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BT10403

Statistik Perniagaan dan Ekonomi


(Statistics for Business and Economics)
Week 5, Semester II, 2016/2017
Faculty of Business, Economics &
Accountancy,
Universiti Malaysia Sabah
Dr. Qaiser Munir

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 1
Chapter 4
Basic Probability

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 2
Learning Objectives

In this chapter, you learn:

Basic probability concepts


About conditional probability
To use Bayes Theorem to revise probabilities
Various counting rules

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 3
Sportsware Brands
Annabel Gonzalez, chief retail analyst at marketing
firm Longmeadow Consultants is tracking the sales
of compression-gear produced by Under Armour,
Inc., Nike, Inc., and Adidas Group.
After collecting data from 600 recent purchases,
Annabel wants to determine weather age influences
brand choice.

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 4
Basic Probability Concepts
Probability A probability is a numerical value that
measures the likelihood that an uncertain event occurs.
The value of a probability is between zero (0) and one
(1).

Impossible Event an event that has no chance of


occurring (probability = 0)
Certain Event an event that is sure to occur
(probability = 1)

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 5
Basic Probability Concepts

Assessing Probability
There are three approaches to assessing the probability
of an uncertain event. Many people mix them up or use
them interchangeably. Each approach will be considered
separately.

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 6
Assessing Probability

There are three approaches to assessing the


probability of an uncertain event:
1. a priori -- based on prior knowledge of the process
X number of ways in which the event occurs
probability of occurrence T total number of possible outcomes
Assuming
all
outcomes 2. empirical probability
are equally
likely number of ways in which the event occurs
probability of occurrence
total number of possible outcomes

3. subjective probability

based on a combination of an individuals past experience,


personal opinion, and analysis of a particular situation

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 7
A priori probability or Classical Approach

A priori refers to the process of assigning probabilities


before the event is observed or the experiment is
conducted.
A priori probabilities are based on logic, not experience.
When flipping a coin or rolling a pair of dice, we do not
actually have to perform an experiment because the
nature of the process allows us to envision the entire
sample space.
Instead of performing the experiment, we can use
deduction to determine the probability of an event.
This is the also called classical approach to probability

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 8
Example of a priori probability or
Classical Approach
For example, the two-dice experiment has 36 equally
likely simple events. The P(that the sum of the dots on
the two faces equals 7) is

The probability is
obtained a priori using
the classical approach
as shown in this Venn
diagram for 2 dice:
Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 9
Another Example of a priori
probability

When randomly selecting a day from the year 2014


what is the probability the day is in January?

X number of days in January


Probabilit y of Day In January
T total number of days in 2014

X 31 days in January 31

T 365 days in 2013 365
Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 10
Example of an empirical probability

Find the probability of selecting a male taking statistics


from the population described in the following table:

Taking Stats Not Taking Total


Stats
Male 84 145 229
Female 76 134 210
Total 160 279 439

number of males taking stats 84


Probability of male taking stats 0.191
total number of people 439

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 11
An Empirical probability

Law of Large Numbers


The law of large numbers says that as the number of
trials increases, any empirical probability approaches its
theoretical limit.
Flip a coin 50 times. We would expect the proportion of
heads to be near .50.
However, in a small finite sample, any ratio can be
obtained (e.g., 1/3, 7/13, 10/22, 28/50, etc.).
A large n may be needed to get close to .50.

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 12
An Empirical probability

Law of Large Numbers Results of 10, 20, 50 and 200 coin flips

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 13
Subjective probability
A subjective probability reflects someones informed
judgment about the likelihood of an event or persons
experiences, opinions, and analysis of a particular
situation.
Used when there is no repeatable random experiment.
Subjective probability may differ from person to person
A media development team assigns a 60%

probability of success to its new ad campaign.


The chief media officer of the company is less

optimistic and assigns a 40% of success to the same


campaign
Subjective probability is useful in situations when an
empirical or a priori probability cannot be computed

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 14
Fundamental Probability Concepts
An experiment is a trial that results in one of several
uncertain outcomes. OR A random experiment is an
observational process whose results cannot be known in
advance.
Example: Trying to assess the probability of a
snowboarder winning a medal in the ladies half-pipe event
while competing in the Winter Olympic Games.
Solution: The athletes attempt to predict her chances of

medaling is an experiment because the outcome is


unknown.
The athletes competition has four possible outcomes:
gold medal, silver medal, bronze medal, and no medal.
We formally write the sample space as
S = {gold, silver, bronze, no medal}.
Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 15
Fundamental Probability Concepts
A sample space, denoted S, of an experiment includes all
possible outcomes of the experiment.
For example, a sample space containing letter grades is:

S A, B,C, D, F
An event is a subset
of the sample space.
A, B,C, D F
The event passing grades The simple event failing
is a subset of S. grades is a subset of S.
Joint event
An event described by two or more characteristics
e.g. A day in January that is also a Wednesday from all days in 2014
Complement of an event A (denoted A)
All events that are not part of event A
e.g., All days from 2014 that are not in January

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 16
Sample Space

The Sample Space is the collection of all possible


events or The set of all possible outcomes (S) is the
sample space for the experiment.
e.g. All 6 faces of a die:

e.g. All 52 cards of a bridge deck:

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 17
Fundamental Probability Concepts
A Venn Diagram represents the sample space for the
event(s).
For example, this Venn Diagram illustrates the sample

space for events A and B.

A B

The union of two events consists of all outcomes in the


sample space S that are contained either in event A or in
event B or in both (denoted A B or A or B).
may be read as or since one or the
other or both events may occur.
Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 18
Rules of Probability
Complement of an Event
The complement of an event A is denoted by
A and consists of everything in the sample space S
except event A. OR The probability of the complement
of an event, P(Ac), is equal to one minus the probability
of the event.
Sample Space S
Since A and A together
comprise the entire sample
space, then
P(A) + P(A ) = 1 or
P(A ) = 1 P(A)
P(Ac ) = 1 P(A)

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 19
Rules of Probability

Intersection of Two Events


The intersection of two events A and B
(denoted by A B or A and B) is the event consisting
of all outcomes in the sample space S that are
contained in both event A and event B.

may be read as
and since both
events occur. This is
a joint probability.

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 20
Fundamental Probability Concepts
Example: Recall the snowboarders sample space
defined as S = {gold, silver, bronze, no medal}.
Given the following, find A B, A B, A C,
and Bc.
A = {gold, silver, bronze}.
B = {silver, bronze, no medal}.
C = {no medal}.
Solution:
A B = {gold, silver, bronze, no medal}. Note that there is
no double counting.
A B = {silver, bronze}. A C = (null or empty set).
Bc = {gold}.

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 21
Rules of Probability
General Law of Addition
The general law of addition states that the probability of
the union of two events A and B is:

The probability that event A or B occurs, or that at least one


of these events occurs.
A and B
When you add the So, you have to
P(A) and P(B) subtract
together, you count P(A B) to avoid
the P(A and B)
A B overstating the
twice. probability.

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 22
Rules of Probability

General Law of Addition


For a standard deck of cards:

P(Q) = 4/52 (4 queens in a deck; Q = queen)


P(R) = 26/52 (26 red cards in a deck; R = red)
P(Q R) = 2/52 (2 red queens in a deck)
P(Q R) = P(Q) + P(R) P(Q R)

Q and R = 2/52 = 4/52 + 26/52 2/52

= 28/52 = .5385 or 53.85%


Q R
4/52 26/52

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 23
Rules of Probability
Example: The addition rule.
Anthony feels that he has a 75% chance of getting an A in
Statistics, a 55% chance of getting an A in Managerial
Economics and a 40% chance of getting an A in both
classes. What is the probability that he gets an A in at least
one of these courses?
P AS AM P AS P AM P AS AM
0.75 0.55 0.40 0.90
What is the probability that he does not get an A in either of
these courses? Using the compliment rule, we find


P AS AM
C
1 P A S AM 1 0.90 0.10

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 24
Mutually Exclusive Events
Mutually exclusive events
Events that cannot occur simultaneously

Example: Randomly choosing a day from 2014

A = day in January; B = day in February

Events A and B are mutually exclusive


If they do not share any common outcome of a
random experiment. For example, the events earning
a medal and failing to earn a medal in a single
Olympic event are mutually exclusive.
Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 25
Rules of Probability
The Addition Rule for Two Mutually Exclusive
Events Events A and B
AB=0 both cannot occur.

A B

AB A occurs or B occurs

P A B P A P B

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 26
Rules of Probability
Example: The addition rule for mutually exclusive
events.
Samantha Greene, a college senior, contemplates her
future immediately after graduation. She thinks there is a
25% chance that she will join the Peace Corps and a 35%
chance that she will enroll in a full-time law school
program in the United States.
P A B P A P B 0.25 0.35 0.60

What is the probability that she does not choose either of


these options?


P A B
C
1 P A B 1 0.60 0.40

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 27
Collectively Exhaustive Events
Collectively exhaustive events
One of the events must occur
The set of events covers the entire sample space
Example: Randomly choose a day from 2014

A = Weekday; B = Weekend;
C = January; D = Spring;

Events A, B, C and D are collectively exhaustive


(but not mutually exclusive a weekday can be in
January or in Spring)
Events A and B are collectively exhaustive and
also mutually exclusive
Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 28
Rules of Probability
Calculate and interpret a conditional probability.

Unconditional (Marginal) Probability


The probability of an event without any
restriction.
For example, P(A) = probability of finding a job,
and P(B) = probability of prior work experience.

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 29
Rules of Probability
Conditional Probability
The probability of an event given that another
event has already occurred.
In the conditional probability statement, the
symbol | means given.
Whatever follows | has already occurred.

For example, P(A | B) = probability of finding a


job given prior work experience.

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 30
Rules of Probability
Illustrating Conditional Probabilities with the
Venn Diagram Events A and B
AB
both occur.

A B

A occurs or B occurs
AB
or both occur.

P A B P A P B P A B

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 31
Rules of Probability
Calculating a Conditional Probability
Given two events A and B, each with a positive probability
of occurring, the probability that A occurs given that B has
occurred ( A conditioned on B ) is equal to
P A B
P A | B
P B

Similarly, the probability that B occurs given that A has


occurred ( B conditioned on A ) is equal to

P A B
P B | A
P A

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 32
Rules of Probability
Example: Conditional Probabilities
An economist predicts a 60% chance that country A will
perform poorly economically and a 25% chance that
country B will perform poorly economically. There is also
a 16% chance that both countries will perform poorly.
What is the probability that country A performs poorly
given that country B performs poorly?
Let P(A) = 0.60, P(B) = 0.25, and P(A B) = 0.16
P A B 0.16
P A | B 0.64
P B 0.25

Since P(A|B) = 0.64 P(A) = 0.60, events A and B are not


independent.

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 33
Contingency Tables and Probabilities
Contingency Tables
A contingency table generally shows frequencies for two
qualitative or categorical variables, x and y.
Each cell represents a mutually exclusive combination of
the pair of x and y values.
Here, x is Age Group with two outcomes
while y is Brand Name with three outcomes.

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 34
Contingency Tables and Probabilities
Contingency Tables
Note that each cell in the contingency table
represents a frequency.

In the above table, 174 customers under the age


of 35 purchased an Under Armour product.
54 customers at least 35 years old purchased an
Under Armour product.

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 35
Contingency Tables and Probabilities
The contingency table may be used to calculate
probabilities using relative frequency.
Note: Abbreviated labels have been used in place
of the class names in the table.

First obtain the row and column totals.


Sample size is equal to the total of the row totals
or column totals. In this case, n = 600.

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 36
Contingency Tables and Probabilities
Joint Probability Table
The joint probability is determined by dividing
each cell frequency by the grand total.
Joint
Probabilities
Marginal
Probabilities
For example, the probability that a randomly selected
person is under 35 years of age and makes an Under
Armour purchase is 174
P A B1 0.29
600

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 37
Another example: Organizing &
Visualizing Events
Venn Diagram For All Days In 2014
Sample Space (All Days Days That Are In January and Are
In 2014) Wednesdays

January Days

Wednesdays

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 38
Organizing & Visualizing Events
(continued)

Contingency Tables -- For All Days in 2014


Jan. Not Jan. Total

Wed. 5 47 52
Not Wed. 27 286 313

Total 32 333 365

Decision Trees Total


5 Number
Sample Of
Space 27 Sample
All Days Space
In 2014 Outcomes
47

286

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 39
Definition: Simple Probability

Simple Probability refers to the probability of a


simple event.
ex. P(Jan.)
ex. P(Wed.)
Jan. Not Jan. Total
P(Wed.) = 52 / 365
Wed. 5 47 52
Not Wed. 27 286 313

Total 32 333 365

P(Jan.) = 32 / 365
Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 40
Definition: Joint Probability
Joint Probability refers to the probability of an
occurrence of two or more events (joint event).
ex. P(Jan. and Wed.)
ex. P(Not Jan. and Not Wed.)

Jan. Not Jan. Total


P(Not Jan. and Not Wed.)
Wed. 5 47 52
= 286 / 365
Not Wed. 27 286 313

Total 32 333 365

P(Jan. and Wed.) = 5 / 365


Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 41
Computing Joint and
Marginal Probabilities

The probability of a joint event, A and B:


number of outcomes satisfying A and B
P( A and B)
total number of elementary outcomes

Computing a marginal (or simple) probability:

P(A) P(A and B1) P(A and B2 ) P(A and Bk )


Where B1, B2, , Bk are k mutually exclusive and collectively
exhaustive events

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 42
Joint Probability Example

P(Jan. and Wed.)


number of days that are in Jan. and are Wed. 5

total number of days in 2013 365

Jan. Not Jan. Total

Wed. 5 47 52
Not Wed. 27 286 313

Total 32 333 365

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 43
Marginal Probability Example

P(Wed.)
5 48 53
P (Jan. and Wed.) P(Not Jan. and Wed. )
365 365 365

Jan. Not Jan. Total

Wed. 5 48 52
Not Wed. 27 286 313

Total 31 334 365

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 44
Marginal & Joint Probabilities In A
Contingency Table

Event
Event B1 B2 Total
A1 P(A1 and B1) P(A1 and B2) P(A1)
A2 P(A2 and B1) P(A2 and B2) P(A2)

Total P(B1) P(B2) 1

Joint Probabilities Marginal (Simple) Probabilities

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 45
Probability Summary So Far
Probability is the numerical measure
of the likelihood that an event will 1 Certain
occur
The probability of any event must be
between 0 and 1, inclusively
0 P(A) 1 For any event A 0.5
The sum of the probabilities of all
mutually exclusive and collectively
exhaustive events is 1
P(A) P(B) P(C) 1
0 Impossible
If A, B, and C are mutually exclusive and
collectively exhaustive

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 46
General Addition Rule

General Addition Rule:


P(A or B) = P(A) + P(B) - P(A and B)

If A and B are mutually exclusive, then


P(A and B) = 0, so the rule can be simplified:

P(A or B) = P(A) + P(B)


For mutually exclusive events A and B

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 47
General Addition Rule Example

P(Jan. or Wed.) = P(Jan.) + P(Wed.) - P(Jan. and Wed.)


= 32/365 + 52/365 - 5/365 = 79/365
Dont count
the five
Wednesdays
in January
Jan. Not Jan. Total twice!
Wed. 5 47 52
Not Wed. 27 286 313

Total 32 333 365

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 48
Computing Conditional
Probabilities
A conditional probability is the probability of one
event, given that another event has occurred:
P(A and B) The conditional
P(A | B) probability of A given
P(B) that B has occurred

P(A and B) The conditional


P(B | A) probability of B given
P(A) that A has occurred

Where P(A and B) = joint probability of A and B


P(A) = marginal or simple probability of A
P(B) = marginal or simple probability of B
Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 49
Conditional Probability Example

Of the cars on a used car lot, 70% have air


conditioning (AC) and 40% have a GPS. 20%
of the cars have both.

What is the probability that a car has a GPS,


given that it has AC ?

i.e., we want to find P(GPS | AC)

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 50
Conditional Probability Example
(continued)
Of the cars on a used car lot, 70% have air conditioning
(AC) and 40% have a GPS and
20% of the cars have both.
GPS No GPS Total
AC 0.2 0.5 0.7
No AC 0.2 0.1 0.3
Total 0.4 0.6 1.0

P(GPS and AC) 0.2


P(GPS | AC) 0.2857
P(AC) 0.7
Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 51
Conditional Probability Example
(continued)
Given AC, we only consider the top row (70% of the cars). Of these,
20% have a GPS. 20% of 70% is about 28.57%.

GPS No GPS Total


AC 0.2 0.5 0.7
No AC 0.2 0.1 0.3
Total 0.4 0.6 1.0

P(GPS and AC) 0.2


P(GPS | AC) 0.2857
P(AC) 0.7

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 52
Using Decision Trees
.2
Given AC or .7 P(AC and GPS) = 0.2
no AC:
P(AC and GPS) = 0.5
.5
.7
All Conditional
Probabilities
Cars
.2
.3 P(AC and GPS) = 0.2

.1 P(AC and GPS) = 0.1


.3
Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 53
Using Decision Trees (continued)
.2
.4 P(GPS and AC) = 0.2
Given GPS
or no GPS:
P(GPS and AC) = 0.2
.2
.4
All Conditional
Probabilities
Cars
.5
.6 P(GPS and AC) = 0.5

.1 P(GPS and AC) = 0.1


.6
Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 54
Independence
Two events are independent if and only
if:

P(A | B) P(A)
Events A and B are independent when the probability
of one event is not affected by the fact that the other
event has occurred

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 55
Multiplication Rules

Multiplication rule for two events A and B:

P(A and B) P(A | B)P(B)

Note: If A and B are independent, then P(A | B) P(A)


and the multiplication rule simplifies to

P(A and B) P(A)P(B)

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 56
Marginal Probability

Marginal probability for event A:

P(A) P(A | B1)P(B1) P(A | B2 )P(B2 ) P(A | Bk )P(Bk )

Where B1, B2, , Bk are k mutually exclusive and


collectively exhaustive events

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 57
Bayes Theorem

Bayes Theorem is used to revise previously


calculated probabilities based on new
information.

Developed by Thomas Bayes in the 18th


Century.

It is an extension of conditional probability.

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 58
Bayes Theorem

P(A | B i )P(B i )
P(B i | A)
P(A | B 1 )P(B 1 ) P(A | B 2 )P(B 2 ) P(A | B k )P(B k )

where:
Bi = ith event of k mutually exclusive and collectively
exhaustive events
A = new event that might impact P(Bi)

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 59
Bayes Theorem Example

A drilling company has estimated a 40%


chance of striking oil for their new well.
A detailed test has been scheduled for more
information. Historically, 60% of successful
wells have had detailed tests, and 20% of
unsuccessful wells have had detailed tests.
Given that this well has been scheduled for a
detailed test, what is the probability
that the well will be successful?

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 60
Bayes Theorem Example
(continued)

Let S = successful well


U = unsuccessful well
P(S) = 0.4 , P(U) = 0.6 (prior probabilities)
Define the detailed test event as D
Conditional probabilities:
P(D|S) = 0.6 P(D|U) = 0.2
Goal is to find P(S|D)

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 61
Bayes Theorem Example
(continued)

Apply Bayes Theorem:


P(D | S)P(S)
P(S | D)
P(D | S)P(S) P(D | U)P(U)
(0.6)(0.4)

(0.6)(0.4) (0.2)(0.6)
0.24
0.667
0.24 0.12

So the revised probability of success, given that this well


has been scheduled for a detailed test, is 0.667
Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 62
Bayes Theorem Example
(continued)

Given the detailed test, the revised probability


of a successful well has risen to 0.667 from
the original estimate of 0.4

Prior Conditional Joint Revised


Event
Prob. Prob. Prob. Prob.
S (successful) 0.4 0.6 (0.4)(0.6) = 0.24 0.24/0.36 = 0.667
U (unsuccessful) 0.6 0.2 (0.6)(0.2) = 0.12 0.12/0.36 = 0.333

Sum = 0.36

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 63
Counting Rules Are Often Useful
In Computing Probabilities

In many cases, there are a large number of


possible outcomes.

Counting rules can be used in these cases


to help compute probabilities.

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 64
Counting Rules

Rules for counting the number of possible


outcomes
Counting Rule 1:
If any one of k different mutually exclusive and
collectively exhaustive events can occur on each of
n trials, the number of possible outcomes is equal to

kn
Example
If you roll a fair die 3 times then there are 63 = 216 possible
outcomes

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 65
Counting Rules
(continued)
Counting Rule 2:
If there are k1 events on the first trial, k2 events on
the second trial, and kn events on the nth trial, the
number of possible outcomes is
(k1)(k2)(kn)
Example:
You want to go to a park, eat at a restaurant, and see a
movie. There are 3 parks, 4 restaurants, and 6 movie
choices. How many different possible combinations are
there?
Answer: (3)(4)(6) = 72 different possibilities

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 66
Counting Rules
(continued)

Counting Rule 3:
The number of ways that n items can be arranged in
order is
n! = (n)(n 1)(1)

Example:
You have five books to put on a bookshelf. How many
different ways can these books be placed on the shelf?

Answer: 5! = (5)(4)(3)(2)(1) = 120 different possibilities

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 67
Counting Rules (continued)

Counting Rule 4:
Permutations: The number of ways of arranging X objects
selected from n objects in order is

n!
n Px
(n X)!
Example:
You have five books and are going to put three on a bookshelf.
How many different ways can the books be ordered on the
bookshelf?
n! 5! 120
Answer: n Px 60 different possibilities
(n X)! (5 3)! 2

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 68
Counting Rules
(continued)
Counting Rule 5:
Combinations: The number of ways of selecting X
objects from n objects, irrespective of order, is
n!
n Cx
X!(n X)!
Example:
You have five books and are going to select three are to
read. How many different combinations are there, ignoring
the order in which they are selected?
n! 5! 120
Answer: n Cx 10 different possibilities
X!(n X)! 3! (5 3)! (6)(2)

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 69
Chapter Summary
In this chapter we discussed:

Basic probability concepts


Sample spaces and events, contingency tables, simple
probability, and joint probability
Basic probability rules
General addition rule, addition rule for mutually exclusive events,
rule for collectively exhaustive events
Conditional probability
Statistical independence, marginal probability, decision trees,
and the multiplication rule
Bayes theorem
Five useful counting rules
Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 70
End of Chapter 4

THANK YOU!

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 04, Slide 71

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