4.

1 Basic
Probability
Concepts
SHEENA MAE F. PAGARAN
TOPICS
1. BASIC PROBABILITY CONCEPTS
2. EVENTS & SAMPLE SPACES
3. CONTINGENCY TABLES & VENN DIAGRAMS
4. SIMPLE PROBABILITY
5. JOINT PROBABILITY
6. MARGINAL PROBABILITY
7. GENERAL ADDITION RULE
Probability
The numeric value representing the
chance, likelihood, or a possibility
that a particular event will occur,
expressed as a number between 0
(indicating impossibility) and 1
(indicating certainty).
Business
Used in decision making

- Assess risks

- Make predictions

- Allocate resources

- Prioritize actions
Classifications (Approaches) of Probability

A PRIORI EMPIRICAL SUBJECTIVE

Possible outcome Data used is Based on one’s
is known from an observed opinion
sample
A PRIORI PROBABILITY

P = X/T = ½ = 0.5 or 50%

BASIC ELEMENTS OF PROBABILITY
Event
- each possible outcome

Sample space
- collection of all possible events

Complement
- events that are not part of A

Joint Event
- event that has two or more characteristics
Sample
1. Sample Space

2. Events (Simple Events)

3. Complement

4. Joint Event
Contingency Table and Venn Diagram

Contingency Table Venn Diagram

Probability Computation
1. Simple Probability

2. Joint Probability

3. Marginal Probability
Simple Probability
Simple probability refers to the probability of occurrence of a simple event, P(A).

Example: Calculate the probability that a

household will plan to purchase a big-screen
television:
Joint Probability
Joint probability refers to the probability of occurrence of a joint event.

Example: Calculate the probability of the joint

event – Planned to purchase and actually
purchased.
Marginal Probability
Marginal Probability consists of a set of joint probabilities. Determines the probability of a single
event happening without considering the specifics of other events.

P(A1) = P(A1&B1) + P(A1+B2)

P(A1) = 0.1 + 0.4 = 0.5
Marginal Probability

Example: Calculate the probability that a household will plan to

purchase a big-screen television:

P(Planned to purchase) = 200/1000 + 50/1000 = 0.25

General Addition Rule
- The General Addition Rule in probability is a fundamental principle that allows you to calculate
the probability of the union of two or more events.

- Used for not mutually exclusive events

General Addition Rule
Example: Calculate the probability that a
household will plan to purchase a big-screen
television or those who did not purchase.

P = 250/1000 + 700/1000 – 50/1000

P = 0.9 or 90%

Planned to purchase = 250

Did not purchase = 700

Planned to purchase but did not buy = 50

THANK YOU