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Unit 4

The document provides an overview of the theory of probability, including definitions of key concepts such as experiments, sample space, and events. It outlines three approaches to probability theory: Classical, Relative Frequency, and Subjective, along with axioms and types of probabilities like marginal, joint, and conditional. Various examples and questions illustrate the application of these concepts in real-world scenarios.

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3 views

Unit 4

The document provides an overview of the theory of probability, including definitions of key concepts such as experiments, sample space, and events. It outlines three approaches to probability theory: Classical, Relative Frequency, and Subjective, along with axioms and types of probabilities like marginal, joint, and conditional. Various examples and questions illustrate the application of these concepts in real-world scenarios.

Uploaded by

avinashsiinghai
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Business Statistics and Logic – I

UNIT - IV

DR. MD SARWAR ALA M


ASSISTAN T PROFESSOR
DEPARTMENT O F MA NAGEMENT
SC HOO L OF MANAGE ME NT A ND BUSINESS STUDIE S
Theory of Probability
Introduction
 Uncertainty
Continued
 Weather

Stock Market
Basics of Probability
 Probability: The chance of occurrence of an event or happening.

 Experiment: Any action is an experiment.

E.g., Tossing a coin, Rolling a Die, Measuring product quality

 Characteristics of such experiments


I. Two or more outcomes of each experiment
II. Possible to specify the outcomes in advance
III. There is uncertainty about the outcomes
Continued
 Sample Space: The set of all possible outcomes of an experiment. Each outcome is
called as sample point in that sample space.

E.g., Tossing of a Coin, Sample space: {Head, Tail}

Sample point
 Event: In Probability, event refers to one or more possible outcomes of an experiment.
Subset of sample space
Refers to a single outcome or a combination of outcomes
Continued
 E.g., the demand for a product in the next month may be between 100 and 130
Events can be:
1. The demand is 100 Sample Point = 1
2. The demand is between 101 and 110 Sample Points = 10
3. The demand is either 100 or 110 Sample Points = 2
Continued
 Experiment

1. Testing two units of a Product. Find the possible outcomes


(Defective or Not Defective)
2. Three coins are tossed once. List down the possible outcomes. In
how many outcomes do you find the occurrence of two heads?
Approaches to Probability Theory
 Three different approaches to Probability Theory as per three different situations.
 Situation 1
Experiment: Drawing a number from among nine numbers e.g., 1 to 9.
Event: On any draw, number 4 occurs.
In this situation, there are equal chances of occurrence of any number between 1
to 9.
This is a case of equally like outcomes.
Known as Classical Approach of Probability Theory.
Continued
 Under this approach, the probability of occurrence of an event is
calculated as:

The number of outcomes favourable to an event

Total number of outcomes


i.e. P(E) = n(E)/n(S)
Where, E = Event, S = Sample space
Continued
E.G., The event that the no. 4 comes out in the draw.
A = The event that the no. 4 comes out in the draw.
P(A) = Probability of occurrence of event A.
Therefore, P(A) = 1/9

Ques: In a box of 50 torches, 18 are known to be defective. What is the


probability that a torch selected at random from the box is not defective? (0.64)

Ques: Calculate the probability that on tossing a pair of unbiased dice, the sum
of digits is equal to 7. (.167)
Continued
 Situation 2

Experiment: Administering a particular medicine.

Event: The medicine puts a person to sleep in ten minutes.

 We don’t know how many persons may fall asleep in 10 minutes after taking
the medicine.

 For this, we either use the past data or the present data.

 Known as Relative Frequency Approach of Probability.


Continued
 In this situation, if E = event. Then P(E) = Number of times the event occurs (h)
Number of trials (n)

 The total no. of trials in such experiments should be very large.

 Ques: A person who sells newspaper wants to find out the chances that on any day he
will able to sell more than 100 copies. His last year recorded sales are as follows: 73
Days – 85 Copies, 146 Days – 95 Copies, 60 Days – 105 Copies, 86 Days – 110 Copies,
Out of 365 days. Find out the probability of the same.
Continued
 Situation 3
Experiment: Starting a new venture.
Event: The venture turns out to be successful.

 In such cases, we use Subjective Approach of Probability.


Continued
Axioms in Probability Theory

 The probability of an event A, written as P(A), must be a number between 0


and 1, both values inclusive. i.e. 0≤ P(A)≤1.

 The probability of occurrence of one of the other all possible events is equal to
one. As S denotes the sample space or set of all possible events, P(S)=1.

E.g., If A and B are the only two possible events of an experiment, P (A or B )=1
Continued
 If two events are such that occurrence of one implies that the other cannot
occur, then the probability that either one or the other will occur is equal to the
sum of their individual probabilities.

E.g., If A and B are such events then P(A or B) = P(A) + P(B)

 Such events are called as mutually exclusive.

 If two or more events together define the total sample space, the events are
said to be collectively exhaustive.
Continued
Q1: Three coins are tossed at once. Find out the probability that the toss
of these coins will result in only heads. Which approach you will use for
finding the probability?
Continued
Q3: Drawing an Ace from a deck of 52 Cards. Find out the Probability.
Which approach you will use?

Q4: What is the probability of drawing a black card from a pack of cards?
Marginal Probability
 It is also known as simple probability. And, it refers to the occurrence of a
simple event.

Gender Rank Total


R1 R2 R3
Male 30 80 90 200
Female 20 40 40 100
Total 50 120 130 300

E.g. The probability of selecting a female employee on random selection.


Joint Probability
 It is the probability of two events happening together/simultaneously.

 E.g. an employee is selected randomly, the probability that the selected


employee is a female employee with rank R2. It is represented by P(F∩R2).

 Here, P(F∩R2) = 40/300

 The marginal probability of female employee will be the sum of all such joint
probabilities. i.e. P(F) = P(F∩R1) + P(F∩R2) + P(F∩R3)
Conditional Probability
 When there are two events E1 and E2 such that Event E1 has already occurred and the
occurrence of event E1 affects the probability of E2. Then the probability of E2 provided
that E1 has already occurred is called as Conditional Probability represented by
P(E2/E1).

 P(E2/E1) = P(E1∩E2)/P(E1)

Where, P(E1∩E2) is the joint probability of E1 and E2.

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