Chapter 5

A Survey of
Probability Concepts
Learning Outcomes
• Define probability.
• Describe the classical,
empirical, and subjective
approaches to probability.
• Explain the terms experiment,
event, outcome, permutations,
and combinations.
Learning Outcomes
• Define the terms conditional
probability and joint probability.
• Calculate probabilities using
the rules of addition and rules
of multiplication.
Learning Outcomes
• Apply a tree diagram to
organize and compute
probabilities.
• Calculate a probability using
Bayes’ theorem.
Probability
A value between zero and one,
inclusive, describing the relative
possibility (chance or likelihood)
an event will occur.
Experiment, Outcome and Event
• An experiment is a process
that leads to the occurrence of
one and only one of several
possible observations.
• An outcome is the particular
result of an experiment.
• An event is the collection of
one or more outcomes of an
experiment.
Mutually Exclusive Events and
Collectively Exhaustive Events
• Events are mutually exclusive
if the occurrence of any one
event means that none of the
others can occur at the same
time.
• Events are independent if the
occurrence of one event does
not affect the occurrence of
another.
• Events are collectively
exhaustive if at least one of
the events must occur when
an experiment is conducted.
• Events are collectively
exhaustive if at least one of
the events must occur when
an experiment is conducted.
Ways of Assigning Probability
There are three ways of
assigning probability:
Classical Probability
• Based on the assumption that
the outcomes of an
experiment are equally likely.
Empirical Probability
• The probability of an event
happening is the fraction of the
time similar events happened
in the past.
Subjective concept of probability
• The likelihood (probability) of a
particular event happening
that is assigned by an
individual based on whatever
information is available.
Classical Probability
Probability of an event =
No.of favorable outcomes
Total No.of possible outcomes
Consider an experiment of rolling
a six-sided die. What is the
probability of the event “an even
number of spots appear face
up”?
The possible outcomes are:
There are three “favorable”
outcomes (a two, a four, and a
six) in the collection of six
equally likely possible outcomes.
Empirical Probability
The probability of an event
happening is the fraction of the
time similar events happened in
the past.
The empirical approach to
probability is based on what is
called the law of large numbers.
The key to establishing
probabilities empirically is that
more observations will provide a
more accurate estimate of the
probability.
Law of Large Numbers
Over a large number of trials the
empirical probability of an event
will approach its true probability.
Empirical Probability - Example
On February 1, 2003, the Space
Shuttle Columbia exploded. This
was the second disaster in 113
space missions for NASA. On
the basis of this information,
what is the probability that a
future mission is successfully
completed?
Probability of successful flight

No.of successful flights

111
= = 0.98
113
Subjective Concept Of
Probability
The likelihood (probability) of a
particular event happening that
is assigned by an individual
based on whatever information is
available.
Example
• If there is little or no past
experience or information on
which to base a probability, it
may be arrived at subjectively.
• Illustrations of subjective
probability are:
1. Estimating the likelihood the
New England Patriots will
play in the Super Bowl next
year.
2. Estimating the likelihood
you will be married before
the age of 30.
3. Estimating the likelihood the
U.S. budget deficit will be
reduced by half in the next
10 years.
Summary of Types of Probability
Rules for computing probabilities
Rules of Addition
• Special Rule of Addition - If
two events A and B are
mutually exclusive, the
probability of one or the other
event’s occurring equals the
sum of their probabilities.
P(A or B) = P(A) + P(B)
• The General Rule of Addition -
If A and B are two events that
are not mutually exclusive,
then P(A or B) is given by the
following formula:
P(A or B)
= P(A) + P(B) - P(A and B)
Addition Rule – Mutually
Exclusive Events Example
An automatic Shaw machine fills
plastic bags with a mixture of
beans, broccoli, and other
vegetables.
Most of the bags contain the
correct weight, but because of
the variation in the size of the
beans and other vegetables, a
package might be underweight
or overweight. A check of 4,000
packages filled in the past month
revealed:
What is the probability that a
particular package will be either
underweight or overweight?
Solution:
P(A or C) = P(A) + P(C)
= 0.025 + 0.075
= 0.10
Addition Rule – Not Mutually
Exclusive Events Example
What is the probability that a
card chosen at random from a
standard deck of cards will be
either a king or a heart?
P(A or B)
= P(A) + P(B) - P(A and B)
= 4/52 + 13/52 - 1/52
= 16/52, or 0.3077
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.
P(A) + P(~A) = 1
or
P(A) = 1 - P(~A).
Example
An automatic Shaw machine fills
plastic bags with a mixture of
beans, broccoli, and other
vegetables.
Most of the bags contain the
correct weight, but because of
the variation in the size of the
beans and other vegetables, a
package might be underweight
or overweight. Use the
complement rule to show the
probability of a satisfactory bag
is 0.900
Solution
P(B) = 1 - P(~B)
= 1 – P(A or C)
= 1 – [P(A) + P(C)]
= 1 – [.025 + .075]
= 1 - .10
= .90
The General Rule of Addition
P(A or B)
= P(A) + P(B) – P(A and B)
The Venn Diagram shows the
result of a survey of 200 tourists
who visited Florida during the
year.
The survey revealed that 120
went to Disney World, 100 went
to Busch Gardens and 60 visited
both.
What is the probability a selected
person visited either Disney
World or Busch Gardens?
Solution
P(Disney or Busch)
= P(Disney) + P(Busch) –
P(both Disney and Busch)
= 120/200 + 100/200 – 60/200
= .60 + .50 – .80
Joint Probability – Venn Diagram
A probability that measures the
likelihood two or more events will
happen concurrently.
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.
• This rule is written:
P(A and B) = P(A)P(B)
Example
A survey by the American
Automobile association (AAA)
revealed 60 percent of its
members made airline
reservations last year. Two
members are selected at
random.
Since the number of AAA
members is very large, we can
assume that R1 and R2 are
independent.
What is the probability both
made airline reservations last
year?
Solution
• The probability the first
member made an airline
reservation last year is .60,
written as P(R1) = .60
• The probability that the second
member selected made a
reservation is also .60, so
P(R2) = .60.
• Since the number of AAA
members is very large, you
may assume that R1 and R2
are independent.
P(R1 and R2) = P(R1) P(R2)
= (.60) (.60)
= .36
Conditional Probability
• A conditional probability is the
probability of a particular event
occurring, given that another
event has occurred.
• The probability of the event A
given that the event B has
occurred is written P(A|B).
General Multiplication Rule
The general rule of multiplication
is used to find the joint
probability that two independent
events will occur.
It states that for two independent
events, A and B, the joint
probability that both events will
happen is found by multiplying
the probability that event A will
happen by the conditional
probability of event B occurring
given that A has occurred.
P(A and B) = P(A)P(B|A)
Example
A golfer has 12 golf shirts in his
closet. Suppose 9 of these shirts
are white and the others blue.
He gets dressed in the dark, so
he just grabs a shirt and puts it
on. He plays golf two days in a
row and does not do laundry.
What is the likelihood both shirts
selected are white?
Solution
• The event that the first shirt
selected is white is W1. The
probability is P(W 1) = 9/12
• The event that the second
shirt (W2 )selected is also
white. The conditional
probability that the second
shirt selected is white, given
that the first shirt selected is
also white, is
P(W 2 | W 1) = 8/11
• To determine the probability of
2 white shirts being selected
we use formula:
P(AB) = P(A) P(B|A)
P(W 1 and W 2)
= P(W 1)P(W2 |W 1)
= (9/12)(8/11)
= 0.55
Contingency Tables
A CONTINGENCY TABLE is a
table used to classify sample
observations according to two or
more identifiable characteristics.
E.g. A survey of 150 adults
classified each as to gender and
the number of movies attended
last month. Each respondent is
classified according to two
criteria – the number of movies
attended and gender.
Contingency Tables - Example
A sample of executives were
surveyed about their loyalty to
their company.
One of the questions was, “If you
were given an offer by another
company equal to or slightly
better than your present position,
would you remain with the
company or take the other
position?”
The responses of the 200
executives in the survey were
cross-classified with their length
of service with the company.
What is the probability of
randomly selecting an executive
who is loyal to the company
(would remain) and who has
more than 10 years of service?
Tree Diagrams
A tree diagram is useful for
portraying conditional and joint
probabilities. It is particularly
useful for analyzing business
decisions involving several
stages.
A tree diagram is a graph that is
helpful in organizing calculations
that involve several stages. Each
segment in the tree is one stage
of the problem. The branches of
a tree diagram are weighted by
probabilities.
Bayes’ Theorem
• Bayes’ Theorem is a method
for revising a probability given
additional information.
• It is computed using the
following formula:
𝑃 𝐴𝑖 |𝐵
𝑃 𝐴𝑖 𝑃 𝐵|𝐴𝑖
=
𝑃 𝐴1 𝑃 𝐵|𝐴1 +𝑃 𝐴2 𝑃 𝐵|𝐴2
Bayes Theorem - Example
A manufacturer of DVD players
purchases a particular microchip,
called the LS-24, from three
suppliers: Hall Electronics,
Schuller Sales, and Crawford
Com- ponents.
Thirty percent of the LS-24 chips
are purchased from Hall
Electronics, 20 percent from
Schuller Sales, and the
remaining 50 percent from
Crawford Com- ponents.
The manufacturer has extensive
histories on the three suppliers
and knows that 3 percent of the
LS-24 chips from Hall Electronics
are defective, 5 percent of chips
from Schuller Sales are defective,
and 4 percent of the chips
purchased from Crawford
Components are defective.
When the LS-24 chips arrive at
the manufacturer, they are
placed directly in a bin and not
inspected or otherwise identified
by supplier. A worker selects a
chip for installation in a DVD
player and finds it defective.
What is the probability that it was
manufactured by Schuller Sales?
There are three mutually
exclusive and collectively
exhaustive events, that is, three
suppliers.
A1 The LS-24 was purchased
from Hall Electronics.
A2 The LS-24 was purchased
from Schuller Sales.
A3 The LS-24 was purchased
from Crawford Components.
The prior probabilities are:
P(A1) = .30 The probability the
LS-24 was manufactured by
Hall Electronics.
P(A2) = .20 The probability the
LS-24 was manufactured by
Schuller Sales.
P(A3) = .50 The probability the
LS-24 was manufactured by
Crawford Components.
The additional information can
be either:
B1 The LS-24 appears
defective,
or
B2 The LS-24 appears not to
be defective.
The following conditional
probabilities are given.
P(B1|A1) = .03 The probability
that an LS-24 chip produced
by Hall Electronics is defective.
P(B1|A2) = .05 The probability
that an LS-24 chip produced
by Schuller Sales is defective.
P(B1|A3) = .04 The probability
that an LS-24 chip produced
by Crawford Components is
defective.
A chip is selected from the bin.
Because the chips are not
identified by supplier, we are not
certain which supplier
manufactured the chip. We want
to deter- mine the probability that
the defective chip was purchased
from Schuller Sales. The
probability is written P(A2|B1).
The probability the defective LS-
24 chip came from Schuller
Sales can be formally found by
using Bayes' theorem. We
compute P(A2|B1), where A2
refers to Schuller Sales and B1,
to the fact that the selected LS-
24 chip was defective.
𝑃 𝐴2 |𝐵1 =
𝑃 𝐴2 𝑃(𝐵1|𝐴2 )
𝑃 𝐴1 𝑃 𝐵1 𝐴1 +𝑃 𝐴2 𝑃 𝐵1 𝐴2 +𝑃 𝐴3 𝑃 𝐵1 𝐴3

.20 .05
= .30 .03 + .20 .05 + .50 .04
.010
= = .2564
.039
Counting Rules – Multiplication
The multiplication formula
indicates that if there are m ways
of doing one thing and n ways of
doing another thing, there are m
x n ways of doing both.
Example:
Dr. Delong has 10 shirts and 8
ties. How many shirt and tie
outfits does he have?
Solution:
(10)(8) = 80
Counting Rules – Multiplication:
Example
An automobile dealer wants to
advertise that for $29,999 you
can buy a convertible, a two door
sedan, or a four-door model with
your choice of either wire wheel
covers or solid wheel covers.
How many different
arrangements of models and
wheel covers can the dealer
offer?
Multiplication Formula:
Total no. of arrangements =
(m)(n)
We can employ the multiplication
formula as a check (where m is
the number of models and n the
wheel cover type). From formula
(5-8):
Total possible arrangements
= (m)(n)
= (3)(2)
=6
Counting Rules - Permutation
A permutation is any
arrangement of r objects
selected from n possible objects.
The order of arrangement is
important in permutations.
Permutation Formula:
𝑛!
𝑛𝑃𝑟 =𝑛−𝑟 !
where:
• n is the total number of
objects.
• r is the number of objects
selected.
Counting - Combination
A combination is the number of
ways to choose r objects from a
group of n objects without regard
to order.
Combination Formula:
𝑛!
𝑛𝐶𝑟 = 𝑟! 𝑛−𝑟 !
where:
• n is the total number of
objects.
• r is the number of objects
selected.
Combination and Permutation
Examples
Combination Example
There are 12 players on the
Carolina Forest High School
basketball team. Coach
Thompson must pick five players
among the twelve on the team to
comprise the starting lineup.
How many different groups are
possible?

12!
12𝐶5 = = 792
5! 12−5 !
Permutation Example
Suppose that in addition to
selecting the group, he must also
rank each of the players in that
starting lineup according to their
ability.
12!
12𝑃5 = = 95040
12−5 !