DATA ANALYTICS IN BUSINESS

Basic Concept of Probability

Dr. Uka Wikarya

FAKULTAS EKONOMI DAN BISNIS

UNIVERSITAS INDONESIA
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 Outline of Lecture
Probability Concept and application
1. Basic concept of Probability
2. Introduction to Clustering Methods

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 Probability Concept and application

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Events, Sample Spaces, and
Probability
 Experiments & Sample Spaces
1. Experiment
 Process of obtaining an observation, outcome or simple
event
2. Sample point Sample Space
Depends on
 Most basic outcome of an Experimenter!
experiment
3. Sample space (S)
 Collection of all possible outcomes
 Sample Space Properties
1. Mutually Exclusive
Experiment: Observe Gender
2 outcomes can not occur
at the same time
— Male & Female in
same person
2. Collectively Exhaustive
One outcome in sample
space must occur.
— Male or Female

© 1984-1994 T/Maker Co.

 Sample Space Examples

Experiment Sample Space

 Toss a Coin, Note Face {Head, Tail}
 Toss 2 Coins, Note Faces {HH, HT, TH, TT}
 Select 1 Card, Note Kind {2♥, 2♠, ..., A♦} (52)
 Select 1 Card, Note Color {Red, Black}
 Play a Football Game {Win, Lose, Tie}
 Inspect a Part, Note Quality {Defective, Good}
 Observe Gender {Male, Female}
 Event Examples
Experiment: Toss 2 Coins. Note Faces.
Sample Space: HH, HT, TH, TT
Event Outcomes in Event
 1 Head & 1 Tail HT, TH
 Head on 1st Coin HH, HT
 At Least 1 Head HH, HT, TH
 Heads on Both HH
 What is Probability?

1. Numerical measure of the

likelihood that event will 1 Certain
cccur
 P(Event)

 P(A)

 Prob(A)
.5

2. Lies between 0 & 1

3. Sum of sample points is 1
0 Impossible
Compound Events

Compound
Events

A or B A and B Not A A given B

Union Intersection Complement Conditional

(A  B) (A  B) Ac (A|B)
 Compound Event Probability
P( A  B) = P(A) + P(B) – P(A  B)
P( A  B ) = P(A) + P(B) – P( A  B)
P(A) = P(A  B) + P(A  BC)
P(B) = P(B  A) + P(B  AC)
P(AC) = 1- P(A)
Calculating compound probability is easier by using
two–way table: Two variables only
 Complementary Events
Complement of Event A
 The event that A does not occur

 All events not in A: AC

 P(A) + P(AC) = 1

AC
A

S
 Conditional Probability
1. Event probability given that another event
occurred
2. Revise original sample space to account for
new information
 Eliminates certain outcomes

3. P(A | B) = P(A and B) = P(A  B)

P(B) P(B)
Conditional Probability Using Venn
Diagram
Black ‘Happens’:
Eliminates All
Ace Black Other Outcomes

Black
S (S)

Event (Ace  Black)

 Event Probability Using
Two–Way Table

Event
Event B1 B2 Total
A1 P(A 1  B1) P(A1  B2) P(A1)
A2 P(A 2  B1) P(A2  B2) P(A2)
Total P(B1) P(B2) 1

Joint Probability Marginal (Simple) Probability

Conditional Probability Using Two–Way Table

Experiment: Draw 1 Card. Note Kind, Color

& Suit.
Color
Type Red Black Total Revised
Sample
Ace 2 2 4 Space
Non-Ace 24 24 48
Total 26 26 52
P(Ace  Black) 2 / 52 2
P(Ace | Black) =  
P(Black) 26 / 52 26
 Statistical Independence

1. Event occurrence does not

affect probability of another
event
 Toss 1 coin twice

2. Causality not implied

3. Tests for independence
 P(A | B) = P(A)

 P(A  B) = P(A)*P(B)
 Thinking Challenge
C D
What’s the Probability? A 0,40 0,20 0,60

1. P(A) = B 0,10

0,50
0,30

0,50
0,40

1,00

2. P(D) =
Event
3. P(C  B) =
Event C D Total
4. P(A  D) = A 4 2 6
5. P(B  D) = B 1 3 4
Total 5 5 10
 Solution*
The Probabilities Are:
1. P(A) = 6/10
2. P(D) = 5/10
Event
3. P(C  B) = 1/10
Event C D Total
4. P(A  D) = 9/10 A 4 2 6
5. P(B  D) = 3/10 B 1 3 4
Total 5 5 10
 D P N
A
Ac

P(A)= 6/50 =12%

P(Ac)= 1- P(A) = 1 -12% =88%
P(N)= 15/50=0.30
P(A|N)= 1/15 =
P(A|D)=3/20 =
P(P|A) = 2/6
P(Ac  N) = 14/50

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 The End….
Thank You

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