Professional Documents
Culture Documents
BUSINESS
STATISTICS
by
AMIR D. ACZEL
&
JAYAVEL SOUNDERPANDIAN
7th edition.
Chapter 2
Probability
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
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2 Probability
Using Statistics
Basic Definitions: Events, Sample Space, and Probabilities
Basic Rules for Probability
Conditional Probability
Independence of Events
Combinatorial Concepts
The Law of Total Probability and Bayes’ Theorem
The Joint Probability Table
Using the Computer
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2 LEARNING OBJECTIVES
Types of Probability
Subjective Probability
based on personal beliefs, experiences, prejudices, intuition - personal
judgment
different for all observers (subjective)
examples: Super Bowl, elections, new product introduction, snowfall
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A
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Complement of a Set
Intersection (And) A B
– a set containing all elements in both A and B
Union (Or)
A B
– a set containing all elements in A or B or both
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A
B
A B
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Sets: A Union B
A
B
A B
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B
A
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Sets: Partition
S
A3
A1
A2 A4
A5
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Experiment
• Process that leads to one of several possible outcomes *, e.g.:
Coin toss
• Heads, Tails
Rolling a die
• 1, 2, 3, 4, 5, 6
Pick a card
AH, KH, QH, ...
Introduce a new product
• Each trial of an experiment has a single observed outcome.
• The precise outcome of a random experiment is unknown before a trial.
Events : Definition
Sample Space or Event Set
Set of all possible outcomes (universal set) for a given experiment
E.g.: Roll a regular six-sided die
S = {1,2,3,4,5,6}
Event
Collection of outcomes having a common characteristic
E.g.: Even number
A = {2,4,6}
Event A occurs if an outcome in the set A occurs
Probability of an event
Sum of the probabilities of the outcomes of which it consists
P(A) = P(2) + P(4) + P(6)
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Equally-likely Probabilities
(Hypothetical or Ideal Experiments)
• For example:
Roll a die
• Six possible outcomes {1,2,3,4,5,6}
• If each is equally-likely, the probability of each is 1/6 = 0.1667 =
16.67%
1
P ( e)
n( S )
• Probability of each equally-likely outcome is 1 divided by the number of
possible outcomes
Event A (even number)
• P(A) = P(2) + P(4) + P(6) = 1/6 + 1/6 + 1/6 = 1/2
• for e in A
P ( A ) P ( e)
n( A ) 3 1
n( S ) 6 2
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8 8 8 8
n ( Heart Ace ) 7 7 7 7
6 6 6 6
n(S ) 5 5 5 5
4 4 4 4
16 4 3 3 3 3
2 2 2 2
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P( A ) 1 P( A)
Intersection - Probability of both A and B
P( A B) n( A B)
n( S )
Mutually exclusive events (A and C) :
P( A C ) 0
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P( A B) n( A B) P( A) P( B) P( A B)
n( S )
Mutually exclusive events: If A and B are mutually exclusive, then
P( A B) 0 so P( A B) P( A) P( B)
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A
B
P( A B)
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P( A B)
P( A B) , where P( B) 0
P( B)
Independent events:
P( A B) P( A)
P( B A) P( B)
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P( A B) P( A B) so P( A B) P( A B) P( B)
P( B)
P( B A) P( A)
P ( A D) P ( A)
so P( A D) P( A)P(D)
P ( D A) P ( D)
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Counts
AT& T IBM Total
4 13 1
P( Ace Heart) * P( Ace) P( Heart)
52 52 52
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Independence of Events –
Example 2-5
a)P(T B) P(T ) P( B)
0.04 * 0.06 0.0024
b)P(T B) P(T ) P( B) P(T B)
0.04 0.06 0.0024 0.0976
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Example 2-7:
P(Q Q Q Q ) 1 P(Q )P(Q )P(Q )P(Q )
1 2 3 10 1 2 3 10
1 0.9010 1 0.3487 0.6513
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.
Order the letters: A, B, and C
C
. ABC
. .. B
C B .. ACB
. . . A
B A C
.. BAC
. . C
C
A
A
B
BCA
. B
A
. CAB
CBA
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Factorial
Bayes’ Theorem
• Bayes’ theorem enables you, knowing just a little more than the
probability of A given B, to find the probability of B given A.
• Based on the definition of conditional probability and the law of total
probability.
P ( A B)
P ( B A)
P ( A)
P ( A B) Applying the law of total
probability to the denominator
P ( A B) P ( A B )
P ( A B) P ( B)
Applying the definition of
P ( A B) P ( B) P ( A B ) P ( B ) conditional probability throughout
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P ( I ) 0.001 P( I Z )
P( I Z )
P( Z )
P( I Z )
P( I Z ) P( I Z )
P ( I ) 0.999
P( Z I ) P( I )
P( Z I ) P( I ) P( Z I ) P( I )
P ( Z I ) 0.92
(.92)( 0.001)
(.92)( 0.001) ( 0.04)(.999)
0.00092 0.00092
0.00092 0.03996
P ( Z I ) 0.04 .0225
.04088
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P( Z I ) 008
. P( Z I ) (0.001)(0.08) .00008
P( I ) 0001
.
P( I ) 0999
. P( Z I ) 004
. P( Z I ) (0.999)(0.04) .03996
P( Z I ) 096
.
P( Z I ) (0.999)(0.96) .95904
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P( A B )
P ( B A)
1
1
P( A)
Applying the law of total
P( A B ) probability to the denominator
1
P( A B ) i
Applying the definition of
P( A B ) P( B ) conditional probability throughout
1 1
P( A B ) P( B )
i i
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P( H A)
P( H A)
P( A)
P( H A)
P( H A) P( M A) P( L A)
P( A H ) P( H )
P ( A H ) P ( H ) P ( A M ) P ( M ) P ( A L) P ( L)
( 0.70)( 0.30)
( 0.70)( 0.30) ( 0.40)( 0.50) ( 0.20)( 0.20)
0.21 0.21
0.21 0.20 0.04 0.45
0.467
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P ( A H ) 0.30
P ( H ) 0.30 P ( A H ) ( 0.30)( 0.30) 0.09
P ( M ) 0.50
$ Appreciates
0.21 0.2 0.04 0.45
$Depreciates
0.09 0.3 0.16 0.55
Marginal probabilities are the row totals and the column totals.
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