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Krishnamurthy

Indian Institute of Management Indore

Describing Shape of a Bar Graph

Describing Shape of a Histogram

Probability

Proportion sample

Probability population

Example

Industry Probability

Agriculture 0.130

Construction 0.147

Finance, Insurance, Real Estate 0.059

Manufacturing 0.042

Mining 0.002

Services 0.419

Trade 0.159

Transportation, Public Utilities 0.042

Sample Space

Transportation and Public Utilities}

Simple Events

space.

Event

Exercise

A bowl contains three red and two yellow balls. Two balls are

randomly selected and their colors recorded. Use a tree

diagram to list the 20 simple events in the experiment, keeping

in mind the order in which the balls are drawn.

Other Approaches for Calculating Probabilities

likely, the probability of an event is the number of favourable

outcomes divided by the total number of outcomes.

Ex. Rolling a dice

on ones experience.

Example

Industry Probability

Agriculture 0.130

Construction 0.147

Finance, Insurance, Real Estate 0.059

Manufacturing 0.042

Mining 0.002

Services 0.419

Trade 0.159

Transportation, Public Utilities 0.042

Probability

P(Agriculture)

Probability

P(Agriculture) = 0.13

P(Agriculture Construction)

Probability

P(Agriculture) = 0.13

P(Agriculture Construction) = 0.13+0.147=0.277.

P(Agriculture Construction)

Probability

P(Agriculture) = 0.13

P(Agriculture Construction) = 0.13+0.147=0.277.

P(Agriculture Construction) =0.

Probability

P(Agriculture) = 0.13

P(Agriculture Construction) = 0.13+0.147=0.277.

P(Agriculture Construction) =0.

Compound Events

If A and B are two events then

Union event is A B

Intersection event is A B

Complement event is Ac

Venn Diagram Representation

S S

A B A B

U

Disjoint events A and B A B

S S

A B

A B

C D

events: A, B, C, and D

8

Probability Rules

2 P(Ac ) = 1 P(A)

Mutually Exclusive

any common outcome.

events.

Mutually Exclusive

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

Pizza Venn Diagram

What is the sample space?

What is the sample space?

Mushroom-Tomato-Fish, Mushroom-Fish, No toppings}.

Probability of the events in the sample space

P(Tomato only)

Probability of the events in the sample space

Probability of the events in the sample space

P(Mushroom-Tomato)

Probability of the events in the sample space

P(Mushroom-Tomato) =2/8=1/4;

P(Mushroom-Tomato-Fish)

Probability of the events in the sample space

P(Mushroom-Tomato) =2/8=1/4;

P(Mushroom-Tomato-Fish)=1/8.

P(Mushroom-Fish)

Probability of the events in the sample space

P(Mushroom-Tomato) =2/8=1/4;

P(Mushroom-Tomato-Fish)=1/8.

Probability of the events in the sample space

P(Mushroom-Tomato) =2/8=1/4;

P(Mushroom-Tomato-Fish)=1/8.

Union Rule

mushroom?

Union Rule

mushroom?

Ans. 6/8=3/4

Intersection Rule

What is the probability that your slice will have tomato and

mushroom?

Intersection Rule

What is the probability that your slice will have tomato and

mushroom?

Ans. 3/8

Complement Rule

What is the probability that your slice will not have tomato?

Complement Rule

What is the probability that your slice will not have tomato?

Ans. 3/8

Conditional Probability

You have pulled out a slice of pizza that has tomato on it.

What is the probability that your slice will have mushrooms?

Ans. 3/5.

Conditional Probability

Notation: A|B

Multiplication rule

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

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

Independent Venn Pizza

Statistical Independence

has no effect on the chances for the occurrence of the other.

Statistical Independence

mushroom and tomato independent?

Statistical Independence

P(A|B)=P(A).

Independence

Exercise 1

mayoral election? Answer the question using the joint

probabilities given in the table below.

mayoral election

Gender

Voted in the last mayoral election Female Male

Yes 0.25 0.18

No 0.33 0.24

Statistical Independence

1 P(A B) = P(A)P(B)

Law of Total Probability

and exhaustive, and an event A, the probability of the event A

can be expressed as

+P(S3 ).P(A|S3 ) + . . . + P(Sk ).P(A|Sk )

Exercise 2

in India. By studying the past behavior of the revenue

obtained from the three hotels month by month, it has been

observed that the probability of increase in revenue of either B

or C or both of them is 0.5. If As revenue increases in a given

month, the probability of increase in Bs revenue is 0.7, the

probability of increase in Cs revenue is 0.6, and the probability

of increase in both B and Cs revenue is 0.5. However if As

revenue does not increase in a given month, the probability of

increase in Bs revenue is 0.2, the probability of increase in Cs

revenue is 0.3, and the probability of increase in both B and

Cs revenue is 0.1. What is the probability that the revenue of

all the three hotels, A, B, and C increases in a given month?

Exercise 3

You are a physician. You think it is quite likely that one of your patients has strep

throat, but you are not sure. You take some swabs from the throat and send them to

a lab for testing. The test is (like nearly all lab tests) not perfect. If the patient has

strep throat, then 70% of the time the lab says YES but 30% of the time it says NO.

If the patient does not have strep throat, then 90% of the time the lab says NO but

10% of the time it says YES. You send five succesive swabs to the lab, from the same

patient. You get back these results, in order; YNYNY. What do you conclude?

It is likely that the patient does not have the strep throat.

It is slightly more likely than not, that patient does have the strep throat.

It is very much more likely than not, that patient does have the strep throat.

Bayes Rule

exhaustive sub-populations with prior probabilities

P(S1 ), P(S2 ), . . . , P(S2 ). If an event A occurs, the posterior

probability of Si given A is the conditional probability

P(Si ).P(A|Si )

P(Si |A) = Pk

j=1 P(Sj ).P(A|Sj )

Exercise

Bibliography

Hacking

Introduction to Probability and Statistics, by William

Mendenhall, Robert J. Beaver, and Barbara M. Beaver

Practice of Business Statistics, by David S. Moore, George

P. McCabe, William M. Duckworth, and Stanley L. Sclove

Bradley A. Warner, David Pendergrift, and Timothy

Webb,That was Venn, This is now, Journal of

Statistical Education, Volume 6, Number 1, 1998

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