 = town council disapproves the change
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 47
or duplicated, or posted to a publicly accessible website, in whole or in part.
New Information
n Example: L. S. Clothiers
The planning board has recommended against
the zoning change. Let B denote the event of a
negative recommendation by the planning board.
Given that B has occurred, should L. S. Clothiers
revise the probabilities that the town council will
approve or disapprove the zoning change?
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 48
or duplicated, or posted to a publicly accessible website, in whole or in part.
Conditional Probabilities
n Example: L. S. Clothiers
Past history with the planning board and the town
council indicates the following:
P(B|A1) = .2 P(B|A2) = .9
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 49
or duplicated, or posted to a publicly accessible website, in whole or in part.
Tree Diagram
n Example: L. S. Clothiers
P(B|A2) = .9
P(A2 Ç B) = .27
P(A2) = .3
c P(A2 Ç Bc) = .03
P(B |A2) = .1
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 50
or duplicated, or posted to a publicly accessible website, in whole or in part.
Bayes’ Theorem
P( Ai )P( B| Ai )
P( Ai |B) =
P( A1 )P( B| A1 ) + P( A2 )P( B| A2 ) + ... + P( An )P( B| An )
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 51
or duplicated, or posted to a publicly accessible website, in whole or in part.
Posterior Probabilities
n Example: L. S. Clothiers
Given the planning board’s recommendation not
to approve the zoning change, we revise the prior
probabilities as follows:
P( A1 )P( B| A1 )
P( A1 |B) =
P( A1 )P( B| A1 ) + P( A2 )P( B| A2 )
(. 7 )(. 2 )
=
(. 7 )(. 2 ) + (. 3)(. 9)
= .34
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 52
or duplicated, or posted to a publicly accessible website, in whole or in part.
Posterior Probabilities
n Example: L. S. Clothiers
The planning board’s recommendation is good
news for L. S. Clothiers. The posterior probability of
the town council approving the zoning change is .34
compared to a prior probability of .70.
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 53
or duplicated, or posted to a publicly accessible website, in whole or in part.
Bayes’ Theorem: Tabular Approach
n Example: L. S. Clothiers
• Step 1
Prepare the following three columns:
Column 1 - The mutually exclusive events for
which posterior probabilities are desired.
Column 2 - The prior probabilities for the events.
Column 3 - The conditional probabilities of the
new information given each event.
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 54
or duplicated, or posted to a publicly accessible website, in whole or in part.
Bayes’ Theorem: Tabular Approach
n Example: L. S. Clothiers
• Step 1
(1) (2) (3) (4) (5)
Prior Conditional
Events Probabilities Probabilities
Ai P(Ai) P(B|Ai)
A1 .7 .2
A2 .3 .9
1.0
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 55
or duplicated, or posted to a publicly accessible website, in whole or in part.
Bayes’ Theorem: Tabular Approach
n Example: L. S. Clothiers
• Step 2
Prepare the fourth column:
Column 4
Compute the joint probabilities for each event and
the new information B by using the multiplication
law.
Multiply the prior probabilities in column 2 by
the corresponding conditional probabilities in
column 3. That is, P(Ai !B) = P(Ai) P(B|Ai).
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 56
or duplicated, or posted to a publicly accessible website, in whole or in part.
Bayes’ Theorem: Tabular Approach
n Example: L. S. Clothiers
• Step 2
(1) (2) (3) (4) (5)
Prior Conditional Joint
Events Probabilities Probabilities Probabilities
Ai P(Ai) P(B|Ai) P(Ai ! B)
A1 .7 .2 .14
A2 .3 .9 .27
.7 x .2
1.0
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 57
or duplicated, or posted to a publicly accessible website, in whole or in part.
Bayes’ Theorem: Tabular Approach
n Example: L. S. Clothiers
• Step 2 (continued)
We see that there is a .14 probability of the town
council approving the zoning change and a
negative recommendation by the planning board.
There is a .27 probability of the town council
disapproving the zoning change and a negative
recommendation by the planning board.
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 58
or duplicated, or posted to a publicly accessible website, in whole or in part.
Bayes’ Theorem: Tabular Approach
n Example: L. S. Clothiers
• Step 3
Sum the joint probabilities in Column 4. The
sum is the probability of the new information,
P(B). The sum .14 + .27 shows an overall
probability of .41 of a negative recommendation
by the planning board.
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 59
or duplicated, or posted to a publicly accessible website, in whole or in part.
Bayes’ Theorem: Tabular Approach
n Example: L. S. Clothiers
• Step 3
(1) (2) (3) (4) (5)
Prior Conditional Joint
Events Probabilities Probabilities Probabilities
Ai P(Ai) P(B|Ai) P(Ai ! B)
A1 .7 .2 .14
A2 .3 .9 .27
1.0 P(B) = .41
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 60
or duplicated, or posted to a publicly accessible website, in whole or in part.
Bayes’ Theorem: Tabular Approach
n Example: L. S. Clothiers
• Step 4
Prepare the fifth column:
Column 5
Compute the posterior probabilities using the
basic relationship of conditional probability.
P( Ai Ç B)
P( Ai | B) =
P( B)
The joint probabilities P(Ai ! B) are in column 4
and the probability P(B) is the sum of column 4.
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 61
or duplicated, or posted to a publicly accessible website, in whole or in part.
Bayes’ Theorem: Tabular Approach
n Example: L. S. Clothiers
• Step 4
(1) (2) (3) (4) (5)
Prior Conditional Joint Posterior
Events Probabilities Probabilities Probabilities Probabilities
Ai P(Ai) P(B|Ai) P(Ai ! B) P(Ai |B)
A1 .7 .2 .14 .3415
A2 .3 .9 .27 .6585
1.0 P(B) = .41 1.0000
.14/.41
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 62
or duplicated, or posted to a publicly accessible website, in whole or in part.
Using Excel to Compute
Posterior Probabilities
n Formula Worksheet
A B C D E
Prior Conditional Joint Posterior
1 Events
Probabilities Probabilities Probabilities Probabilities
2 A1 0.7 0.2 =B2*C2 =D2/$D$4
3 A2 0.3 0.9 =B3*C3 =D3/$D$4
4 =SUM(B2:B3) =SUM(D2:D3) =SUM(E2:E3)
5
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 63
or duplicated, or posted to a publicly accessible website, in whole or in part.
Using Excel to Compute
Posterior Probabilities
n Value Worksheet
A B C D E
Prior Conditional Joint Posterior
1 Events
Probabilities Probabilities Probabilities Probabilities
2 A1 0.7 0.2 0.14 0.3415
3 A2 0.3 0.9 0.27 0.6585
4 1.0 0.41 1.0000
5
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide 64
or duplicated, or posted to a publicly accessible website, in whole or in part.