Module II

Concepts of Probability Probability Rules Bayes Theorem Probability Distributions : Poisson, Binomial, Normal

Founders
Laplace Bernoulli Bayes Lagrenge

First applications
Gaming tables Insurance industry (loss/ risk) Basis for statistical applications and decision making research

Probability
Probability is a numerical measure of the likelihood that an event will occur. Probability values are always assigned on a scale from 0 to 1. A probability near 0 indicates an event is very unlikely to occur. A probability near 1 indicates an event is almost certain to occur. A probability of 0.5 indicates the occurrence of the event is just as likely as it is unlikely.

Probability as a Numerical Measure of the Likelihood of Occurrence

Increasing Likelihood of Occurrence

Probability:

.5 The occurrence of the event is just as likely as it is unlikely.

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. A sample point is an element of the sample space, any one particular experimental outcome.

Approaches to Probability
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 the assignors judgment.

Classical Method
If an experiment has n possible outcomes, this method would assign a probability of 1/n to each outcome. Example Experiment: Rolling a die Sample Space: S = {1, 2, 3, 4, 5, 6} Probabilities: Each sample point has a 1/6 chance of occurring.

Q
Find the prob of getting a tail in a throw of a coin ? S= N(s) = 2 P(t) = n(E) / n(S)

Q
AN unbiased die is thrown. What is the prob of getting - A six - Getting either a five or six

Ans
1/6 2/6

Q
In a simultaneous throw of two dice, find the prob of getting a total of 6 Ans : S=

Sol
S = {(1,5), (2,4), (3,3), (4,2), (5,1),} N(E) = 5 P(E) = n(E) / n(S) = 5 / 36

Q
What is the prob that a leap year selected at random contains 54 sundays ?

Soln
A leap year consists of 366 days. There are 52 complete weeks and 2 more days. These may form the following combinations : - S,M - M,T - T,W - W,TH - TH,F - F,SAT, - SAT, SUN

OUT OF THESE, only 2 are favorable to the event. Thus, the reqd prob is 2/7

Q
A & B throw with 2 dice. If A throws 9, find Bs chance of throwing a higher number.

Soln
n(S)=36 B denotes the event of getting a higher no. than 9 B={(4,6),(5,5),(6,4),(5,6), (6,5),(6,6)} n(B) = 6 P(B) = n(B) / n(S) = 6/36 = 1/6

Relative frequency method

When the assumption that the outcomes of a statistical experiment are known in advance and are equally likely is not satisfied, the estimation of probability for events of interest can be done by using past statistics.

Lucas Tool Rental

Relative Frequency Method Lucas would like to assign probabilities to the number of floor polishers it rents per ay. Office records show the following frequencies of daily rentals for the last 40 days

No. of polishers rented 0 1 2 3 4

No. of days 4 6 18 10 12

No. of polishers No. of days rented

0 1 2 3 4 4 6 18 10 12 40

Probability
4/40 = 0.10 6/40 =0.15 0.45 0.25 0.05 1.00

Q
The distribution of marks of 1000 students in a college is given on the next slide. A student is selected at random. Find the probability that his marks are : 1. Under 30 2. Above 50 3. Between 20 and 50

Marks

0-10 10- 20- 30- 4020 30 40 50 50

5060

60- Total 70 1000

No. of 40 students

150 400 230 100 30

Sol
1. 240 / 1000 = 0.24 2. 130 / 1000 = 0.13 3. 780 / 1000 = 0.78

Q
In the following table distribution of marks 0f 250 students in Economics and Statistics are given : If a student is selected at random, find the prob that 1. The selected students marks in economics are in the group (20-30_and he scores more than 40 in statistics

2.The selected students marks in statistics are in the group (40 -50) and his score in economics is higher than 40

Econo mics

Marks in Statistics 20-30 30-40 10 60 40-50 10 10 50-60 0 20 Total 50 110

20 - 30 30 30 -40 20

40-50
50 -60

10
0 60

20
10 100

20
10 50

10
10 40

60
30 250

1. 10 / 250 = 0.04 2. 30 / 250 = 0.12

Subjective Method
When economic conditions and a companys 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 estimates.

Since this method relies on individual judgmental, it is highly subjective. Nonetheless, the method is quite common in the absence of any information. Later, when the information becomes available, the assigned probability can be revised

Subjective Interpretation of Probability

Core

meltdown of a nuclear reactor You being alive at the age of 80 India beating England in the next series (unsure about the outcome although the event has happened)

Subjective interpretation of probability: an individuals degree of belief in the occurrence of an event

32

 Why Subjective Interpretation Frequentist interpretation (earlier 2 methods) is not always appropriate Some events cannot be repeated many times e.g. Core meltdown of a nuclear power, your 80th birthday The actual event has taken place, but you are uncertain about the result unless you have known the answer e.g. The cricket game Subjective interpretation allows us to model and structure individualistic uncertainty through probability Degree of belief that a particular event will occur can vary among different people and depend on the contexts
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Events and Their Probability

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.

 There are some basic probability relationships that can be used to compute the probability of an event without knowledge of al the sample point probabilities.
Complement of an Event Union of Two Events Intersection of Two Events Mutually Exclusive Events

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. The Venn diagram below illustrates the concept of a complement.
Event A Ac Sample Space S

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 is denoted by A U B
The union of A and B is illustrated below.

Sample Space S Event A Event B

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 is denoted by A The intersection of A and B is the area of overlap in the illustration below.
Event A Event B Sample Space S

Addition Law
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: P(A B) = P(A) + P(B) - P(A B )

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

Mutually Exclusive Events

Two events are said to be mutually exclusive if the events have no sample points in common. That is, two events are mutually exclusive if, when one event occurs, the other cannot occur.
Event B Event A Sample Space S

Addition Law for Mutually Exclusive Events

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

Q
What is the prob of getting an odd number in tossing a die ?

Soln
A = the event of getting 1 B= the event of getting 3 C= the event of getting 5 P(A) = 1/6 P(B) = 1/6 P(C) = 1/6 P(A or B or C) = P(A) +P(B) + P(C) = 3/6 = 1/2

Q
In a certain college the students engage in various sports in the following proportions Football : 60 % of all students Basket Ball : 50 % of all students Both football & basketball : 30 % of all students If a student is selected at random, what is the prob that he will

1. Play football or basketball 2. Play neither sports

P(F) = 0.6 P(B) = 0.5 P(FB) = 0.3 1. P(FB) = P(F) + P(B)- P(FB) = 0.6 + 0.5 0.8 = 0.8 2. P(FB) = 1 P(he plays at least one of the two games) = 1- 0.8 = 0.2

Q multiplication law
A problem in statistics is given to 3 students A,B and C, whose chances of solving it are 1/3, and 1/5 respectively. Find the prob that the problem will be solved

Soln
P(A)=1/3 P(B)=1/4 P(C)=1/5 P(AC)=1 - 1/3 = 2/3 P(BC)=1 - 1/4 = 3/4 P(CC)=1 - 1/5 = 4/5 IF the problem is solved, at least one of the students shoild be able to solve it.

P(ABC) = 1- P(ABC) = 1- P(AC).P(BC).P(CC) = 1 2/3. .4/5 = 3/5

Q
Items produced by a certain process, each may have one or both of two types of defects, A and B. It is known that 22 % of the items have type A defects and 12 % have type B defects. Further, 8 % are known to have both types of defects. What is the prob that a randomly selected item will be defective ?

Soln
P(A) = 0.22 P(B) = 0.12 P(AB) = 0.08 P(AB) = 0.22 + 0.12 0.08 = 0.26

COUNTING TECHNIQUES
FOR LARGE EVENTS - factorials n!=n(n-1)(n-2).. 4! = 4.3.2.1 = 24 0! = 1

COUNTING TECHNIQUES
Permutations The total number of arrangements of n objects taken r at a time : nPr = n! (n-r)!

Q
A personnel manager has received requisitions for one typist each from the production deptt, marketing deptt and research deptt. There are seven applicants available from which these positions may be filled. In how many ways 3 typists be selected from the 7 applicants and assigned to the 3 different openings ?

soln
There are 7 ways to fill the first position after which there are 6 ways for the second and 5 ways for the third
7P = 7! 3

= 210

(7-3)!

Combinations
A combination of number of objects, considered without regard to their order. The total no. of combinations of a set of n objects taken r at a time nC = n! r r !(n-r)!

Q
A sales manager has seven field reps working under him. A local consulting firm at a fee of Rs. 1500 per man is conducting a three day seminar on sales to which the sales manager would like to send all the seven of his team. However, his budget will allow him to send only 3 men. How many different ways are there for him to compose this group of 3 men ?

7C3 = 7!

= 35

4! 3!

Q
A bag contains 10 red and 8 black balls. Two balls are drawn at random from the bag. Find the prob that 1. Both of them are red 2. One is red and the other is black

Soln
Total no. of balls = 18 2 balls can be drawn out of 18 by 18C = 153 ways 2 1. Let A be the event that both the balls are red. The no. of ways of selecting 2 red balls out of 10 is 10C2 = 45 P(A=BOTH RED BALLS) = 45 / 153 = 15 / 51

2. Let B = one ball is red and other is black. one red and one black ball can be drawn by 10C1 * 8C1 = 80 ways P(B=one red and one black ball) = 80 / 180 =4/9

Q
A bag contains seven white, five black and four red balls. If two balls are drawn at random from the bag, find the prob that - Both the balls are white - One is black & the other is white

Ans
7/40 35 / 120 = 7/24

Conditional Probability
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).

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

Q
Two cards are selected from a well shuffled deck of cards. What is the prob that both are black cards ?

 Ans 26C2 / 52 C2

= 0.245

Q
A FAIR coin is tossed 4 times. What is the prob that we will get 2 heads and 2 tails

 2*2*2*2 = 16 {H,H,T,T}, {H,T,T,H}, {H,T,H,T}, {T,T,H,H}, {T,H,T,H}, {T,H,H,T}, {H,H,H,T}, {H,T,H,H} {T,H,H,H}, {H,T,T,T}, {T,H,T,T}, {T,T,H,T}, {H,H,H,H}, {T,T,T,T}, {H,T,H,H}, {T,T,T,H} = 6/16 = 3/8

Q
A BAG contains four black, seven blue and 12 red balls. If three balls are drawn at random, what are the chances of each ball being a different colour ?

Sol
4C

* 7C1* 12C1 1 23C 3

=48 / 253

Q
TICKETS numbered from 1 to 100 are well shuffled and a ticket is drawn. What is the prob that the ticket has : 1. An odd number 2. The number 5 or a multiple of 5 3. The number which is a square

Soln
1. 0.5 2. A={5,10,15,20,25,30,35,40,45,50,55,60, 65,70,75,80,85,90,95,100} P(A) = 20 / 100 = 0.2 3. B= {1,4,9,16,25,36,49,64,81,100} P(B) = 10 / 100 = 0.1

Q
SIX technicians and four laymen form an advisory committee for an enterprise. Of these, two technicians and one layman hold degrees from foreign universities. If, of these, selecting at random a technician as chairman is called an event A and a foreign degree holder event B, find expressions for P(A), P(A)+P(B),P(A+B), And P(AB).

P(A) = 6/10 = 0.6 P(A)+P(B) =0.6 +0.3 = 0.9 P(A+B) =0.6 +0.3 0.2 = 0.7 P(AB) =0.2

Q
Urn A contains two white and three black balls. Urn B contains three white and four black balls. If one ball is drawn at random from each urn, find the prob of getting one white ball and one black ball.

Soln
2C1 * 3C1 5C1 7C1 + 3C1 * 4C1 5C1 7C1

= 18 35

Example
Suppose 2 dice are thrown. Then S = 36 A = the event that the first dice shows a 4 A= { (4,1), (4,2), (4,3), (4,3), (4,5), (4,6) } P(A) = 6/36 = 1/6 B= the event that the sum of numbers on the two dice = 9

B = {(3,6),(4,5),(5,4),(6,3)} P(B) = 4 / 36 = 1/9 When it is given that the first dice is a 4, then the prob of getting a total of 9 on both dice is known as the conditional prob and denoted by P(B/A). SO THE REDUCED SAMPLE SIZE =6 and P(B/A) = n(AB)/ n(A) = 1/6

Multiplication Law
The multiplication law provides a way to compute the probability of an intersection of two events. The law is written as: P(A B) = P(B)P(A|B)

Independent Events
Events A and B are independent if P(A|B) = P(A). P(A B) = P(A)P(B)

Independent Events
Multiplication Law for Independent Events P(A B) = P(A)P(B) The multiplication law also can be used as a test to see if two events are independent.

Q
A die is rolled. If the outcome is an odd number, what is the prob that it is prime. ?

Soln
S = {1,2,3,4,5,6} A = the event of getting an odd number A = {1,3,5} B=the event of getting a prime number B={2,3,5} AB = {3,5} P(B/A) = n (AB) / n(A) = 2/3

Q
Two dice are thrown. Find the prob that the sum of the numbers in the two die is10, given that the first die shows a six.

soln
A= the event that the sum of numbers is 10 B = the event that first die shows 6 A= {(4,6),(5,5), (6,4)} B= {(6,1),(6,2), (6,3), (6,4),(6,5), (6,6)} AB = {(6,4)} P(A) = 3/36 P(B) = 6/36

P(AB) = 1/36 P(A/B) = 1/6

Q
The prob that A hits a target is 1/3 and the prob that B hits a target is 2/5. what is the prob that the target will be hit, if each one of A and B shoots at the target ?

Soln
A = event that A hits the target B= event that B hits the target P(A) = 1/3 P(B) = 2/5 Prob that A fails to hit the target is P(AC) = 2/3 Prob that B fails to hit the target is P(BC) = 3/5

 Prob that target is not hit = 2/3. 3/5 = 6/15 P(target is hit) = 1- 6/15 = 9/15

Q conditional prob/ bayes theorem

THE prob that a new product will be successful if a competitor does not launch a similar product is 0.67. THE prob that a new product will be successful if a competitor does launch a similar product is 0.42. The prob that the competitor will launch a new product is 0.35. What is the prob that the product will be a success ?

Soln
S =event that product is successful L= competitor will launch a product Lc =competitor will not launch product P(S/Lc) = 0.67 P(S/L) = 0.42 P(L) = 0.35 P(Lc) = 1 P(L) = 1 0.35 = 0.65

PROB that the product will be a success P(S) = P(S/L)P(L) + P(S/LC)P(LC) = 0.42 * 0.35 + 0.67 * 0.65 = 0.5825

Bayes Theorem
Often we begin probability analysis with initial or prior probabilities. Then, from a sample, special report, or a product test we obtain some additional information. Given this information, we calculate revised or posterior probabilities. Bayes theorem provides the means for revising the prior probabilities.
Prior Probabilities New Information Application of Bayes Theorem Posterior Probabilities

AN event B can occur only if any one of the set of exhaustive and mutually exclusive events A1, A2, A3.An occur. The probabilities P(A1), P(A2), P(An) and the conditional probabilities P(B/Ai), where i=1,2,3.n are known, then the conditional prob P(Ai / B) when B has acually occurred is given by

Bayes Theorem
To find the posterior probability that event Ai will occur given that event B has occurred we apply Bayes theorem.

P ( Ai ) P ( B| Ai ) P ( Ai | B ) P ( A1 ) P ( B| A1 ) P ( A2 ) P ( B| A2 ) ... P ( An ) P ( B| An )

 Bayes theorem is applicable when the events for which we want to compute posterior probabilities are mutually exclusive and their union is the entire sample space.

Q
Suppose a black ball has been drawn from one of three bags, the first containing three black ballsand seven white, the second five black balls and three white, the third eight black balls and four white: what is the prob that it was drawn from the first bag ?

Soln
Let B1, B2, B3 be the events that first, second and third bags respectively are selected. Let A be the event that ball drawn is black. Then P(B1) = P(B2) = P(B3) = 1/3 P(A / B1) = PROB of drawing a black ball given that first bag is selected = 3/10 P(A / B2) = 5/8 P(A / B3) = 8 / 12

P(B1/A) = P(B1)P(A/B1) P(B1)P(A/B1)+ P(B2)P(A/B2)+ P(B3)P(A/B3) = 1/3 * 3/10 1/3 * 3/10 +1/3* 5/8 + 1/3 *8/12 = 36 / 191