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The word probability is commonly used in our day-to-day conversation and we generally use this word even without going into the details of its actual meaning. Probability is a branch of mathematics that deals with calculating the likelihood of a given event's occurrence, which is expressed as a number between 1 and 0. The concept of probability originated in the beginning of eighteenth century in problems pertaining to games of chance such as throwing a die, tossing a coin, drawing a card from a pack of cards etc. Starting with games of chance, probability today has become one of the basic tools of Statistics and has wide range of applications in Science and Engineering. Probability theory had its start in the 17th century, when two French mathematicians, Blaise Pascal and Pierre de Fermat carried on a correspondence discussing mathematical problems dealing with games of chance. Contemporary applications of probability theory run the gamut of human inquiry, and include aspects of computer programming, astrophysics, music, weather prediction, and medicine. In the theory of probability we deal with events which are outcomes of an experiment. The word Experiment means an operation which can produce some well defined outcome(s): there are two types of experiments. i. ii. Deterministic and Random or probabilistic

Deterministic experiments are those experiments which when repeated

under identical conditions produce the same result or outcome. When experiments in science and engineering are repeated under identical conditions, we obtain almost the same result every time.

If an experiment, when repeated under identical conditions, do not produce the same outcome every time but the outcome in a trial is one of the several possible outcomes, then it is known as Random or Probabilistic experiments.

Probability is the numerical value of an uncertainty. Probability theory is also associated with the study of randomness and risk. It is a technique that reduces the risk associated with decision-making. It is believed to be the oldest branch of mathematics. Historically, the knowledge of probability has been associated with gambling. In the modern times, the theory of probability is widely used in almost all spheres of life, i.e., medicine, engineering, production, human behaviour, finance, stock market, inventory management, insurance, elections, politics, weather, and so on. The theory of probability lays the foundation stone of inferential statistics.

Concept of uncertainty
Consider the following experiment. A person X tosses a coin and Y also tosses a similar coin simultaneously and observes the result. It is uncertain to say: i. ii. iii. Whether both heads come up or Both tails come up or One head and one tail come up.

The situation of uncertainty can also be observed by considering two sets A and B in three different situations as shown in the given diagram.

i .

ii .

iii. 2

In situation (i) and (ii), it is certain that x belongs to A which implies x does not belongs to B; x belongs to A which implies x belongs to B, respectively; while in situation (iii) if x belongs to A we cannot say whether the element x belongs to B or x does not belongs to B, which is the situation of uncertainty. Before giving a formal definition of probability, it is necessary to introduce the concepts of probability, sample space and events.

Rules of counting
For calculating probability of any event, the knowledge of the rules of counting is essential. To understand the rules of counting let us assume that activity N can be done in n ways and activity M can be done in m ways, thus, total numbers of ways in which activities N and M can be done are nm. This is known as the rule of multiplication.

An arrangement of r elements from n elements is called permutation. It is denoted as n Pr. In permutation, the order of arrangement is important. An arrangement is called a Permutation. It is the rearrangement of objects or symbols into distinguishable sequences. When we set things in order, we say we have made an arrangement. When we change the order, we say we have changed the arrangement. So each of the arrangement that can be made by taking some or all of a number of things is known as Permutation. Formula for calculating permutation,


=n (n-1) (n-2)..... (n -r+1). Where, n, r are non negative integers and r<=n. r is the size of each permutation.

n is the size of the set from which elements are permuted. ! is the factorial operator. There are basically two types of permutation: 1. Repetition is Allowed. 2. No Repetition.

The concept of combination is widely applied to solve problems of probability. A Combination is a selection of some or all of a number of different objects. It is an un-ordered collection of unique sizes. In a permutation the order of occurrence of the objects or the arrangement is important but in combination the order of occurrence of the objects is not important. If r items are chosen out of n items, the number of combinations found by the following formula:

where, n, r are non negative integers and r<=n. r is the size of each combination. n is the size of the set from which elements are combined. ! is the factorial operator.

In combination, the order of arrangement is not relevant. There are also two types of combinations: 1. Repetition is Allowed: such as coins in your pocket (5,5,5,10,10) 2. No Repetition: such as lottery numbers (2,14,15,27,30,33)

Concept of probability
In our daily life, we often come across sentences like: i. ii. It is impossible that he may refuse to do my work. Probability, it will rain tomorrow.

Here, in sentence (i), we observe that the probability of doing work is unity and, therefore, probability of refusing to do work will be zero. Consequently, in sentence (ii) the probability of raining lies between zero and unity.

We can compute the probability of a one or a six using the formula:

Random experiment
Random experiment is an unbiased procedure of finding out some outcome. It is impossible to foresee outcomes of an experiment. A Random
Experiment is an experiment, trial, or observation that can be repeated numerous times under the same conditions. The outcome of an individual random experiment must be independent and identically distributed. It must in no way be affected by any previous outcome and cannot be predicted with certainty.

Examples of a Random experiment include:

The tossing of a coin. The experiment can yield two possible outcomes, heads or tails. The roll of a die. The experiment can yield six possible outcomes, this outcome is the number 1 to 6 as the die faces are labelled

The selection of a numbered ball (1-50) in an urn. The experiment can yield 50 possible outcomes. Percentage of calls dropped due to errors over a particular time period. The experiment can yield several different outcomes in the region 0 - 100%. The time difference between two messages arriving at a message centre. This experiment can yield any number of possible outcomes. The time difference between two different voice calls over a particular network. This too can yield any number of possible outcomes.

Sample space
Definition: The set S= {e1, e2, e3......., en} is called a sample space of an experiment satisfying the following two conditions: i. ii. Each element of the set S denotes one of the possible outcomes. The outcome is one and only one element of the set S whenever the experiment is performed.

The sample space of an experiment is the set of all possible outcomes for that experiment. You may have noticed that for each of the experiments above, the sum of the probabilities of each outcome is 1. This is no coincidence. The sum of the probabilities of the distinct outcomes within a sample space is 1. The sample space for choosing a single card at random from a deck of 52 playing cards is shown below. There are 52 possible outcomes in this sample space.

Any subset of the sample space associated with outcomes is known as an event. Events can be divided into favourable and unfavourable events. Favourable events are those that we wish to occur but unfavourable events are those in which we are not interested.

For example, in rolling a die, if the player is interested in getting the

number 5; then, occurrence of 5 is a favourable event and occurrence of 1, 2,3,4,6 are unfavourable events.

Types of events
The different types of events in probability are as follows: i. ii. iii. iv. v. vi. Simple and compound events Mutually exclusive events Not mutually exclusive events Independent events Dependent events Mutually exclusive and exhaustive events


Simple events are those that occur in one way only. In the tossing of

two dice there are two specific events: (1, 1) and (6, 6) which give a sum 2 and 12 respectively. These sums cannot be obtained in any other manner. Such events are known as simple events.

Compound events are those that are obtained in more than one ways. For example, the sum 11 can be obtained in 2 ways (5, 6) or (6, 5);
such events are treated as compound events. Compound events are obtained by using the symbols of intersection [] or union [U].


When no outcome is common in two or more events they are said to be mutually exclusive events. In other words, when one event occurs, others do not occur. Mutually Exclusive means you can't get both events at the same time. It is either one or the other, but not both. Examples: i. Turning left or right are Mutually Exclusive (you can't do both at the same time) Heads and Tails are Mutually Exclusive Kings and Aces are Mutually Exclusive

ii. iii.

What isn't Mutually Exclusive? i. Kings and Hearts are not Mutually Exclusive, because you can have a King of Hearts!

Aces and Kings are Mutually Exclusive


If two or more events have some common elements, they are said to be not mutually exclusive events. For example, you may watch a TV programme and have your dinner simultaneously. These two events are not mutually exclusive to each other as watching a TV programme does not stop you from taking our dinner. Similarly, you may be a Chartered Accountant and a member of a gymnasium.

If two occurrences of events are not influenced by the occurrence/nonoccurrence of other events, such events are known as independent events. For example, if you toss a coin twice; the outcome of the second toss is not at all influenced by the outcome of the first toss, hence; the outcome of the second toss is an independent event.

Dependent events are such, occurrence of which are influenced by the occurrence of other event. For example, getting a job in a company is an independent event and getting free lunch in the companys canteen is a dependent event. Events without replacements are also known as dependent events. For example, if you draw two cards, one by one, from a pack of cards and the second card is drawn without putting back the first card, drawing the second card is a dependent event.


When all possible outcomes of a random trial are taken into consideration and all of them are mutually exclusive, they are termed as mutually exclusive and exhaustive events. All possible outcomes in the roll of a die: 1, 2,3,4,5 and 6 is an example of such events. Sum of the probabilities of mutually exclusive and exhaustive events is always 1.

The complement A' of an event A consists of all the outcomes not in the event A. Special result involving the probabilities of an event and its complement: P (A) + P (A') = 1 For example: For a throw of a die, A = {number less than 5} P (A) = = A' = {5 or 6} P (A') = =


Approaches to probability
Probabilities can be assigned in the following three ways. These three ways are known as the three approaches to probability.

Under classical approach the probability of an event is calculated (without actual observation) by dividing the favourable events by the total number of events. Simply, it is ratio of favourable events to total events. Through this approach we decide the probability of the event in a before the fact manner. This approach has been widely used in gambling. Symbolically: P (A) = Where P (A) = probability of an event A; m = favourable events; and n = total number of possible events. For example, the probability of getting an odd number in the toss of a die is .


Under this approach, probability of an event is calculated by finding the ratio of favourable frequency to total frequency (f/n). This approach is often applied in sales forecasting and insurance companies use this approach for fixing premiums. Symbolically: P (A) = im The classical and the relative frequency approaches suffer from some serious limitations. The concept of equally likely events has restrictive applications and more so in the field of business. Similarly, a very large n is still undefined.



Under axiomatic approach, probability is calculated by certain rules (axioms). There are three axioms of probability: i. ii. iii. 0 < P (A) < 1, which means probability of an event cannot be negative or more than 1. P (A1 U A2 U.....................U An) = P (A1) + P (A2) +..........+ P (An). This shows the sum of the probabilities of all mutually exclusive events. P (S) =1. Probability of all events of a sample space is 1.

In this approach we use the concepts of set theory and the probability of every event need not be necessarily equal. This approach is applied when observations of past data is not possible or even sometimes not desired rather we prefer to rely on our personal judgement. Since our personal judgement s is subjective, therefore, this approach is also known as Subjective Approach. This approach is widely used in managerial decision-making as most of the managerial decisions do not follow equi-probable pattern.


Laws of probability
The rule of addition applies to the following situation. We have two events, and we want to know the probability that either event occurs. For Mutually exclusive events P (A U B) = P (A) + P (B) P (A U B U C) = P (A) + P (B) + P (C)

Circles/ ovals in the Venn diagram indicate favourable events and remaining area shows unfavourable events. For Not Mutually exclusive events The probability that Event A or Event B occurs is equal to the probability that Event A occurs plus the probability that Event B occurs minus the probability that both Events A and B occur. P (A B) = P (A) + P (B) - P (A B)) Invoking the fact that P(A B) = P( A )P( B | A ), the Addition Rule can also be expressed as P(A B) = P(A) + P(B) - P(A)P( B | A )

S A AB B A 1 S Fig.1 C 4 3 2 B

Fig. 2


In fig. 2 1 stands for A C. 2 stand for B C. 3 stand for A B C. And 4 stand for A B. In the above Venn diagram intersection events refer to the joint probability of two events.



The rule of multiplication applies to the situation when we want to know the probability of the intersection of two events; that is, we want to know the probability that two events (Event A and Event B) both occur. For Independent events If A and B are independent events, then A, B, and C are independent if all the four conditions are satisfied P (A B C) = P (A). P (B). P(C) P (A B) = P (A). P (B) P (A C) = P (A). P (C) P (B C) = P (B). P (C) For dependent events The probability that Events A and B both occur is equal to the probability that Event A occurs times the probability that Event B occurs, given that A has occurred. P ( A B) = P (A). P (B|A) P ( A B C) = P (A). P (B|A). P (C|AB) P (B|A) is pronounced as probability of B such that A has happened. It means that occurrence of B is dependent on the occurrence of A. P (B|A) is also known as the CONDITIONAL PROBABILITY of B. Similarly P (C|A B) is also known as the conditional probability of C. The concept of conditional probability is often used in making diagnosis.



We have learned two important properties of probability:

The probability of an event ranges from 0 to 1. The sum of probabilities of all possible events equals 1.

The rule of subtraction follows directly from these properties. The probability that event A will occur is equal to 1 minus the probability that event A will not occur. P (A) = 1 P (A')

Suppose, for example, the probability that Bill will graduate from college is 0.80. What is the probability that Bill will not graduate from college? Based on the rule of subtraction, the probability that Bill will not graduate is 1.00 - 0.80 or 0.20.


For any n events E1, E2,..., En. P (E1 E2 E3 ... En) = P (E1).P (E2|E1).P (E3|E1E2). P (En|E1E2..En-1) If the events E1, E2,..., En are independent, then P(E1 E2 E3... En)= P(E1).P(E2)...P(En)


I. Joint probability

Joint probability is that probability which is common in two or more events. Joint probability is a measure of two events happening at the same time, and can only be applied to situations where more than one observation can be occurred at the same time. Notation for joint probability takes the form: P (XY) or P (X, Y) Which reads: The joint probability of X and Y. For example, a joint probability cannot be calculated when tossing a coin on the same flip. However, the joint probability can be calculated on the probability of rolling a 2 and a 5 using two different dice.



Marginal probability refers to sum of the probability of an individual attribute in case of joint probability distribution. To put it differently, it is the ratio of some subtotal to whole.


A probability tree diagram shows all the possible events. The first event is represented by a dot. From the dot, branches are drawn to represent all possible outcomes of the event. The probability of each outcome is written on its branch. Through probability tree, one can understand simple, joint and conditional probabilities easily. The following examples explain the concept of probability through decision tree.

Decision tree (probability tree) showing the outcomes of an unbiased coin.




Decision tree showing outcomes of two coins.

HH 0.5




T TH 0.5 TT




Thomas Baye (1702-1761) was the first mathematician who evolved the process of determining the posterior probability. In many real life situations we may have to revise original probability as new and additional information is available. This additional information is obtained from market surveys, laboratory tests etc. Before revision, the original probability is referred to as PRIOR PROBABILITY but after revision this is referred to as POSTERIOR PROBABILITY. Posterior probability is also known as conditional probability. Following is the Bayes Theorem: ( | ) = ( | )= ( ( ) )

). ( |

( ). ( | ) ( ( ). ( | )

). ( |

Where E1 , E 2, ... , En represent n mutually exclusive events with prior probabilities P(E1), P(E2),...,P(En). If an event A occurs, the posterior probabilities of Ei given A is the conditional probability. Thus, Bayes theorem is an extension of conditional probability. In this formula, Ei stands for a theory or hypothesis that we are interested in testing, and A represents a new piece of evidence that seems to confirm or disconfirm the theory. For any proposition S, we will use P(S) to stand for our degree of belief, or "subjective probability," that S is true. In particular, P (Ei) represents our best estimate of the probability of the theory we are considering, prior to consideration of the new piece of evidence. It is known as the prior probability of Ei.


Random Variables
A random variable, usually written X, is a variable whose possible values are numerical outcomes of a random phenomenon. There are two types of random variables, discrete and continuous.

Discrete Random Variables

A discrete random variable is one which may take on only a countable number of distinct values such as 0,1,2,3,4,........ Discrete random variables are usually (but not necessarily) counts. If a random variable can take only a finite number of distinct values, then it must be discrete. Examples of discrete random variables include the number of children in a family, the Friday night attendance at a cinema, the number of patients in a doctor's surgery, the number of defective light bulbs in a box of ten. The probability distribution of a discrete random variable is a list of probabilities associated with each of its possible values. It is also sometimes called the probability function or the probability mass function. Suppose a random variable X may take k different values, with the probability that X = xi defined to be P(X = xi) = pi. The probabilities pi must satisfy the following:

1: 0 < pi < 1 for each i 2: p1 + p2 + ... + pk = 1.


Continuous Random Variables

A continuous random variable is one which takes an infinite number of possible values. Continuous random variables are usually measurements. Examples include height, weight, the amount of sugar in an orange, the time required to run a mile. A continuous random variable is not defined at specific values. Instead, it is defined over an interval of values, and is represented by the area under a curve (in advanced mathematics, this is known as an integral). The probability of observing any single value is equal to 0, since the number of values which may be assumed by the random variable is infinite. Suppose a random variable X may take all values over an interval of real numbers. Then the probability that X is in the set of outcomes A, P(A), is defined to be the area above A and under a curve. The curve, which represents a function p(x), must satisfy the following:

1: The curve has no negative values (p(x) > 0 for all x) 2: The total area under the curve is equal to 1.
A curve meeting these requirements is known as a density curve.


A probability distribution is a table or an equation that links each outcome of a statistical experiment with its probability of occurrence. Consider the coin flip experiment described above. The table below, which associates each outcome with its probability, is an example of a probability distribution. Number of heads 0 1 2 Probability 0.25 0.50 0.25

The above table represents the probability distribution of the random variable X.


I. Discrete Probability Distributions
If a random variable is a discrete variable, its probability distribution is called a discrete probability distribution. An example will make this clear. Suppose you flip a coin two times. This simple statistical experiment can have four possible outcomes: HH, HT, TH, and TT. Now, let the random variable X represent the number of Heads that result from this experiment. The random variable X can only take on the values 0, 1, or 2, so it is a discrete random variable. The probability distribution for this statistical experiment appears below. Number of heads 0 1 2 Probability 0.25 0.50 0.25


The above table represents a discrete probability distribution because it relates each value of a discrete random variable with its probability of occurrence. In subsequent lessons, we will cover the following discrete probability distributions. With a discrete probability distribution, each possible value of the discrete random variable can be associated with a non-zero probability. Thus, a discrete probability distribution can always be presented in tabular form.



If a random variable is a continuous variable, its probability distribution is called a continuous probability distribution. A continuous probability distribution differs from a discrete probability distribution in several ways.

The probability that a continuous random variable will assume a particular value is zero. As a result, a continuous probability distribution cannot be expressed in tabular form. Instead, an equation or formula is used to describe a continuous probability distribution.

Most often, the equation used to describe a continuous probability distribution is called a probability density function. Sometimes, it is referred to as a density function, a PDF. For a continuous probability distribution, the density function has the following properties:

Since the continuous random variable is defined over a continuous range of values (called the domain of the variable), the graph of the density function will also be continuous over that range. The area bounded by the curve of the density function and the x-axis is equal to 1, when computed over the domain of the variable. The probability that a random variable assumes a value between a and b is equal to the area under the density function bounded by a and b.


For example, consider the probability density function shown in the graph below. Suppose we wanted to know the probability that the random variable X was less than or equal to a. The probability that X is less than or equal to a is equal to the area under the curve bounded by a and minus infinity - as indicated by the shaded area.

The shaded area in the graph represents the probability that the random variable X is less than or equal to a. This is a cumulative probability. However, the probability that X is exactly equal to a, would be zero. A continuous random variable can take on an infinite number of values. The probability that it will equal a specific value (such as a) is always zero.