Concept Of Probability

Ankita Mahajan
Probability:
Probability of a given event is an expression of likelihood of
occurrence of an event.
Probability is a number which ranges from 0 to 1.
Zero (0) for an event which cannot occur and 1 for an event which
is certain to occur.

Importance of the concept of Probability

Probability models can be used for making predictions.
Probability theory facilitates the construction of econometric
model.
It facilitates the managerial decisions on planning and
control.
Exhaustive Events :
The total number of possible outcomes in any
trial.
Experiment
In a tossing of an unbiased coin
In a throw of an unbiased cubic
die
In drawing a card from a well
shuffled standard pack of playing
cards
Exhaustive Events
Possible solutions Head/ Tail
Exhaustive no. of cases 2
Possible solutions 1,2,3,4,5,6
Exhaustive no. of cases 6
Possible solutions Ace to King
Exhaustive no. of cases 52
3
Favorable Events/ Cases:
It is the number of outcomes which entail the
happening of an event.

For example:
In throwing of 2 dice, the number of cases favorable to getting
the sum 5 is:
(1,4), (4,1), (2,3), (3,2).

In drawing a card from a pack of cards the number of cases

favorable to drawing an ace is 4, for drawing a spade is 13 & for
drawing a red card is 26.
Independent Events:
Two events are said to be independent if the result of the
second event is not affected by the result of the first
event.

For example:

In tossing an unbiased coin the event of getting a head in

the first toss is independent of getting a head in the second,
third & subsequent throws.
Mutually exclusive Events:
-
If the happening of any one of the event precludes
the happening of all the others.

Experiment Mutually Exclusive Events

In a tossing of an unbiased Head/ Tail
coin
In a throw of an unbiased Occurrence of 1 or 2 or 3 or 4 or 5 or
cubic die 6
In drawing a card from a well Card is a spade or heart
shuffled standard pack of Card is a diamond or club
playing cards Card is a king or a queen
6
Equally likely Events: -
Outcomes of a trial are said to be equally likely if
taken into consideration all the relevant evidences,
there is no reason to expect one in preference to
the others.

Experiment Collectively Exhaustive Events

In a tossing of an unbiased
coin
In a throw of an unbiased
cubic die
In drawing a card from a well
shuffled standard pack of
playing cards
Head is likely to come up as a Tail
Any number out of 1,2,3,4,5,6 is
likely to come up
Any card out of 52 is likely to come
up

7
Approaches To Probability
There are 4 approaches to probability, namely:

1. The Classical or a priori probability

2. The Statistical or Empirical probability
3. The Axiomatic approach to probability
4. The Subjective approach to probability
Mathematical/ Classical/ a priori
Probability
Basic assumption of classical approach is that the outcomes
of a random experiment are equally likely.

According to Laplace, a French Mathematician:

Probability, is the ratio of the number of favorable cases to
the total number of equally likely cases.

If the probability of occurrence of A is denoted by p(A), then

by this definition, we have:

Number of favorable cases m

p = P(A) = ------------------------------ = ----
Total number of equally likely cases n
 Probability p of the happening of an event is also known as
probability of success & q the non-happening of the event
as the probability of failure.

If P(E) = 1, E is called a certain event &

if P(E) = 0, E is called an impossible event

The probability of an event E is a number such that

0 P(E) 1, & the sum of the probability that an event will
occur & an event will not occur is equal to 1.
i.e., p + q = 1
 Relative/ Statistical/ Empirical
Probability
Probability of an event is determined objectively by repetitive
empirical observations/ Experiments. Probabilities are
assigned a posterior.
According to Von Mises

If an experiment is performed repeatedly under essentially homogeneous

conditions and identical conditions, then the limiting value of the ratio of the
number of times the event occurs to the number of trials, as the number of trials
becomes indefinitely large, is called the probability of happening of the event, it
being assumed that the limit is finite and unique .

Example: - When a coin is tossed, what is the probability that the

coin will turn heads?
Suppose coin is tossed for 50 times & it falls head 20 times, then
the ratio 20/50 is used as an estimate of the probability of
heads of this coin.
 Symbolically, if in n trials an event E happens m
times, then the probability p of the happening
of E is given by m
p = P(E) = Lt ----
N -> N

In this case, as the number of trails increase

probabilities of outcomes move closer to the real
probabilities and tend to be real probabilities as the
number of trails tends to infinity (a large number).

The empirical probability approaches the classical

probability as the number of trails becomes indefinitely
large.
 The Axiomatic Approach
Modern theory of probability is based on the axiomatic approach
introduced by the Russian Mathematician A. N. Kolmogorov in 1930s.

Classical approach restricts the calculation of probability to

essentially equally likely & mutually exclusively events.

Empirical approach requires that every question be examined

experimentally under identical conditions, over a long period of time
considering repeated observations.

Axiomatic approach is largely free from the inadequacies of both the

classical & empirical approaches.
The 3 Axioms
Given a sample space of a random experiment, the
probability of the occurrence of any event A is defined as
a set function P(A) satisfying the following axioms.

1. Axiom 1: - P(A) is defined, is real and non-negative i.e.,

1 P(A) 0 (Axiom of non-negativity)
2. Axiom 2: - P(S) = 1 (Axiom of certainty)
3. Axiom 3: - If A & B are two mutually exclusive events then the
probability of occurrence of either A or B denoted by P(A U B)
shall be given by

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

 The Objective and Subjective
Approach
Objective approach to probability is arrived on opinion
basis or on an empirical basis.
It is given by the ratio of frequency of an outcome to the total number of
possible outcomes.

Subjective approach to probability is not concerned with

the relative or expected frequency of an outcome.
It is concerned with the strength of a decision makers belief that an
outcome will not occur.
It is particularly oriented towards decision-making situations.
 Theorems of Probability

There are 2 important theorems of probability which are

as follows:

The Addition Theorem

The Multiplication Theorem
ADDITION
THEOREM
 18

Addition theorem when events are

Mutually Exclusive
Definition: - It states that if 2 events A and B are mutually
exclusive then the probability of the occurrence of either A or B
is the sum of the individual probability of A and B.

Symbolically

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

The theorem can be extended to three or more mutually

exclusive events. Thus,

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

EXAMPLE
One card is drawn from a standard pack of
52. what is the probability that it is either
a King or Queen ?

Number of Kings & Queens in a pack of 52 cards =

4 each

P(king)=4/52 & P(queen)=4/52

Since both of them are mutually exclusive events ,
Therefore P(king or queen )=4/52 + 4/52
=8/52
 20

Addition theorem when events are not

Mutually Exclusive (Overlapping or
Intersection Events)
Definition: - It states that if 2 events A and B are not
mutually exclusive then the probability of the occurrence of
either A or B is the sum of the individual probability of A
and B minus the probability of occurrence of both A and B.

Symbolically

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

EXAMPLE

One card is drawn from a standard pack of 52.

what is the probability that it is either a King
or Heart ?
Number of Kings in a pack of 52 cards = 4
Number of Hearts in a pack of 52 cards = 13
P(king)=4/52 & P(hearts)=13/52
Since both of them are not mutually exclusive events ,
Therefore P(king or queen )=4/52 + 13/52 -1/52
=16/52
=4/13
MULTIPLICATION
THEOREM
 23

Multiplication theorem
Definition: States that if 2 events A and B are
independent, then the probability of the occurrence of
both of them (A & B) is the product of the individual
probability of A and B.
Symbolically,
Probability of happening of both the events:
P(A and B) or P(A B) = P(A) x P(B)

Theorem can be extended to 3 or more independent events.

Thus,
P(A, B and C) or P(A B C) = P(A) x P(B) x P(C)
 EXAMPLE
A girl wants to marry a boy having qualities : cute smile the
probability of getting such a guy is one in twenty; intelligent -
the probability of getting this is one in fifty; good height -
the probability of getting such a guy is one in hundred. Find
the probability of her getting married to such a guy when the
possession of these three attributes is independent.

Probability of getting a guy WITH CUTE SMILE = 1/20 =.05

Probability of getting a guy who is INTELLIGENT = 1/50 = .02
Probability of getting a guy WITH GOOD HEIGHT= 1/100 = .01
SINCE these three events are independent , the probability of simultaneous
occurrence of all these qualities = 1/20 x 1/50 x 1/100
= .05 x .02 x .01
= .00001
Conditional probability
The multiplication theorem explained earlier is not applicable in case of
dependent events.

If the result of one event IS affected by the result of another event, the
events are said to be dependent.

If A and B are dependent events, the probability of both events occurring

is the product of the probability of the first event and the
probability of the second event once the first event has
occurred.
The probability attached to such an event is known as CONDITIONAL
PROBABILITY.

It is denoted by P(A/B) or probability of A given that B has

occurred.
Conditional probability

If A and B are dependent events, and A

occurs first,

P(A and B) = P(A) P(B, once A has occurred)

... and is written as ...
P(A and B) = P(A) P(B|A)
 Example
A bag contains 5 white & 4 black balls. Two balls are drawn at
random one after the other without replacement. Find the
probability that both balls drawn are black.

Probability of drawing a black ball in the first attempt =

P(A) = 4/(5+4) = 4/9
Probability of drawing the second black ball given that the first ball
drawn is black P(B/A) = 3/(5+3) = 3/8

Therefore, the probability the both balls drawn are black is given by
P(AB) = P(A) x P(B/A)
= 4/9 x 3/8
= 1/6
Bayes Theorem
If an event A can occur only in conjunction with n mutually exclusive
& exhaustive events B1, B2, , Bn, & if A actually happens, then the
probability that it was preceded by an event Bi (for a conditional
probabilities of A given B1, A given B2 A given Bn are known) & if
marginal probabilities P(Bi) are also known, then the posterior
probability of event Bi given that event A has occurred is given by:

P(A | Bi). P(Bi)

P(Bi | A) = ----------------------
P(A | Bi). P(Bi)
 The probabilities P(B1), P(B2), , P(Bn) are termed as
the a priori probabilities because they exist before we
gain any information from the experiment itself.

The probabilities P(A | Bi), i=1,2,,n are called

Likelihoods because they indicate how likely the event A
under consideration is to occur, given each & every a priori
probability.

The probabilities P(Bi | A), i=1, 2, ,n are called

Posterior probabilities because they are determined
after the results of the experiment are known.
Example :
In a bolt factory machines A, B, & C manufacture
respectively 25%, 35%, & 40% of the total. Of their
output 5%, 4%, 2% are defective bolts. A bolt is drawn at
random from the product & Is found to be defective.

What are the probabilities that it was

manufactured by
machines A, B & C?
 Solution
Let E1, E2, E3 denote the events manufactured by machines A, B & C
respectively.

Let E denote the event of its being defective.

P(E1) = 0.25; P(E2) = 0.35; P(E3) = 0.40;
Probability of drawing a defective bolt manufactured by machine A is P(E|
E1) = 0.05
Similarly P(E|E2) = 0.04; P(E|E3) = 0.02

Probability that defective bolt selected at random is manufactured by machine

A is given by
 P(E1). P(E|E1)
P(E1|E) = ------------------------
P(E1). P(E|E1)
i=1 to 3

0.25 x 0.05 =
---------------------------------------------------------------
0.25 x 0.05 + 0.35 x 0.04 + 0.40 x 0.02
= 25/69

Similarly P(E2|E) = 28/69

= [(0.35 x 0.04)/(.25 x .05+.35 x .04+.40 x.02)]

P(E3|E) = 16/69
= [(0.40 x 0.02)/(.25 x .05+.35 x .04+.40 x .02)]
CONCLUSION
Classical Probability: It is based on the idea that certain
occurrences are equally likely.
Example: - Numbers 1, 2, 3, 4, 5, & 6 on a fair die are each
equally likely to occur.
Conditional Probability: The probability that an event
occurs given the outcome of some other event.
Independent Events: Events are independent if the
occurrence of one event does not affect the occurrence of
another event.
Joint Probability: Is the likelihood that 2 or more events will
happen at the same time.
Multiplication Formula: If there are m ways of doing one
thing and n ways of doing another thing, there are m x n ways
of doing both.
 34

Mutually exclusive events: A property of a set of

categories such that an individual, object, or measurement is
included in only one category.
Objective Probability: It is based on symmetry of games of
chance or similar situations.
Outcome: Observation or measurement of an experiment.
Posterior Probability: A revised probability based on
additional information.
Prior Probability: The initial probability based on the
present level of information.
Probability: A value between 0 and 1, inclusive, describing
the relative possibility (chance or likelihood) an event will
occur.
Subjective Probability: Synonym for personal probability.
Involves personal judgment, information, intuition, & other
subjective evaluation criteria.
Example: - A physician assessing the probability of a
patients recovery is making a personal judgment based on
what they know and feel about the situation.
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