BUSINESS STATISTICS

UNIT II
PROBABILITY
 PROBABILITY
Likelihood of an event happening.
Probability assigned to an outcome is
between 0 and 1.
Odds.
 TYPES OF PROBABILITY
Classical probability.
No of outcomes where the event occurs
Total no of possible outcomes
Relative frequency probability.
Observed relative frequency of an event
in a very large number of trials.
Proportion of times that an event occurs
in the long run when conditions are table.
Subjective probability.
 RANDOM EXPERIMENT
An experiment is an act of conducting
a controlled test or investigation A
random experiment is a process
leading to two or more possible
outcomes, with uncertainty as to which
of the outcomes will occur.
 DEFINITIONS
Sample Space : Set of all possible
experimental (basic) outcomes.
Event : Any subset of basic outcomes
from the sample space. An event
occurs if the random experiment
results in one of its constituent basic
outcomes.
If two events A and B have no
common basic outcomes, they are
called mutually exclusive.
 EXAMPLES
Die example.
Probability of getting exactly 2 heads
and one tail in three tosses of a coin.
Probability of any two persons in this
class having the same birthday.
 SOME RULES
If mutually exclusive :
P(A or B) = P(A) + P(B)
If not mutually exclusive :
P(A or B) = P(A) + P(B) P(AB) (Ex : Ace
of hearts)
STATISTICAL INDEPENDENCE
Occurrence of one event has no
effect on the probability of any other
event.
Marginal probability is the simple
(unconditional) probability of the
occurrence of an event.
Joint probability is the probability of
two or more independent events
occurring together.
P(AB) = P(A) x P(B) (Coin tosses)
STATISTICAL INDEPENDENCE
Conditional probability is the
probability that a second event will
occur if a first event has already
occurred.
P(B|A) = P(B)
What is the probability that a couples
second child will be a boy, given that the
first child was a girl?
 STATISTICAL DEPENDENCE
Conditional Probability :
P(B|A) = P(BA)
P(A)
Joint Probability :
P(BA) = P(B|A) x P(A)
 EXAMPLE
A hamburger chain found that 75% of
all customers use mustard, 80% use
ketchup, and 65% use both. What
are the probabilities that a ketchup
user uses mustard and that a
mustard user uses ketchup?
 EXAMPLES
A coin is flipped four times and turns up heads
each time. What is the probability that the fifth
trial will be heads?
Find the probability of tossing five heads in a row.
A bag has 8 red and 5 white balls. 2 successive
drawings of 3 balls are made under 2 conditions:
(a) Balls are replaced after the 1st drawing.
(b) Balls are NOT replaced after the 1st drawing
Find the probability that the 1st drawing gives 3
white and the 2nd one gives 3 red balls.
 EXAMPLE
A focus group of three members is to
be randomly selected from a medical
team consisting of five doctors and
seven technicians.
What is the probability that the focus
group will be comprised of doctors only?
What is the probability that the focus
group will not be comprised of doctors
only?
 EXAMPLE
A bag contains 32 marbles : 4 are red, 9 are
black, 12 are blue, 6 are yellow and 1 is
purple.
Marbles are drawn one at a time, with
replacement.
What is the probability that :
(a)Second marble is yellow, given that the first
one was yellow.
(b)Second marble is yellow, given that the first
one was black.
 EXAMPLE
Out of 10 balls in a box, 3 are colored
and dotted, 1 is colored and striped, 2
are gray and dotted, 4 are gray and
striped.
One ball is randomly drawn.
(a)What is the probability of drawing a
dotted ball?
(b)You have drawn a colored ball, what
is the probability that it is dotted?
 EXAMPLE
A deptl store has a database of 250 shoplifters
who had been caught in the past :
Gender I time II time
offender offender
Male 60 70 130
Female 44 76 120
104 146 250

A shoplifter was apprehended today.

(a)What is the probability that he is male?
(b)What is the probability that he is a first timer,
given that he is male?
(c)What is the probability that the shoplifter is a
female, given that she/he is a repeat offender?
 BAYES THEOREM
If A and B are two events,
P(B|A) = P(A|B)P(B)
P(A)

P(B|A) = P(A|B)P(B)
P(A|B)P(B) + P(A|B)P(B)
 EXAMPLE
Based on an examination of past
records of a corporations account
balances, an auditor finds that 15%
have contained errors. Of those
balances in error, 60% were regarded
as unusual values based on historical
figures. Of all the account balances
20% were unusual values. If the
figure for a particular balance
appears unusual on this basis, what
 EXAMPLE
Three different suppliers (A, B and C) provide the
same part to a manufacturer, who now wants to stop
his supplies from one of these suppliers. All supplies
of this part are kept in a large bin. Suppose you
reach into the bin and select a part, and find it is
defective. Take a decision on his behalf.
Past records of defectives:
5% of the parts supplied by A
9% of the parts supplied by B
1% of the parts supplied by C
A supplies thrice as many parts as B and 1/2 as
many as C.
 EXAMPLE
Two new drugs are administered to 200
heart patients. 50 get A, 50 get B and 100
get both. 200 patients were chosen such
that each had an 80% chance of a heart
attack if no drug was given. A reduces the
probability of an attack by 35%, B reduces
by 20%. Two drugs, taken together, work
independently.
If a randomly selected patient out of 200
has a heart attack, what is the probability
that he had both the drugs.
CONCLUSION