BBALLB, SEMESTER II [BUSINESS STATISTICS]
Module VII
1
Prepared by: Department of Mathematics
Brainware University, Barasat.
BBALLB, SEMESTER II [BUSINESS STATISTICS]
(Probability)
Table of Contents
Sl. No. Topic Name Page
No.
1. Introduction 2
2. Theorems of addition and multiplication 4
3. Conditional probability 4
4. Bayes’ theorem 5
5. Independent events 7
6. Exercise 9
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BBALLB, SEMESTER II [BUSINESS STATISTICS]
Probability
Introduction to Probability
Sample space: The sample space is a nonempty set that contains (at least) all possible
outcomes of the random experiment.
Let us formulate some easy rules for the occurrence of events.
1. By the choice of the sample space the event always occurs. Therefore, is also called
a certain event.
2. The empty set never occurs. Thus, it is called an impossible event.
3. An event A occurs if and only if the complementary event Ac does not, and vice versa,
A does not occur if and only if Ac does.
4. If A and B are two events, then A B occurs if at least one of the two sets occurs.
Hereby we do not exclude that A and B may both occur.
5. The event A B occurs if and only if A and B both occur.
Random experiment: If an experiment is conducted, any number of times, under identical
conditions, there is a set of all possible outcomes associated with it. If the outcome it’s not
unique but maybe any one of the possible outcomes, the experiment is called a random
experiment.
Outcome: the result of a random experiment it’s called an outcome. For example, consider the
following:
a. Suppose a random experiment is ‘a coin is tossed’. This experiment gives two possible
outcomes- head or tail.
b. Suppose a random experiment is ‘a dice is thrown’. This experiment gives six possible
outcomes- 1,2,3,4,5 or 6 – on the uppermost face of a dice.
Event and trial: Any particular performance of a random experiment is called a trial and
outcome. A combination of outcomes is called an event. For example, consider the following:
a. Tossing of a coin is a trial and getting a head or tail is an event.
b. Throwing of a dice is a trial and getting 1 or 2 or 3 or 4 or 5 or 6 is an event.
Exhaustive event: The total number of possible outcomes of a random experiment is called an
exhaustive event. Consider the following:
a. In tossing of a coin, there are two exhaustive events, head and tail.
b. In throwing of a dice, there are six exhaustive events, getting 1 or 2 or 3 or 4 or 5 or 6
are mutually exclusive events.
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Equally likely events: The outcomes of a random experiment are said to be equally likely if
the occurrence of none of them is expected in preference to others. For example, consider the
following:
a. In tossing a coin, head or tail are equally likely events.
b. In throwing a dice, all the six faces are equally likely events.
Independent events: Events are said to be independent if the occurrence of an event does not
have any effect on the occurrence of other events. For example, consider of following:
a. In tossing a coin, the event of getting a head in the first toss is independent of getting a
head in the second, third and subsequent tosses.
b. In throwing a dice, the result of the first throw does not affect the result of the second
throw.
Favourable events: The favourable events in a random experiment are the number of outcomes
which entail the occurrence of the event. For example, consider the following:
In throwing of two dice, the favourable events of getting the sum 5 is (1,4), (4,1), (2,3), (3,2),
i.e., 4.
Definitions of Probability:
Let, n be the number of equally likely, mutually exclusive and exhaustive outcomes of a
random experiment. Let m be number of the outcomes which are favourable to the occurrence
of an event A. The probability of event A occurring, denoted by P(A), is given by,
Number of outcomes favourableto A
P( A)
Number of all outcomes
Theorems on Probability
Theorem 1: The probability of an impossible event is zero.
Theorem 2: The probability of the complement event Ac of A is P ( Ac ) = 1 – P (A)
Theorem 3: (Additive law of Probability) For any two events A and B in the sample space S,
P( A B) P( A) P( B) P( A B)
Theorem 4: For any two events A and B in the sample space S,
P( A B) P( A) P( B) P( A B)
Theorem 5: For any two events A and B in the sample space S, P( AC B) P( B) P( A B)
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Theorem 6: If A and B are mutually exclusive events, i.e., A B then, P( A B) 0 .
Hence, P( A B) P( A) P( B)
Theorem 7: De Morgan’s Laws: P( A B)c P( Ac B c ) , P( A B)c P( Ac B c )
Conditional Probability
For any two events A and B in a sample space, S, the probability of their simultaneous
occurrence, i.e., both the events occurring’s simultaneously is given by
P( A B) P( A).P( B | A)
P( A B) P( B).P( A | B)
Where, P(B|A) is the conditional probability of B given that A has already occurred. P(A|B) is
the conditional probability of A given that B has already occurred.
P( A B)
So, the probability of A given B, P ( A | B )
P( B)
P( A B)
And, the probability of B given A, P ( B | A)
P ( A)
Theorem of total probability:
Let I1 , I 2 ,...., I n be n events having the following characteristics:
1. They are mutually disjoint, I j I k
n
2. They cover all the sample space, Ij
j 1
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3. They have strictly positive probability, P( I j ) 0
Where I1 , I 2 ,...., I n is the partition of .
The law of total probability states that, for any event E, the following holds:
P( E ) P( E | I1 ) P( I1 ) P( E | I 2 ) P( I 2 ) .... P( E | I n ) P( I n )
n
Which can, of course, also be written as P ( E ) P ( E | I j ) P ( I j )
j 1
Bayes’ Theorem:
Let A and B be two events. Denote their probabilities by P(A) and P(B) and suppose that both
P (A) > 0 and P (B) > 0. Denote by P(A|B) the conditional probability of A given B and by
P(B|A) the conditional probability of B given A. Bayes’ rule states that:
P ( B | A) P ( A)
P( A | B)
P( B)
Notations:
1. P(A) is called prior probability or, simply, prior;
2. P(B|A) is called conditional probability or likelihood;
3. P(B) is called marginal probability;
4. P(A|B) is called posterior probability or, simply, posterior.
Proof of the Bayes’ theorem can be done using the conditional probability.
Proof:
Conditional probability of A given B,
P( A B)
P( A | B)
P( B)
P( A B) P( A | B) P( B)....................(1)
Conditional probability of B given A,
P( A B)
P( B | A)
P( A)
P( A B) P( B | A) P( A).......................(2)
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Equating these two equations, we get,
P( A | B) P( B) P( B | A) P( A)
P( B | A) P( A)
P( A | B)
P( B)
Hence, Bayes’ theorem is proved.
Question:
An HIV test gives a positive result with probability 98% when the patient is indeed affected by
HIV, while it gives a negative result with 99% probability when the patient is not affected by
HIV. If a patient is drawn at random from a population in which 0.1% of individuals are
affected by HIV and he is found positive, what is the probability that he is indeed affected by
HIV?
Solution:
In probabilistic terms, what we know about this problem can be formalized as follows:
P (positive | HIV) = 0:98
P (positive | NO HIV) = 1 – 0.99 = 0.01
P (HIV) = 0.001
P (NO HIV) = 1 – 0.001 = 0.999
The unconditional probability of being found positive can be derived using the law of total
probability:
P (positive)
= P (positive | HIV) P (HIV) + P (positive | NO HIV) P (NO HIV)
= (0.98). (0.001) + (0.01). (0.999) = 0.00098 + 0.00999 = 0.01097
Using Bayes’ rule:
P( Positive | HIV ) P( HIV )
P( HIV | Positive)
P( Positive)
0.98 0.001
0.08933
0.01097
Question:
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BBALLB, SEMESTER II [BUSINESS STATISTICS]
An economics consulting firm has created a model to predict recessions. The model predicts a
recession with probability 80% when a recession is indeed coming and with probability 10%
when no recession is coming. The unconditional probability of falling into a recession is 20%.
If the model predicts a recession, what is the probability that a recession will indeed come?
Solution:
What we know about this problem can be formalized as follows:
P (rec. pred. | rec. coming) = 8/10
P (rec. pred. | rec. not coming) = 1/10
P (rec. coming) = 2/10
P (rec. not coming) = 1- P (rec. coming) = 1 - 2/10 = 8/10
The unconditional probability of predicting a recession can be derived using the law of total
probability:
P (rec. pred.) = P (rec. pred. | rec. coming) P (rec. coming) + P (rec. pred. | rec. not coming) P
(rec. not coming)
= (8/10). (2/10)+(1/10).(8/10)
= 24/100 = 0.24
Using Bayes’ rule, we obtain:
P ([Link].|[Link]) P ([Link]) 0.8 0.2 2
P (rec. coming | rec. pred.) = =
P ([Link].) 0.24 3
Independent events:
Two events E and F are said to be independent if the occurrence of E makes it neither more nor
less probable that F occurs and, conversely, if the occurrence of F makes it neither more nor
less probable that E occurs. In other words, after receiving the information that E will happen,
we revise our assessment of the probability that F will happen, computing the conditional
= (0.98). (0.001) + (0.01). (0.999) = 0.00098 + 0.00999 = 0.01097
Using Bayes’ rule:
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BBALLB, SEMESTER II [BUSINESS STATISTICS]
P( Positive | HIV ) P( HIV )
P( HIV | Positive)
P( Positive)
0.98 0.001
0.08933
0.01097
Question:
An economics consulting firm has created a model to predict recessions. The model predicts a
recession with probability 80% when a recession is indeed coming and with probability 10%
when no recession is coming. The unconditional probability of falling into a recession is 20%.
If the model predicts a recession, what is the probability that a recession will indeed come?
Solution:
What we know about this problem can be formalized as follows:
P (rec. pred. | rec. coming) = 8/10
P (rec. pred. | rec. not coming) = 1/10
P (rec. coming) = 2/10
P (rec. not coming) = 1- P (rec. coming) = 1 - 2/10 = 8/10
The unconditional probability of predicting a recession can be derived using the law of total
probability:
P (rec. pred.) = P (rec. pred. | rec. coming) P (rec. coming) + P (rec. pred. | rec. not coming) P
(rec. not coming)
= (8/10). (2/10)+(1/10).(8/10)
= 24/100 = 0.24
Using Bayes’ rule, we obtain:
P ([Link].|[Link]) P ([Link]) 0.8 0.2 2
P (rec. coming | rec. pred.) = =
P ([Link].) 0.24 3
Exercise:
MCQ
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BBALLB, SEMESTER II [BUSINESS STATISTICS]
Three unbiased coins are tossed. Select the probability of getting at most two heads.
a)3/4 b)3/8
c)7/4 d)7/8
If two coins are tossed simultaneously, identify the chances of getting at least one tail
a)3/4 b)1/4
c)1/2 d)1
Suppose two coins are tossed simultaneously. Select the chances of getting at least one head
a)1/7 b)3/4
c)3/7 d)4/7
Identify the correct option: Bag contain 10 back and 20 white balls, one ball is drawn at random.
Then the probability that ball is white
a)1 b)1/3
c)2/3 d) 0
A speaks truth in 75% of cases and B in 80% of cases. Select the percentage of cases are they
likely to contradict each other, narrating the same incident
a)25% b)35%
c)45% d)50%
From a pack of 52 cards, one card is drawn at random. Select the probability of a face card is
drawn
a)4/13 b)1/13
c)1/52 d)1/26
A card is drawn from a pack of 52 cards. Select the probability of getting a queen of club or a king
of heart is
a)1/26 b)1/52
c)3/52 d) none of these
In a throw of coin identify the probability of getting head is
a)1 b)1/2
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c)0 d) 1/4
Three unbiased coins are tossed, select the probability of getting at least 2 tails is
a)1/3 b)1/6
c)1/2 d)1/4
Select the correct option: In a throw of dice, the probability of getting number greater than 5 is
a)1/6 b)1/3
c)0 d)1
Select the correct option: The probability of getting a sum 9 from two throws of dice is
a)1/3 b)1/9
c)1/12 d)2/9
Select the correct option: Let A and B be events on the same sample space, with P (A) = 0.6 and P
(B) = 0.7. Can these two events be disjoint?
a) Yes b) No
c) Cannot be determined from these data d) None of those
Select the correct option: Probability lies between
a) -1 and +1 b) 0 and 1
c) 0 and n d) 0 and ∞
Identify the correct option: A random experiment contains
a) At least one outcome b) At least two outcomes
c) At most one outcome d) At most two outcomes
Identify the correct option: The probability of all possible outcomes of a random experiment is
always equal to
a) One b) Zero
c) Infinity d) All of these
Identify the correct option: A set of all possible outcomes of an experiment is called
a) Combination b) Sample point
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c) Sample space d) Compound event
Short Answer Type
An urn contains 8 white and 3 red balls. If 2 balls are drawn at random, illustrate the probability that
58 (i) both are white, (ii) both are red, (iii) one of each color.
Two dice are rolled, if it is known that at least one of the dice always shows 4, estimate the
59 probability that the numbers appeared on the dice have a sum 8.
60 If P(A) = 2P(B) = 4/13 and P(A|B) = ⅔, estimate the value of P (A U B).
Let X and Y be two events such that P(X|Y) = 1/2. P(Y|X) = 1/3 and P(X⋂Y) = 1/6. Show that, X and Y
61 are independent and Calculate P (X U Y).
A store contains 35 light green parakeets (14 females and 21 males) and 44 sky blue parakeets (28
females and 16 males). You randomly choose 1 of the parakeets. Estimate the probability that it is a
62 female or sky-blue parakeet.
63
A fair coin is tossed twice such that
E = event of having both head and tail, and
F = event of having at most one tail.
64 Estimate P(E), P(F) and P(E∣F).
A card is drawn at random from a well shuffled pack of cards. Show that the probability that it is a
65 heart or a queen is 4/13.
A four-digit number is formed by the digits 1, 2, 3, 4 with no repetition, illustrate the probability that
66 the number is odd.
An urn contains 8 white and 3 red balls. If 2 balls are drawn at random, illustrate the probability that
67 both are white.
An urn contains 8 white and 3 red balls. If 2 balls are drawn at random, illustrate the probability that
68 both are red.
An urn contains 7 white and 3 red balls. If 2 balls are drawn at random, illustrate the probability that
69 one of each color.
A four-digit number is formed by the digits 1, 2, 4, 5 with no repetition, illustrate the probability that
70 the number is divisible by 4.
71 Judge that the probability of 53 Mondays in a leap year is 2/7.
Long Answer Type
The probability that Ashok can solve a problem in Business Statistics is 4/5 that Amal can solve is
2/3 and that Abdul can solve is 3/7. If all of them try independently, observe the probability that
the problem is solved.
65
66 Given P(A ) = 1/3, P(A+B) = 2/3, Find P(B). Show that P(A) = 1/2 if P(AB)=1/6.
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If P(A)=1/4, P(B)=2/5, P(A+B)=1/2. Show that P(AB) = 3/20, P(A/B) = 3/8, P(B/A) = 3/5.
67
68
Three urns are there containing white and black balls; first urn has 3 white and 2 black balls,
second urn has 2 white and 3 black balls and third urn has 4 white and 1 black balls. Without any
biasing one urn is chosen from that one ball is chosen randomly which was white. Calculate the
probability that it came from the third urn.
69
The probability that a contractor will get a plumbing contract is 2/3 and the probability that he
will not get an electric contract is 5/9. If the probability of getting at least one contract is 4/5,
70 show that the probability that he will get both the contracts is 14/45.
In a neighborhood, 90% children were falling sick due flu and 10% due to measles and no other
disease. The probability of observing rashes for measles is 0.95 and for flu is 0.08. If a child
develops rashes, calculate the child’s probability of having flu.
71
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