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Chapter Five

A Survey of
Probability Concepts
GOALS
When you have completed this chapter, you
will be able to:

ONE
Define probability.

TWO
Describe the classical, the empirical, and the subjective approaches to
probability.
THREE
Understand the terms: experiment, event, outcome, permutations, and
combinations.
FOUR
Define the terms: conditional probability and joint probability.
Irwin/McGraw-Hill

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Chapter Five

continued

A Survey of
Probability Concepts
GOALS
When you have completed this chapter, you
will be able to:

FIVE
Calculate probabilities applying the rules of addition and the rules of
multiplication.
SIX
Use a tree diagram to organize and compute probabilities.
SEVEN
Calculate a probability using Bayes’ theorem.
EIGHT
Determine the number of permutations and the number of combinations.

Irwin/McGraw-Hill

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Definitions

• Probability: A measure of the likelihood that an
event in the future will happen; it can only
assume a value between 0 and 1, inclusive.
• Experiment: The observation of some activity
or the act of taking some measurement.
• Outcome: A particular result of an experiment.
• Event: A collection of one or more outcomes of
an experiment.

Irwin/McGraw-Hill

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Approaches to Probability

• Classical probability is based on the
assumption that the outcomes of an
experiment are equally likely.
• Using this classical viewpoint,
Number of favorable outcomes
Probability of an event =
Total number of possible outcomes

Irwin/McGraw-Hill

TH. HT. Irwin/McGraw-Hill © The McGraw-Hill Companies. . • Probability of one head = 2/4 = 1/2. • The sample space S = {HH. TT} • Consider the event of one head.5-5 EXAMPLE 1 • Consider the experiment of tossing two coins once.

.5-6 Mutually Exclusive Events • Mutually Exclusive Events: The occurrence of any one event means that none of the others can occur at the same time. • In EXAMPLE 1. Irwin/McGraw-Hill © The McGraw-Hill Companies. the four possible outcomes are mutually exclusive.

5-7 Collectively Exhaustive Events • Collectively exhaustive: At least one of the events must occur when an experiment is conducted. the four possible outcomes are collectively exhaustive.25 + . . In other words. Irwin/McGraw-Hill © The McGraw-Hill Companies. • In EXAMPLE 1.25 + . 25).25 + . the sum of probabilities = 1 (.

5-8 Relative Frequency Concept • The probability of an event happening in the long run is determined by observing what fraction of the time like events happened in the past: Number of times event occured in the past Probability of event = Total number of observations Irwin/McGraw-Hill © The McGraw-Hill Companies. .

5-9 EXAMPLE 2 • Throughout her career Professor Jones has awarded 186 A’s out of the 1200 students she has taught. What is the probability that a student in her section this semester will receive an A? • By applying the relative frequency concept.155 Irwin/McGraw-Hill © The McGraw-Hill Companies. the probability of an A= 186/1200=. .

Irwin/McGraw-Hill © The McGraw-Hill Companies. • Examples of subjective probability are estimating the probability the Washington Redskins will win the Super Bowl next year and estimating the probability of an earthquake in Los Angeles this year. .5-10 Subjective Probability • Subjective probability: The likelihood (probability) of a particular event happening that is assigned by an individual based on whatever information is available.

• Rules of addition: If two events A and B are mutually exclusive.5-11 Basic Rules of Probability • If events are mutually exclusive. then the occurrence of any one of the events precludes any of the other events from occurring. the special rule of addition states that the probability of A or B occurring equals the sum of their respective probabilities: P(A or B) = P(A) + P(B) Irwin/McGraw-Hill © The McGraw-Hill Companies. .

.5-12 EXAMPLE 3 • New England Commuter Airways recently supplied the following information on their commuter flights from Boston York: Arrival to NewFrequency Irwin/McGraw-Hill Early 100 On Time 800 Late 75 Canceled 25 Total 1000 © The McGraw-Hill Companies.

1.075.1 + .5-13 EXAMPLE 3 continued • If A is the event that a flight arrives early. Irwin/McGraw-Hill © The McGraw-Hill Companies. • If B is the event that a flight arrives late.075 =. then P(A) = 100/1000 = . • The probability that a flight is either early or late is P(A or B) = P(A) + P(B) = .175. . then P(B) = 75/1000 = .

. P(A) + P(~A) = 1 OR P(A) = 1-P(~A).5-14 The Complement Rule • The complement rule is used to determine the probability of an event occurring by subtracting the probability of the event not occurring from 1. Irwin/McGraw-Hill © The McGraw-Hill Companies. If P(A) is the probability of event A and P(~A) is the complement of A.

5-15 The Complement Rule continued • A Venn diagram illustrating the complement rule would appear as: A Irwin/McGraw-Hill ~A © The McGraw-Hill Companies. .

025. . Irwin/McGraw-Hill © The McGraw-Hill Companies. • If D is the event that a flight is canceled. then P(C) = 800/1000 = . then P(D) = 25/1000 = . • If C is the event that a flight arrives on time.8.5-16 EXAMPLE 4 • Recall EXAMPLE 3. • Use the complement rule to show that the probability of an early (A) or a late (B) flight is .175.

025 ~(C or D) = (A or B) .8 +.5-17 EXAMPLE 4 continued • P(A or B) = 1 .P(C or D) = 1 -[. .175 C .025] =.8 D .175 Irwin/McGraw-Hill © The McGraw-Hill Companies.

. then P(A or B) is given by the following formula: • P(A or B) = P(A) + P(B) .P(A and B) Irwin/McGraw-Hill © The McGraw-Hill Companies.5-18 The General Rule of Addition • If A and B are two events that are not mutually exclusive.

5-19 The General Rule of Addition • The Venn Diagram illustrates this rule: B A and B A Irwin/McGraw-Hill © The McGraw-Hill Companies. .

175 said they had a TV.5-20 EXAMPLE 5 • In a sample of 500 students. . and 100 said they had both: Stereo 320 Irwin/McGraw-Hill Both 100 TV 175 © The McGraw-Hill Companies. 320 said they had a stereo.

5-21 EXAMPLE 5 continued • If a student is selected at random. and both a stereo and TV? • P(S) = 320/500 = .35.20. • P(T) = 175/500 = .64. what is the probability that the student has only a stereo. • P(S and T) = 100/500 = . Irwin/McGraw-Hill © The McGraw-Hill Companies. only a TV. .

20 = .35 -. .64 +.79.P(S and T) = .5-22 EXAMPLE 5 continued • If a student is selected at random. Irwin/McGraw-Hill © The McGraw-Hill Companies. what is the probability that the student has either a stereo or a TV in his or her room? • P(S or T) = P(S) + P(T) .

5-23 Joint Probability • Joint Probability is a probability that measures the likelihood that two or more events will happen concurrently. . Irwin/McGraw-Hill © The McGraw-Hill Companies. An example would be the event that a student has both a stereo and TV in his or her dorm room.

. Irwin/McGraw-Hill © The McGraw-Hill Companies. • The special rule is written: P(A and B) = P(A)*P(B).5-24 Special Rule of Multiplication • The special rule of multiplication requires that two events A and B are independent. • Two events A and B are independent if the occurrence of one has no effect on the probability of the occurrence of the other.

35.5.5)(.7) = . . • What is the probability that both stocks increase in value next year? • P(A and B) = (. The probability that stock B will increase in value next year is . The probability that stock A increases in value next year is .7.5-25 EXAMPLE 6 • Chris owns two stocks which are independent of each other. Irwin/McGraw-Hill © The McGraw-Hill Companies.

5) = . .7)(.5-26 EXAMPLE 6 continued • What is the probability that at least one of these stocks increase in value during the next year (this implies that either one can increase or both)? • Thus.7) + (.85. P(at least one) = (.5) (. Irwin/McGraw-Hill © The McGraw-Hill Companies.3) + (.5)(.

• Note: The probability of the event A given that the event B has occurred is denoted by P(A|B).5-27 Conditional Probability • Conditional probability is the probability of a particular event occurring. . given that another event has occurred. Irwin/McGraw-Hill © The McGraw-Hill Companies.

5-28 General Multiplication Rule • The general rule of multiplication is used to find the joint probability that two events will occur. the joint probability that both events will happen is found by multiplying the probability that event A will happen by the conditional probability of B given that A has occurred. . Irwin/McGraw-Hill © The McGraw-Hill Companies. as it states: for two events A and B.

. P(A and B) is given by the following formula: P(A and B) = P(A)*P(B|A) OR P(A and B) = P(B)*P(A|B) Irwin/McGraw-Hill © The McGraw-Hill Companies.5-29 General Multiplication Rule • The joint probability.

5-30 EXAMPLE 7 • The Dean of the School of Business at Miami collected the following information about undergraduate students MAJOR in her Malecollege: Female Total Accounting 170 110 280 Finance 120 100 220 Marketing 160 70 230 Management 150 120 270 Total 600 400 1000 Irwin/McGraw-Hill © The McGraw-Hill Companies. .

275. • Given that the student is a female.5-31 EXAMPLE 7 continued • If a student is selected at random. . what is the probability that she is an accounting major? P(A|F) = [P(A and F)]/[P(F)] = [110/1000]/[400/1000] = . what is the probability that the student is a female accounting major? P(A and F) = 110/1000. Irwin/McGraw-Hill © The McGraw-Hill Companies.

5-32 Tree Diagrams • A tree diagram is very useful for portraying conditional and joint probabilities and is particularly useful for analyzing business decisions involving several stages. • EXAMPLE 8: In a bag containing 7 red chips and 5 blue chips you select 2 chips one after the other without replacement. . Construct a tree diagram for this information. Irwin/McGraw-Hill © The McGraw-Hill Companies.

.5-33 EXAMPLE 8 6/11 7/12 R1 5/11 7/11 5/12 R2 B2 R2 B1 4/11 Irwin/McGraw-Hill continued B2 © The McGraw-Hill Companies.

.5-34 Bayes’ Theorem • Bayes’ Theorem is given by the formula: P ( A1) * P ( B| A1) P ( A1| B )  P ( A1) * P ( B| A1)  P ( A2 ) * P ( B| A2) Irwin/McGraw-Hill © The McGraw-Hill Companies.

What is the probability that the under filled bottle came from plant A? Irwin/McGraw-Hill © The McGraw-Hill Companies.5-35 EXAMPLE 9 • Duff Beer Company has received several complaints that their bottles are under-filled. . A complaint was received today but the production manager is unable to identify which of the two Springfield plants (A or B) filled this bottle.

4783. Irwin/McGraw-Hill © The McGraw-Hill Companies.03)+(.45) (.03)]/[(.5-36 EXAMPLE 9 continued % of Total Production % of underfilled bottles A 55 3 B 45 4 • P(A|U) = [(.04)] =. .55)(.55)(.

there are m x n ways of doing both. • Example 10: Dr. How many shirt/tie outfits does he have? (10)(8) = 80. Irwin/McGraw-Hill © The McGraw-Hill Companies. .5-37 Some Principles of Counting • The Multiplication Formula: If there are m ways of doing one thing and n ways of doing another thing. Delong has 10 shirts and 8 ties.

Irwin/McGraw-Hill © The McGraw-Hill Companies. n! n Pr  (n  r ) ! • Note: The order of arrangement is important in permutations.5-38 Some Principles of Counting • Permutation: Any arrangement of r objects selected from n possible objects. .

5-39 Some Principles of Counting • Combination: The number of ways to choose r objects from a group of n objects without regard to order. . n! nCr  r !(n  r ) ! Irwin/McGraw-Hill © The McGraw-Hill Companies.

040. How many different groups are possible? 12C5 = (12!)/[5!(12-5)!] =792 • Suppose Coach Thompson must rank them: 12P5 = (12!)/(12-5)! = 95. Irwin/McGraw-Hill © The McGraw-Hill Companies.5-40 EXAMPLE 11 • Coach Thompson must pick five players among the twelve on the team to comprise the starting lineup. .