Total Probability

Total Probability
Problem 1: School Attendance
Scenario: A school has two types of students: full-time and part-time. On any given day, the
school wants to know the probability that a student is present in class.
Given Information:
 70% of the students are full-time (P(F)=0.7P(F) = 0.7P(F)=0.7).

 30% are part-time (P(P)=0.3P(P) = 0.3P(P)=0.3).
 The probability that a full-time student is present on any given day is 90%
(P(A∣F)=0.9P(A | F) = 0.9P(A∣F)=0.9).
 The probability that a part-time student is present is 60% (P(A∣P)=0.6P(A | P) =
0.6P(A∣P)=0.6).
Step 1: Define Events
Let:
 AAA: the event that a student is present.

 FFF: the event that a student is full-time.
 PPP: the event that a student is part-time.
Step 2: Apply the Law of Total Probability
We want to find the total probability that a student is present, P(A)P(A)P(A):
P(A)=P(A∣F)⋅P(F)+P(A∣P)⋅P(P)P(A) = P(A | F) \cdot P(F) + P(A | P) \cdot

P(P)P(A)=P(A∣F)⋅P(F)+P(A∣P)⋅P(P)
Step 3: Substitute the Values
Substituting in the values:
P(A)=(0.9⋅0.7)+(0.6⋅0.3)P(A) = (0.9 \cdot 0.7) + (0.6 \cdot 0.3)P(A)=(0.9⋅0.7)+(0.6⋅0.3)

=0.63+0.18=0.81= 0.63 + 0.18 = 0.81=0.63+0.18=0.81
Conclusion
The probability that a randomly selected student is present in class is 0.81, or 81%.
Problem 2: Insurance Claims Analysis (Difficult)
Scenario: An insurance company provides two types of policies: comprehensive and basic.
They want to analyze claims based on the type of policy. The company has the following
data:
 40% of their customers have comprehensive policies (P(C)=0.4P(C) = 0.4P(C)=0.4).

 60% have basic policies (P(B)=0.6P(B) = 0.6P(B)=0.6).
 The probability of making a claim for comprehensive policyholders is 20%
(P(Claim∣C)=0.2P(Claim | C) = 0.2P(Claim∣C)=0.2).
 The probability of making a claim for basic policyholders is 10%
(P(Claim∣B)=0.1P(Claim | B) = 0.1P(Claim∣B)=0.1).
 If a claim is made, the probability that it is a high-value claim is 30% for
comprehensive policyholders and 15% for basic policyholders.
Questions:
1. What is the total probability of making a claim?

2. Given that a claim is made, what is the probability that it is a high-value claim?
Step 1: Define Events
Let:
 ClaimClaimClaim: the event that a customer makes a claim.

 CCC: the event that a customer has a comprehensive policy.
 BBB: the event that a customer has a basic policy.
 HighHighHigh: the event that a claim is a high-value claim.
Step 2: Calculate Total Probability of Making a Claim
Using the law of total probability:
P(Claim)=P(Claim∣C)⋅P(C)+P(Claim∣B)⋅P(B)P(Claim) = P(Claim | C) \cdot P(C) + P(Claim |

B) \cdot P(B)P(Claim)=P(Claim∣C)⋅P(C)+P(Claim∣B)⋅P(B)
Substituting the values:
P(Claim)=(0.2⋅0.4)+(0.1⋅0.6)P(Claim) = (0.2 \cdot 0.4) + (0.1 \cdot

0.6)P(Claim)=(0.2⋅0.4)+(0.1⋅0.6) =0.08+0.06=0.14= 0.08 + 0.06 = 0.14=0.08+0.06=0.14
Step 3: Calculate Total Probability of High-Value Claims
Next, we need P(High∣Claim)P(High | Claim)P(High∣Claim):
Using the law of total probability again, we find P(High∣Claim)P(High |

Claim)P(High∣Claim):
P(High∣Claim)=P(High∣Claim,C)⋅P(C∣Claim)+P(High∣Claim,B)⋅P(B∣Claim)P(High | Claim) =
P(High | Claim, C) \cdot P(C | Claim) + P(High | Claim, B) \cdot P(B |
Claim)P(High∣Claim)=P(High∣Claim,C)⋅P(C∣Claim)+P(High∣Claim,B)⋅P(B∣Claim)
Step 3a: Find P(C∣Claim)P(C | Claim)P(C∣Claim) and P(B∣Claim)P(B |

Claim)P(B∣Claim)
Using Bayes' Theorem:
P(C∣Claim)=P(Claim∣C)⋅P(C)P(Claim)=(0.2⋅0.4)0.14=0.080.14≈0.5714P(C | Claim) = \
frac{P(Claim | C) \cdot P(C)}{P(Claim)} = \frac{(0.2 \cdot 0.4)}{0.14} = \frac{0.08}
{0.14} \approx 0.5714P(C∣Claim)=P(Claim)P(Claim∣C)⋅P(C)=0.14(0.2⋅0.4)=0.140.08
≈0.5714 P(B∣Claim)=P(Claim∣B)⋅P(B)P(Claim)=(0.1⋅0.6)0.14=0.060.14≈0.4286P(B | Claim)
= \frac{P(Claim | B) \cdot P(B)}{P(Claim)} = \frac{(0.1 \cdot 0.6)}{0.14} = \frac{0.06}
{0.14} \approx 0.4286P(B∣Claim)=P(Claim)P(Claim∣B)⋅P(B)=0.14(0.1⋅0.6)=0.140.06
≈0.4286
Step 3b: Substitute to Find P(High∣Claim)P(High | Claim)P(High∣Claim)
Using the conditional probabilities for high-value claims:
P(High∣Claim)=(0.3⋅0.5714)+(0.15⋅0.4286)P(High | Claim) = (0.3 \cdot 0.5714) + (0.15 \cdot

0.4286)P(High∣Claim)=(0.3⋅0.5714)+(0.15⋅0.4286)
Calculating:
=0.17142+0.06429≈0.2357= 0.17142 + 0.06429 \approx 0.2357=0.17142+0.06429≈0.2357
Conclusion
1. The total probability of making a claim is 0.14, or 14%.

2. Given that a claim is made, the probability that it is a high-value claim is
approximately 23.57%.

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Total Probability

Problem 1: School Attendance

 70% of the students are full-time (P(F)=0.7P(F) = 0.7P(F)=0.7).

Step 1: Define Events

 AAA: the event that a student is present.

Step 2: Apply the Law of Total Probability

We want to find the total probability that a student is present, P(A)P(A)P(A):

P(A)=P(A∣F)⋅P(F)+P(A∣P)⋅P(P)P(A) = P(A | F) \cdot P(F) + P(A | P) \cdot

Step 3: Substitute the Values

Substituting in the values:

P(A)=(0.9⋅0.7)+(0.6⋅0.3)P(A) = (0.9 \cdot 0.7) + (0.6 \cdot 0.3)P(A)=(0.9⋅0.7)+(0.6⋅0.3)

 40% of their customers have comprehensive policies (P(C)=0.4P(C) = 0.4P(C)=0.4).

1. What is the total probability of making a claim?

Step 1: Define Events

 ClaimClaimClaim: the event that a customer makes a claim.

Step 2: Calculate Total Probability of Making a Claim

Using the law of total probability:

P(Claim)=P(Claim∣C)⋅P(C)+P(Claim∣B)⋅P(B)P(Claim) = P(Claim | C) \cdot P(C) + P(Claim |

Substituting the values:

P(Claim)=(0.2⋅0.4)+(0.1⋅0.6)P(Claim) = (0.2 \cdot 0.4) + (0.1 \cdot

Step 3: Calculate Total Probability of High-Value Claims

Next, we need P(High∣Claim)P(High | Claim)P(High∣Claim):

Using the law of total probability again, we find P(High∣Claim)P(High |

Step 3a: Find P(C∣Claim)P(C | Claim)P(C∣Claim) and P(B∣Claim)P(B |

Using Bayes' Theorem:

Step 3b: Substitute to Find P(High∣Claim)P(High | Claim)P(High∣Claim)

Using the conditional probabilities for high-value claims:

P(High∣Claim)=(0.3⋅0.5714)+(0.15⋅0.4286)P(High | Claim) = (0.3 \cdot 0.5714) + (0.15 \cdot

=0.17142+0.06429≈0.2357= 0.17142 + 0.06429 \approx 0.2357=0.17142+0.06429≈0.2357

1. The total probability of making a claim is 0.14, or 14%.

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