LECTURE 4

INTRODUCTION TO
PROBABILITY
 Introduction to Probability
• Experiments, Counting Rules, and
Assigning Probabilities
• Events and Their Probabilities
• Some Basic Relationships of Probability
• Conditional Probability

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Introduction to Probability
• ”Many situations are not deterministic (when all values
are known exactly) but stochastic (when there is
uncertainty).
• Probabilities are a way of measuring this uncertainty”
(Waters, p. 431)
• We refer to the probability of an event occurring
• Examples:
• probability of a defective item being produced on a machine
• probability of winning the lottery
• probability of winning a contract
Uncertainties
Managers often base their decisions on an analysis of
uncertainties such as the following:

• What are the chances that sales will decrease if

we increase prices?
• What is the likelihood a new assembly method
will increase productivity?
• What are the odds that a new investment will be
profitable?

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Probability
• Probability is a numerical measure of the likelihood that
an event will occur.
• The Probability that an event will occur is expressed as:
pr(Event)
• Probability values are always assigned on a scale from 0
to 1.

 A probability near zero indicates an event is quite

unlikely to occur.
 A probability near one indicates an event is almost
certain to occur.
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Probability as a Numerical Measure
of the Likelihood of Occurrence

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Statistical Experiments
• In statistics, the notion of an experiment differs
somewhat from that of an experiment in the
physical sciences.

• In statistical experiments, probability determines

outcomes.

• Even though the experiment is repeated in exactly

the same way, an entirely different outcome may
occur.

• For this reason, statistical experiments are

sometimes called random experiments.
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An Experiment and Its Sample
Space, Part 1
• An experiment is any process that
generates well-defined outcomes.
• The sample space for an experiment is the
set of all experimental outcomes.
• An experimental outcome is also called a
sample point.

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An Experiment and Its Sample Space, Part 2

Experiment Experiment Outcomes

Toss a coin Head, tail
Inspection a part Defective, non-
defective
Conduct a sales call Purchase, no purchase
Roll a die 1, 2, 3, 4, 5, 6
Play a football game Win, lose, tie

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Simple example – Prize draw
• A magazine advertises a prize draw with:
• 1 first prize
• 5 second prizes
• 100 third prizes
• 1000 fourth prizes

• The prizes are drawn at random and after each draw the
winning ticket is returned to the draw.

• By the closing date there are 10,000 entries.

Prize draw questions (1) 1 first prize
5 second prizes
100 third prizes
1000 fourth prizes
1.What is the probability that a given ticket will
win first prize?
Pr (First Prize) = = 0.0001

2. What is the probability that a given ticket

will win second prize?
Pr (Second prize) = = 0.0005
Prize draw questions (2)

3. What is the probability that a given ticket will any prize?

1 first prize
5 second prizes
100 third prizes
Pr (any prize) = = 0.1106 1000 fourth
prizes

4. What is the probability a given ticket will not win any prize?

Pr (did not win any prize) = = 0.8894

Office Example

An office has the following types of employee:

Female Male
Administrative 25 15

Operational 35 25

One person from the office is selected at random,

Office example questions (1)

What is the probability that the person

selected is: F M
Administrative 25 15
1. A male administrator? Operational 35 25

Pr (male administrator) = = 0.15

2. A female operator?

Pr (female operator) = = 0.35

Office example questions (2)
F M
Administrative 25 15
Operational 35 25

What is the probability that the person selected is:

1. Male?
Pr (male) = = 0.4

2. An operator?

Pr (operator) = = 0.6
An Experiment and Its Sample Space
• An experiment is any process that generates well-defined
outcomes.

• The sample space for an experiment is the set of all

experimental outcomes.

• An experimental outcome is also called a sample point.

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Assigning Probabilities, Part 1
 Basic Requirements for Assigning Probabilities
1. The probability assigned to each experimental
outcome must be between 0 and 1, inclusively.

0 < P(Ei) < 1 for all i

where: Ei is the ith experimental outcome

P(Ei) is its probability

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Assigning Probabilities, Part 2
 Basic Requirements for Assigning Probabilities
2. The sum of the probabilities for all
experimental outcomes must equal 1.

P(E1) + P(E2) + . . . + P(En) = 1

where: n is the number of experimental outcomes

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Assigning Probabilities, Part 3
• Classical Method
Assigning probabilities based on the
assumption of equally likely outcomes.
• Relative Frequency Method
Assigning probabilities based on
experimentation or historical data.
• Subjective Method
Assigning probabilities based on judgment.
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Classical Method
Example: Rolling a Die
If an experiment has n possible outcomes, the classical
method would assign a probability of 1/n to each
outcome.

Experiment: Rolling a die

Sample Space: S = {1, 2, 3, 4, 5, 6}

Probabilities: Each sample point has a 1/6 chance of
occurring
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Relative Frequency Method, Part 1
Example: Waiting time in the X-ray department for a local
hospital
Consider a study of waiting times in the X-ray department for
a local hospital. A clerk recorded the number of patients
waiting for service at 9:00 A.M on 20 successive days and
obtained the following results:
Number waiting Number of days outcome
occurred
0 2
1 5
2 6
3 4
4 3
Total 20 21
Relative Frequency Method, Part 2
Example: Waiting time in the X-ray department for a
local hospital
Each probability assignment is given by dividing the
frequency (number of days) by the total frequency
(total number of days).
Number waiting Number of days Probability
outcome occurred
0 2 2/20 = 0.1
1 5 0.25
2 6 0.30
3 4 0.20
4 3 0.15
Total 20 1.00

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Subjective Method, Part 1
• When economic conditions or a company’s circumstances
change rapidly it might be inappropriate to assign
probabilities based solely on historical data.

• We can use any data available as well as our experience

and intuition, but ultimately a probability value should
express our degree of belief that the experimental outcome
will occur.

• The best probability estimates often are obtained by

combining the estimates from the classical or relative
frequency approach with the subjective estimate.
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Subjective Method, Part 2
Example:
Tom and Judy make an offer to purchase a house.

Possible outcomes: E1 = offer is accepted

E2 = offer is rejected
Judy’s Probability estimates
P(E1) = 0.8
P(E2) = 0.2
Tom’s probability estimates
P(E1) = 0.6
P(E2) = 0.4

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Subjective Method, Part 3

Example:
The assigned probabilities satisfy the two basic
requirements.

The different probability estimates emphasize

the personal nature of the subjective method.

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Events and Their Probabilities
• An event is a collection of sample points.
• The probability of any event is equal to the sum of the
probabilities of the sample points in the event.
• If we can identify all the sample points of an experiment
and assign a probability to each, we can compute the
probability of an event.

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Independent events
TWO EVENTS ARE INDEPENDENT IF:-

The outcome of one does not affect the

outcome of the other.
e.g. rolling two dice.
Mutually Exclusive Events
TWO EVENTS ARE MUTUALLY EXCLUSIVE IF:-

One event happens then the other one

can’t.
e.g. a coin can’t land heads and tails at the
same time.
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 Some Basic
Relationships of
Probability

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Some Basic Relationships of
Probability
There are some basic probability relationships that can be
used to compute the probability of an event without
knowledge of all the sample point probabilities.

• Complement of an Event

• Union of Two Events

• Intersection of Two Events

• Mutually Exclusive Events

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Complement of an Event
• The complement of event A is defined to be the
event consisting of all sample points that are not in
A.
• The complement of A is denoted by Ac.
• P(A) + P(Ac ) = 1
• Complement of event A is shaded.

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Union of Two Events
• The union of events A and B is the event containing
all sample points that are in A or B or both.
• The union of events A and B is denoted by A  B.

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Intersection of Two Events
• The intersection of events A and B is the set of all
sample points that are in both A and B.
• The intersection of events A and B is denoted by
A  B.

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Addition Law, Part 1
• The addition law provides a way to compute the
probability of event A, or B, or both A and B
occurring.
• The law is written as:

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Addition Law, Part 2
Example
A small assembly plant with 50 employees is carrying
out performance evaluation. Each worker is expected
to complete work assignments on time and in such a
way that the assembled product will pass a final
inspection. The results were as follows:
Result Number of Relative Frequency
Employees
Late completion of work 5 5/50 = 0.1
Assembled a defective work 6 0.12
Completed work late and 2 0.04
assembled defective work

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Addition Law, Part 3
Example

Event L = the event that the work is completed late

Event D = the event that the assembled product is

defective

The production manager decided to assign poor

performance rating to any employee whose work is
either late or defective.

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Addition Law, Part 4
L  D = Event that the production manager assigned
an employee a poor performance rating

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Mutually Exclusive Events, Part 1
• Two events are said to be mutually exclusive if the
events have no sample points in common.
• Two events are mutually exclusive if, when one
event occurs, the other cannot occur.

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Mutually Exclusive Events, Part 2

The probabilities are added

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Addition Rule – Example 1
• From a pack of 52 cards, 1 is selected. What is the
probability that it is either the King of Spades OR
the Queen of Hearts?

pr(King S) OR pr(Queen H)

OR 1 1 2 1
  
52 52 52 26
Addition Rule – Example 2
• A company makes 40,000 washing machines a year.
• Of these,
• 10,000 are for the home market
• 8,000 are exported to North America
• 7,000 to Europe
• 5,000 to South America
• 4,000 to the Far East
• 3000 to Australia
• 3000 to other markets
Washing machines – questions

1. Pr (machine is sold to the home 10,000 - Home Market

market)? 8,000 - N America
7,000 - Europe
2. Pr (machine is exported)? 5,000 - S America
4,000 - Far East
3. Pr(machine is exported to either 3000 - Australia
3000 - Other Markets
North or South America)?
4. Pr(machine is sold either to the
home market or Europe)?
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Conditional Probability, Part 1
If 2 events are NOT independent, then:

• The probability of an event given that another event

has occurred is called a conditional probability.
• The conditional probability of A given B is denoted
by P(A|B).
• A conditional probability is computed as follows

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Conditional Probability, Part 2
Example: Promotion status of police officers over
the past two years

Empty Cell Men Women Total

Promoted 288 36 324
Not 672 204 876
Promoted
Total 960 240 1200

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Conditional Probability, Part 3
Example: Promotion status of police officers over
the past two years

Empty Cell Probability

Men (M) Table (W)
Women Total
Promoted (A) 288/1200 = 0.03 0.27
0.24
Not Promoted 0.56 0.17 0.73
(Ac )
Total 0.80 0.20 1.00

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Conditional Probability, Part 4
Example: Promotion status of police officers over
the past two years
Event A = An officer is promoted
Event M = The promoted officer is a man
P = An officer is promoted given that the officer
is a man
From the table we know:

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 Conditional Probabilities -
Example
Students in a class can be classified as follows:

Home Overseas
Male 66 29
Female 102 3

1. What is the probability that a student selected at random is from

overseas?
2.If a student selected at random is female, what is the probability
that she is from overseas?
3. If a student selected at random is male, what is the probability
that he is from overseas?
Students – questions (2)

Pr(overseas/male) = ?
If a student selected at random is male, what is the probability that he is from overseas?

Pr (overseas/male) =

Pr(a AND b) = Pr (b) * Pr (a/b)  Pr (a/b) =

Pr (overseas/male) = = divided by = * = = 0.305

Multiplication Law
• The multiplication law provides a way to compute
the probability of the intersection of two events.
• The law is written as:

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 Example of Multiplication Rule
From a pack of 52 cards, 2 are selected. What is the probability that the first is
the King of Spades AND the second is the Queen of Hearts?

pr(KingS) AND pr(QueenH)

AND

1 1 1
* 
52 51 2652
Independent Events
• If the probability of event A is not changed by the
existence of event B, we would say that events A
and B are independent.

• Two events A and B are independent if:

P(A|B) = P(A)
or
P(B|A) = P(B)

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Multiplication Law for
Independent Events, Part 1
• The multiplication law also can be used as a test to
see if two events are independent.
• The law is written as:

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Multiplication Law for
Independent Events, Part 2
Example : Use of credit card for purchase of gasoline

From past experience it is known 80% of customers

use credit card for the purchase of gasoline. The
service station manager wants to determine the
probability that the next two customers purchasing
gasoline will each use a credit card.

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Multiplication Law for
Independent Events, Part 3
Example : Use of credit card for purchase of gasoline

Event A: First customer uses a credit card

Event B: The second customer uses a credit card

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 Another example of
multiplication rule
• A workshop combines 2 parts, X and Y, into a final
assembly.
• This is tested an average of 10% of X are defective and
5% of Y are defective.
• X and Y are independent.

• Pr (X is defective) = ?
• Pr (X is defective) = 0.1
• Pr (Y is defective) = ?
• Pr (Y is defective) = 0.05
Another example
of multiplication rule
1. What is the probability that a final
assembly has both X and Y defective?

• Pr (X and Y defective) =
• Pr (X defective AND Y defective) =
• Pr(X defective) * Pr (Y defective) =
• 0.1 * 0.05 = 0.005
Pr (X defective) = 0.1
Pr (Y defective) = 0.05
Another example
of multiplication rule
2. What is the probability that a final assembly has X
defective and Y NOT defective?

• Pr (X defective AND Y not defective) =

• Pr(X defective) * Pr (Y NOT defective) =
• 0.1 * 0.95 = 0.095
3. What is the probability that X is NOT defective
AND Y is defective)?
4. What is the probability that X is NOT defective
AND Y is NOT defective)?
Mutual Exclusiveness and
Independence
• Do not confuse the notion of mutually exclusive
events with that of independent events.
• Two events with nonzero probabilities cannot be
both mutually exclusive and independent.
• If one mutually exclusive event is known to occur,
the other cannot occur; thus, the probability of the
other event occurring is reduced to zero (and they
are therefore dependent).
• Two events that are not mutually exclusive, might
or might not be independent.
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