Chapter 0.2 LESSON

Chapter 0
Probability and Random Variables

Sample Space, events, probability measure
▪ Sample point and sample space: A sample point is the simple outcome of a random experiment.
The probability space (also called sample space) is the collection of all possible sample points
related to a specified experiment. When the experiment is performed, one of the sample points will
be the outcome. The probability space is the "full set" of possible outcomes of the experiment.
▪ Event: Any collection of sample points, or any subset of the probability space is referred to as an
event. We say that "event A has occurred” if the experimental outcome was one of the sample
points in A.
▪ Union of events and A and B: A U B denotes the union of events A and B, and consists of all
sample points that are in either A or B.
DeMorgan’s Law
Example 1
Exercise 1
Find: 𝐴 𝑈 𝐵, 𝐴 ∩ 𝐵, 𝐴 ∩ 𝐶, 𝐴’, 𝐵’, (𝐴 𝑈 𝐵)′, 𝐴′ ∩ 𝐵′
Assignment
(1)
(2)
(3)
An auto insurance company has 10,000 policyholders. Each policyholder is classified as
(i) young or old;
(ii) male or female; and
(iii) married or single.
Of these policyholders, 3000 are young, 4600 are male, and 7000 are married. The policyholders
can also be classified as 1320 young males, 3010 married males, and 1400 young married persons. Finally,
600 of the policyholders are young married males. How many of the company’s? policyholders are young,
female, and single?
Independence and Conditional Probabilities

Events A1 and A2 are said to be independent if
P (A1A2) = P (A1) P (A2)
Event A1, A2, ……., An are mutually independent if for any sample of integers ( i1, i2, ….., ik)
from (1, 2, ……., n)
P (Ai1, Ai2, ……., Aik) = P(Ai1), P (Ai2), .…, P(Aik)
The conditional probability of event A given event B is
𝑃(𝐴∩𝐵)
P (A/B) = 𝑃(𝐵)
If A and B are independent, then

P (A/B) = P(A)
Multiplication Rule
P (B∩A) = P (B/A) P(A)
P (Ac/B) = 1- P (A /B)
Example 2
Law of Total probability
P (B) = P (B/A) P(A) + P (B/Ac) P(Ac)
This relationship is valid since for any
two or more steps.

Example 3
Random Variables
The formal definition of a random variable is that it is a function on a probability space S.
Discrete random variable: The random variable is discrete and is said to have a discrete
distribution if it can take on values only from a finite or countable infinite sequence (usually the
integers or some subset of the integers).
As an example, consider the following two random variables related to successive tosses of a coin:
X=1 if the first head occurs on an even-numbered toss, X= 0 if the first head occurs on an odd-
numbered toss;
Y= n, where n is the number of the toss on which the first head occurs.
Both X and Y are discrete random variables, where X can take on only the values 0 or 1 , and Y
can take on any positive integer value. The "probability space" or set of possible outcomes for X
is {0,1}, and the probability space for Y is {1,2,3, 4,…..}
Probability Function of a Discrete Random Variable:
The probability function (pf) of a discrete random variable is usually denoted p(x), f(x), fx (x) or
𝑝𝑥 , and is equal to the probability that the value x occurs. This probability is sometimes denoted
P [ X=x]. The probability function must satisfy
Suppose that X has the probability function p (0) = 0.2, p (1) = 0.4, p (2) = 0.3, and p (3) =0.1.
Find Various probability for this random variables X.
Continuous Random Variables:
A continuous random variable usually can assume numerical values from an interval of real
numbers, or perhaps the whole set of real numbers. The probability space for the random variable
is this interval.
Probability Density Function
A continuous random variable has a probability density function (pdf) usually denoted f(x) or 𝑓𝑥
(x), which is a continuous function except possibly at a finite number of points. Probabilities
related to X are found by integrating the density function over an interval. The probability that X
is in the interval (a , b) is
Note that for a continuous random variable P[ X=c] =0 for any individual point c, since
This is true since the probability at a single point is 0, so it doesn't matter whether or not we include
the endpoints a and b or not.
Example 4
Exercise 2
Assignment
(1)
An Insurance Company insures a large number of homes. The Insured Value X of a randomly selected
home is assumed to follow up distribution with density function.
(2)
The loss due to a fire in a commercial Building is modeled by a random Variables X with density function
(3)
________________________________1st week__________________________________
EXPETATION
For a random variable, the expected value (also called the expectation) is denoted 𝐸ሾ𝑋ሿ , or µx or
µ.
The mean is interpreted as the "average" of the random outcomes.
Mean of a Discrete Random Variable
For a discrete random variable, the expected value of X is
where the sum is taken over all points x at which X has non-zero probability. For instance, if is the
result of one toss of a fair die, then
Example 1
A cube has three red faces, two green faces, and one blue face. A game consists of rolling the
cube twice. You pay $2 to play. If both faces are the same color, you are paid $5(that is you win
$3). If not, you lose the $2 it costs to play. Will you win money in the long run? Let W denote
the event that you win. Then
𝟏 𝟏 𝟏 𝟏 𝟏 𝟏 𝟕
W = {RR, GG, BB} and P (W) = P (RR) + P (GG) + P (BB) = ∗𝟐+𝟑∗𝟑+𝟔∗𝟔 = =
𝟐 𝟏𝟖
𝟑𝟗%
𝟏𝟏
Thus, P (L) = 𝟏𝟖 = 61%
Hence, if you play the game 18 times you expect to win 7 times and lose 11 times on average. So
your winnings in dollars will be 3 × 7 − 2 × 11 = −1. That is, you can expect to lose $1 if you play
𝟏
the game 18 times. On the average, you will lose $ 𝟏𝟖 per game (about 6 cents).
Quiz 1
Suppose that an insurance company has broken down yearly automobile claims for drivers from
age 16 through 21 as shown in the following table.
Amount of claim Probability
$0 0.80
$ 2000 0.10
$ 4000 0.05
$ 6000 0.03
$ 8000 0.01
$ 10000 0.01
How much should the company charge as its average premium in order to break even on costs for
claims?
(a) 660 (b) 665 (c) 760 (d) 765
Quiz 2
Calculate the E(X).

𝟕 𝟓 𝟏 𝟒
(a) (b) 𝟏𝟐 (c) 𝟏𝟐 (d) 𝟏𝟐
𝟏𝟐
Mean of a Continuous Random Variable
Note that even though this random Variable is defined on_

Quiz 3
(a) 1-𝒆−𝟒 (b) 1-𝒆−𝟖 (c) 1-𝒆−𝟏𝟎 (d) 1-𝒆−𝟏𝟐
Quiz 4
(a) 0.27 (b) 0.26 (c) 0.31 (d) 0.28

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Chapter 0

Probability and Random Variables

Find: 𝐴 𝑈 𝐵, 𝐴 ∩ 𝐵, 𝐴 ∩ 𝐶, 𝐴’, 𝐵’, (𝐴 𝑈 𝐵)′, 𝐴′ ∩ 𝐵′

Independence and Conditional Probabilities

If A and B are independent, then

two or more steps.

Calculate the E(X).

Mean of a Continuous Random Variable

Note that even though this random Variable is defined on_

(a) 1-𝒆−𝟒 (b) 1-𝒆−𝟖 (c) 1-𝒆−𝟏𝟎 (d) 1-𝒆−𝟏𝟐

(a) 0.27 (b) 0.26 (c) 0.31 (d) 0.28

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