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 Important Terms

a Probability ± the chance that an uncertain event

will occur (always between 0 and 1)
a Experiment ± a process of obtaining outcomes
for uncertain events
a Elementary Event ± the most basic outcome
possible from a simple experiment
a Sample Space ± the collection of all possible
elementary outcomes
 Sample Space
The Sample Space is the collection of all
possible outcomes
e.g., All 6 faces of a die:

e.g., All 52 cards of a bridge deck:

 i 

a Elementary event ± An outcome from a sample

space with one characteristic
a Example: A red card from a deck of cards

a Event ± May involve two or more outcomes

simultaneously
a Example: An ace that is also red from a deck of
cards
 °
i 
a Tables can be used to help us
enumerate events
a Example: 1000 people asked about

gender and employment status

a From this you can tell, for example:

± 459 are male and employed

± 499 (= 459 + 40) are male
± 926 (= 459 + 467) are employed
a ¦e can use this table to calculate probabilities
a Example: Probability that a randomly chosen
person from the 1,000 is male 6



6
 
a ¦ell, 459 out of 1,000 possible outcomes lead
to this event
a So P(A and B) = 459/1000 = 0.459
a ¦hat about the probability that a person chosen
is male, P(A)?
a ¦ell, 459 + 40 = 499 are male
a So P(A) = 499/1000 = 0.499
a ¦hat about the probability that a person is male
employed, P(A or B)?
a Is it equal to P(A) + P(B)? No!
a Adding all males (499) and all employed people
(926), means 459 people (male 6


counted twice!
 


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a   6
 

a If E1 occurs, then E2 cannot occur
a E1 and E2 have no common elements
E2 A person cannot
E1
be married and
Married remain single at
Single the same time.
 


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a ?

 6

  

a Independent: Occurrence of one does not
influence the probability of
occurrence of the other

a Dependent: Occurrence of one affects the

probability of the other
? i 
a ?

  

E1 = heads on one flip of fair coin
E2 = heads on second flip of same coin
Result of second flip does not depend on the result of
the first flip.
a 
  

E1 = rain forecasted on the news
E2 = take umbrella to work
Probability of the second event is affected by the
occurrence of the first event
 ˜



a mlassical Probability Assessment
Number of ways Ei can occur
P(Ei) =
Total number of elementary events

a Relative Frequency of Occurrence

Number of times Ei occurs
Relative Freq. of Ei =
N

a Subjective Probability Assessment

An opinion or judgment by a decision maker about
the likelihood of an event
 ÿ 



Rules for
Possible Values
and Sum

Individual Values Sum of All Values

k
0 ” P(ei) ” 1
P(e i ) º 1
For any event ei i º1
where:
k = Number of elementary events
in the sample space
ei = ith elementary event
 ˜ ÿ i
 i 

a The probability of an event Ei is equal to the

sum of the probabilities of the elementary
events forming Ei.
a That is, if:
Ei = {e1, e2, e3}
then:
P(Ei) = P(e1) + P(e2) + P(e3)
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a The complement of an event E is the collection of

all possible elementary events  contained in
event E. The complement of event E is
represented by E.
E
a momplement Rule:

P( E ) º 1 Î P(E) E

Or, (E)
( E ) º
 ˜ ÿ  i 

Ŷ 

  

 


 6


     

 


 6

Don¶t count common
elements twice!
 ˜ ÿi









6

 !   " 
Don¶t count
the two red
$ aces twice!
% 
6# %6
   !
&  ! ! !"
%6   
 ˜ ÿ 

 i
 i 
a If E1 and E2 are mutually exclusive, then

P(E1 and E2) = 0  

So

 


 6





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a monditional probability for any

two events E1 , E2:

P(E1 and E 2 )
P(E1 | E 2 ) º
P(E 2 )

w ere P(E 2 ) 
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 i



a Of the cars on a used car lot, 70% have air

conditioning (Am) and 40% have a mD player
(mD). 20% of the cars have both.

a ¦hat is the probability that a car has a mD

player, given that it has Am ?

i.e., we want to find P(mD | Am)

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 i


2

a Of the cars on a used car lot, (*+ have air conditioning
(Am) and !*+ have a mD player (mD).
*+ of the cars have both.
$ &$ %6
$ ' ' '(
&$ ' ' ')
%6 '! ' '*

(mD and Am) .

(mD | Am) º º º. 8
(Am) .
 m  



 i


2

a Xiven Am, we only consider the top row (70% of the cars). Of these,
20% have a mD player. 20% of 70% is about 2 .57%.

$ &$ %6
$ ' ' '(
&$ ' ' ')
%6 '! ' '*

(mD and Am) .2

(mD | Am) º º º .2 57
(Am) .7
 ½ ?i 

a monditional probability for

independent events E1 , E2:

(E1 | E 2 ) º (E1 ) where (E2 ) 0

(E 2 | E1 ) º (E 2 ) where (E1 ) 0
 
 ÿ

a Multiplication rule for two events E1 and E2:

(E1 and E 2 ) º (E1 ) (E 2 | E1 )

& If E1 and E2 are independent, then (E 2 | E1 ) º (E 2 )

and the multiplication rule simplifies to

P(E1 and E 2 ) º P(E1 ) P(E 2 )

 

i



6
)*'" *' *'

$6
!-*'

6
!*'" *' *'!*
,6
 

*'"

6
 *'" *') *'!

6
)*' *' *'



*' $6
!-*'

6
!*' *'*'*

)6
!*' *') *'*
 G
  

P(Ei )P(B| Ei )
P(Ei | B) º
P(E1)P(B| E1) a P(E2 )P(B| E2 ) a Õ a P(Ek )P(B| Ek )

a where:
Ei = ith event of interest of the k possible events
B = new event that might impact P(Ei)
Events E1 to Ek are mutually exclusive and collectively
exhaustive
 G
  i



a A drilling company has estimated a 40%

chance of striking oil for their new well.
a A detailed test has been scheduled for more
information. Historically, 60% of successful
wells have had detailed tests, and 20% of
unsuccessful wells have had detailed tests.
a Xiven that this well has been scheduled for a
detailed test, what is the probability
that the well will be successful?
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  i


2 
a Aet S = successful well and U = unsuccessful well
a P(S) = .4 , P(U) = .6 (prior probabilities)
a Define the detailed test event as D
a monditional probabilities:
P(D|S) = .6 P(D|U) = .2
a Revised probabilities
Prior monditional Joint Revised
Event
Prob. Prob. Prob. Prob.
S (successful) .4 .6 .4*.6 = .24 .24/.36 = .67
U (unsuccessful) .6 .2 .6*.2 = .12 .12/.36 = .33

Sum = .36
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  i


2 

a Xiven the detailed test, the revised probability

of a successful well has risen to .67 from the
original estimate of .4

Prior monditional Joint Revised

Event
Prob. Prob. Prob. Prob.
S (successful) .4 .6 .4*.6 = .24 .24/.36 = .67
U (unsuccessful) .6 .2 .6*.2 = .12 .12/.36 = .33

Sum = .36