Introduction to Probability

Learning Outcomes

• Be familiar with the common terms used in probability theory

• Understand the different approaches to assigning probabilities

– classical, empirical, and subjective

• Be able to apply the different principles of counting

– the multiplication formula, permutations, and combinations

• Be able to apply the different rules for computing probabilities

– rules of addition, the complement rule, and rules of multiplication

• Know how to use contingency tables and tree diagrams to

determine various probabilities

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 Probability

• Probability (P)
– a value between zero and one, inclusive, describing the relative
possibility (chance or likelihood) an event will occur
– often expressed as a decimal or fraction
– P(X) = 0; event cannot happen
– P(X) = 1; event is certain to happen

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 Experiment, Outcome, and Event

• Experiment
– a process that leads to the occurrence of one and only one of several
possible results

• Outcome
– a particular result of an experiment

• Event
– a collection of one or more outcomes of an experiment

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 Mutually Exclusive and Collectively Exhaustive

• Mutually Exclusive
– the occurrence of one event means that none of the other events can
occur at the same time

• Collectively Exhaustive
– at least one of the events must occur when an experiment is conducted

• ∑ 𝐏 𝐗𝐢 = 𝟏
– occurs when a set of events is collectively exhaustive and the events are
mutually exclusive

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 Assigning Probabilities – The Classical Probability

• The Classical Probability

– assumes that the outcomes of an experiment are equally likely
– represents an objective probability

Number of Favorable Outcomes

P X =
Number of Possible Outcomes

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 Assigning Probabilities – The Empirical Probability

• The Empirical Probability

– AKA the “relative frequency probability”
– the probability of an event happening is the fraction of the time similar
events happened in the past
– represents an objective probability

Number of Times the Event Occurs

P X =
Total Number of Observations

• The Law of Large Numbers

– over a large number of trials, the empirical probability of an event will
approach its true probability

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 Assigning Probabilities – The Subjective Probability

• The Subjective Probability

– the probability of an event happening that is assigned by an individual
on the basis of whatever information is available

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 Principles of Counting – The Multiplication Formula

• The Multiplication Formula

– used to find the total number of possible arrangements when there are
two or more groups of objects

Total Number of Arrangements = m ∗ n

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 Principles of Counting – The Permutation Formula

• The Permutation Formula

– used to find the total number of possible arrangements when there is
only one group of objects
– requires that the order of “r” objects selected from a single group of “n”
possible objects is important
– if repetition is allowed: total number of arrangements = nr

n!
=P> =
n−r !

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 Principles of Counting – The Combination Formula

• The Combination Formula

– used to find the total number of possible arrangements when there is
only one group of objects
– requires that the order of “r” objects selected from a single group of “n”
possible objects is not important

n!
=C> =
r! n − r !

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 Computing Probabilities – The Special Rule of Addition

• The Special Rule of Addition

– requires that the events are mutually exclusive

P A or B = P A + P B

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 Computing Probabilities – The Complement Rule

• The Complement Rule

– used to determine the probability of an event occurring by subtracting
the probability of the event not occurring from 1
– requires that the events A and not A are mutually exclusive and
collectively exhaustive

P A = 1 − P ~A

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 Computing Probabilities – The General Rule of Addition

• The General Rule of Addition

– requires that the events are not mutually exclusive
– involves a joint probability – P(A and B) – that measures the likelihood
two events will happen at the same time

P A or B = P A + P B − P A and B

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 Computing Probabilities – The Special Rule of
Multiplication

• The Special Rule of Multiplication

– requires that the events are independent
– independent events: the occurrence of one event has no effect on the
probability of the occurrence of another event

P A and B = P A ∗ P B

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 Computing Probabilities – The General Rule of
Multiplication

• The General Rule of Multiplication

– requires that the events are dependent
– involves a conditional probability – P(B|A) – that measures the
likelihood of a particular event occurring, given that another event has
already happened

P A and B = P A ∗ P B A

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 Contingency Tables

• Contingency Tables
– provide a cross-tabulation that summarizes two variables of interest
and their relationship
– results are used to determine various probabilities

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 Tree Diagrams

• Tree Diagrams
– a visual representation that helps organize calculations that involve
several stages
– includes three distinct segments: marginal probabilities, conditional
probabilities, and joint probabilities
– branches are weighted by probabilities
– the sum of the joint probabilities must equal 1

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