A Survey of Probability

Concepts

Chapter 5
 Learning Objectives

LO5-1 Define the terms probability, experiment, event, and

outcome.
LO5-2 Assign probabilities using a classical, empirical, or
subjective approach.
LO5-3 Calculate probabilities using the rules of addition.

LO5-4 Calculate probabilities using the rules of multiplication.

LO5-5 Compute probabilities using a contingency table.

 LO5-1 Define the terms probability,
experiment, event, and outcome.

Probability

PROBABILITY A value between zero and one, inclusive, describing

the relative possibility (chance or likelihood) an event will occur.

Note: Probability, chance and likelihood, all have same meanings

 LO5-1

Experiment, Outcome and Event

An experiment is a process that leads to the occurrence of

one and only one of several possible results.

An outcome is the particular result of an experiment.

An event is the collection of one or more outcomes of an

experiment.
 Self Review 5 - 1

Video Games Inc. recently developed a new video game.

Its playability is to be tested by 80 experienced game
players.
a) What is the experiment?
b) What is one possible outcome?
c) Suppose 65 of the 80 players testing the new game
said they liked it. Is 65 a probability?
d) The probability that the new game will be a success is
computed to be -1. Comment.
e) Specify one possible event.
 Solution to Self Review 5 - 1

a) Count the number who think the new game is playable.

b) Seventy-three players found the game playable. Many
other answers are possible.
c) No. Probability cannot be greater than 1. The probability
that the game, if put on the market, will be successful is
65/80, or .8125.
d) Cannot be less than 0. Perhaps a mistake in arithmetic.
e) More than half of the players testing the game liked it.
(Of course, other answers are possible.)
 LO5-2 Assign probabilities using a classical,
empirical, or subjective approach.

Ways to Assign Probabilities

There are three ways to assign probabilities:
1. CLASSICAL PROBABILITY
Based on the assumption that the outcomes of an experiment
are equally likely.
2. EMPIRICAL PROBABILITY
The probability of an event happening is the fraction of the time
similar events happened in the past.
3. SUBJECTIVE PROBABILITY
The likelihood (probability) of a particular event happening that
is assigned by an individual based on whatever information is
available.
 LO5-2
Classical Probability

Example: Consider an experiment of rolling a dice. What is

the probability of the event: “an even number of spots appear
face up”?
Solution:
The possible outcomes are:

There are three “favorable” outcomes (a two, a four, and a six)

out of six equally likely possible outcomes.
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. The union of collectively exhaustive events
must cover all the events within the entire sample space

Note: If the set of events is collectively exhaustive and the

events are mutually exclusive the sum of the probabilities is 1.
 LO5-2

Empirical Probability
The probability of an event happening is the fraction of
the time similar events happened in the past.

Empirical Probability = No. of times the event occurs

Total No. of observations
Empirical approach to probability is based on what is called
the Law of Large Numbers.

The key to establishing probabilities empirically: a larger

number of observations provides a more accurate estimate
of the probability.
 LO5-2

Empirical Probability - Example

On February 1, 2003, the Space Shuttle Columbia

exploded. This was the second disaster in 113 space
missions for NASA. Based on this information, what is the
probability that a future mission is successfully completed?

Number of successful flights

Probability of a successful flight =
Total number of flights
111
P(A) = = 0.98
113
 LO5-2

Subjective Probability
The probability of a particular event happening that is
assigned by an individual based on whatever information is
available.

• If there is little or no data or information to calculate a

probability, it may be arrived at subjectively.

• Examples of subjective probability are:

1. Estimating the likelihood the New England Patriots will
play in the Super Bowl next year.
2. Estimating the likelihood a person will be married
before the age of 30.
3. Estimating the likelihood the U.S. budget deficit will be
reduced by half in the next 10 years.
 LO5-2

Summarizing Probability
 Self Review 5 - 2

1. One card will be randomly selected from a standard 52-

card deck. What is the probability the card will be a
queen? Which approach to probability did you use to
answer this question?
2. The Center for Child Care reports on 539 children and
the marital status of their parents. There are 333
married, 182 divorced, and 24 widowed parents. What
is the probability a particular child chosen at random will
have a parent who is divorced? Which approach did you
use?
3. What is the probability you will save one million dollars
by the time you retire? Which approach to probability
did you use to answer this question?
 Solution to Self Review 5 - 2

1. P(A) = 4 queens in deck = 4 = 0.0769

52 cards total 52
Classical approach

2. P(B) = 182 = 0.338

539
Empirical approach

3. The probability of the outcome is estimated by

applying the subjective approach to estimating a
probability. If you think that it is likely that you will
save $1 million, then your probability should be
between 0.5 and 1.0.
 LO5-3 Calculate probabilities
using rules of addition.

Rules of Addition for Computing

Probabilities
▪ Special Rule of Addition - If two events A and B are
mutually exclusive, the probability of one or the other
event occurring equals the sum of their probabilities.
P(A or B) = P(A) + P(B)

▪ Events are mutually exclusive if the occurrence of any

one event means that none of the others can occur at
the same time.
 LO5-3
Special Rule of Addition- Example
Mutually Exclusive Events
A machine fills plastic bags with a mixture of beans, broccoli, and
other vegetables. Most of the bags contain the correct weight, but
because of the variation in the size of the beans and other
vegetables, a package might be underweight or overweight. A
check of 4,000 packages filled in the past month revealed:

What is the probability that a particular package will be either

underweight or overweight?
P(A or C) = P(A) + P(C) = 0.025 + 0.075 = 0.10
 LO5-3
Rules of Addition for Computing
Probabilities
The General Rule of Addition - If A and B are two events
that are not mutually exclusive, then P(A or B) is given by the
following formula:
P(A or B) = P(A) + P(B) – P(A and B)

P(A and B) is called a joint probability, a probability that

measures the likelihood two or more events will happen
together.
 LO5-3
The General Rule of Addition - Example
The Venn Diagram shows the results of a survey of 200
tourists who visited Florida during the year. The results
revealed that 120 went to Disney World, 100 went to Busch
Gardens, and 60 visited both.
What is the probability a
selected person visited
either Disney World or
Busch Gardens?

P(Disney or Busch) = P(Disney) + P(Busch) – P(Disney and Busch)

= 120 + 100 – 60
200 200 200
= 0.60 + 0.50 – 0.30
= 0.80`
 LO5-3
Basic Probability: The Complement
Rule
The complement rule is used to determine the probability of
an event occurring by subtracting the probability of the event
not occurring from 1.

P(A) + P(~A) = 1
or
P(A) = 1 – P(~A)

P(~A) is read as “not A”

 LO5-3
Complement Rule- Example Mutually
Exclusive Events
Referring to the previous example/solution, the probability a
bag of mixed vegetables is underweight is 0.025 and the
probability of an overweight bag is 0.075. Use the
complement rule to show the probability of a satisfactory bag
is 0.900. Show the solution using a Venn diagram.
 LO5-3

The Complement Rule - Example

Note that
P(A or C) = P(A) + P(C) = P(~B),
Since
P(B) = 1 – P(~B) = 1 – (P(A) + P(C))
= 1 – (0.025 + 0.075)
= 0.900
 Self Review 5 - 3
A sample of 2000 employees of Worldwide Enterprises is to
be surveyed about a new health care plan. The employees
are classified as follows:

a) What is the probability that the first person selected is:

(i) either in maintenance or a secretary?
(ii) not in management?
b) Draw a Venn diagram illustrating your answers to part (a).
c) Are the events in part (a)(i) complementary or mutually
exclusive or both?
 Solution to Self Review 5 - 3

a) (i) P(B or E) = P(B) + P(E) = 50 + 68 = 0.059

2000 2000
(ii) P(~D) = 1 – P(D)
= 1 – 302
2000
= 0.849
b)

c) They are not complementary, but are mutually

exclusive.
A Deck of 52 Cards
 LO5-3

General Rule of Addition– Example

What is the probability that a card chosen at random from a
standard deck of cards will be either a king or a heart?

P(A or B) = P(A) + P(B) – P(A and B)

= 4 + 13 – 1
52 52 52
= 0.3077
 Self Review 5 - 4

Routine physical examinations are conducted annually as

part of a health service program for General Concrete Inc.
employees. It was discovered that 8% of the employees
need corrective shoes, 15% need major dental work, and
3% need both corrective shoes and major dental work.

(a) What is the probability that an employee selected at

random will need either corrective shoes or major dental
work?

(b) Show this situation in the form of a Venn diagram.

 Solution to Self Review 5 - 4

a) Need for corrective shoes is event A. Need for major

dental work is event B.
P(A or B) = P(A) + P(B) – P(A and B)
= 0.08 + 0.15 – 0.03
= 0.20
b) One possibility is
 LO5-4 Calculate probabilities using
the rules of multiplication.

Special Rule of Multiplication

The special rule of multiplication calculates the joint

probability of two events A and B that are independent.

Two events A and B are independent if the occurrence of

one has no effect on the probability of the occurrence of the
other.
 LO5-4
Special Rule of Multiplication-Example

A survey by the American Automobile Association

revealed 60% of its members made airline reservations
last year. Two members are selected at random. What is
the probability both made airline reservations last year?

Solution:
The probability the 1st member made an airline reservation
last year is 0.60, written as P(R1) = 0.60.
The probability that the 2nd member made a reservation is
also 0.60, so P(R2) = 0.60.

P(R1 and R2) = P(R1* )P(R2) = (0.60)*0.60) = 0.36

Joint probability Distribution
 Self Review 5 - 5

From experience, Teton Tire knows the probability is 0.95

that a particular XB-70 tire will last 60,000 miles before it
becomes bald or fails. You purchase four XB-70s. What is
the probability all four tires will last at least 60,000 miles?

Solution

(0.95)*(0.95) *0.95) *(0.95) = 0.8145

 LO5-4

General Rule of Multiplication

The general rule of multiplication is used to find the joint

probability that two events will occur when they are
dependent.

It states that for two events, A and B, the joint probability

that both events will happen is found by multiplying the
probability that event A will happen by the conditional
probability of event B occurring given that A has occurred.
 LO5-4

Conditional Probability

A conditional probability is the probability of a particular

event occurring, given that another event has occurred.

The probability of the event A given that the event B has

occurred is written P(A|B).
 LO5-4

General Rule of Multiplication - Example

A golfer has 12 golf shirts in his closet. Suppose 9 of these

shirts are white and the others blue. He gets dressed in the
dark, so he just grabs a shirt and puts it on. He plays golf two
days in a row and does not do laundry.

What is the likelihood both shirts selected are white?

 LO5-4

General Rule of Multiplication - Example

• The probability that the first shirt selected is white is

P(W1) = 9/12
• The probability of selecting a second white shirt (W2) is
dependent on the first selection. So, the conditional
probability is the probability the second shirt selected is
white, given that the first shirt selected is also white:
P(W2 | W1) = 8/11
• The joint probability of selecting 2 white shirts is:
P(W1 and W2) = P(W1)P(W2 |W1) = (9/12)(8/11) = 0.55
 Self Review 5 - 6

The board of directors of Tarbell Industries consists of 8 men

and 4 women. A four-member search committee is to be
chosen at random to conduct a nationwide search for a new
company president.

(a) What is the probability all four members of the search

committee will be women?

(b) What is the probability all four members will be men?

(c) Does the sum of the probabilities for the events described
in parts (a) and (b) equal 1? Explain.
 Solution to Self Review 5 - 6

Consider the probability that a woman is chosen is event A.

The probability that a man is chosen is event B.
a)
P(A1 and A2 and A3 and A4) = P(A1) P(A2\A1) P(A3\A1 and A2)
P(A4\A1 and A2 and A3)
4 3 2 1
= = 0.002
12 11 10 9
b)
P(B1 and B2 and B3 and B4) = P(B1) P(B2\B1) P(B3\B1 and B2)
P(B4\B1 and B2 and B3)
8 7 6 5
= = 0.1414
12 11 10 9
c) No, because there are other possibilities, such as three
women and one man.
 LO5-5 Calculate probabilities using
a contingency table.

Contingency Tables
A contingency table is used to classify sample
observations according to two or more identifiable
characteristics measured.

For example, 150 adults were asked their gender and the
number of Facebook accounts they used. The following
table summarizes the results.
 LO5-5
Contingency Table - Example
Last month, the National Association of Theater Managers
conducted a survey of 500 randomly selected adults. The survey
asked respondents their age and the number of times they saw a
movie in a theater. The results are summarized in Table.

The association is interested in understanding the probabilities

that an adult will see a movie in a theater, especially for adults 60
and older. This information is useful for making decisions
regarding discounts on tickets and concessions for seniors.
 LO5-5
Example - Continued

Determine the probability of:

1. Selecting an adult who attended 6 or more movies per month.
2. Selecting an adult who attended 2 or fewer movies per month.
3. Selecting an adult who attended 6 or more movies per month
or is 60 years of age or older.
4. Selecting an adult who attended 6 or more movies per month
given the person is 60 years of age or older.
5. Selecting an adult who attended 6 or more movies per month
and is 60 years of age or older.
Determine the independence of:
6. Number of movies per month attended and the age of the adult.
 LO5-5

Solution Contingency Table - Example

1. To find the probability that a randomly selected adult

attended 6 or more movies per month, focus on the row
labeled “6 or more” (also labeled A4) in Table. The table
shows that 50 of the total of 500 adults are in this class.
Using the empirical approach, the probability is computed:

P(6 or more) = P(A4) = 50 = 0.10 or 10%

500
 LO5-5

Solution Contingency Table - Example

2. Two outcomes must be combined: attending 0 movies per

month and attending 1 or 2 movies per month. These two
outcomes are mutually exclusive therefore we use the
special rule of addition:

P[(attending 0) or (attending 1 or 2)] = P(A1) + P(A2)

= 75 + 200
500 500
= 0.55 or 55%
 LO5-5

Solution Contingency Table - Example

3. To determine the probability of randomly selecting an adult

who went to “6 or more” movies per month or whose age is
“60 or older,” we again use the rules of addition. However,
in this case the outcomes are not mutually exclusive. Why
is this? Because a person can attend more than 6 movies
per month, be 60 or older, or be both. So the two groups
are not mutually exclusive because it is possible that a
person would be counted in both groups. To determine this
probability, the general rule of addition [formula (5–4)] is
used.
P[(6 or more) or (60 or older)] = P(A4) + P(B3) − P(A4 and B3)
= 50 + 175 − 30
500 500 500
= 0.39 or 39%
 LO5-5

Solution Contingency Table - Example

4. To determine the probability of selecting a person who

attends 6 or more movies per month given that the person
is 60 or older, focus only on the column labeled B3 in Table.
That is, we are only interested in the 175 adults who are 60
or older. Of these 175 adults, 30 attended 6 or more
movies. Using the general rule of multiplication:
P[(6 or more) given (60 or older)] = P(A4\ B3)
= 30
175
= 0.17 or 17%

This is valuable information for the theater manager

regarding the characteristics of their customers.
 LO5-5

Solution Contingency Table - Example

5. The probability a person attended 6 or more movies and is

60 or older is based on two conditions and they must both
happen. That is, the two outcomes “6 or more movies” (A4)
and “60 or older” (B3) must occur jointly.
P[(6 or more) and (60 or older)] = P(A4 and B3) = P(A4)P(B3| A4)
To find the probability P(A4), refer to row A4 in Table.
P(A4) = 50
500
Next the probability P(B3|A4) of selecting an adult who is 60
or older given that the person attended 6 or more movies.

P[(60 or older) given (60 or more)] = P(B 3| A 4) = 30

50
50 30
P(A4 and B3) = P(A4) P(B3| A4) = = 0.06 or 6%
500 50
 LO5-5

Solution Contingency Table - Example

6. Independence requires that P(A | B) = P(A). In part 4, we

found the probability of selecting an adult who was 60 or
older given that the adult attended 6 or more movies was
0.17. If age is not a factor in movie attendance, then we
would expect the probability of a person who is 30 or less
that attended 6 or more movies to also be 17%. That is, the
two conditional probabilities would be the same. The
probability that an adult attends 6 or more movies per month
given the adult is less than 30 years old is:

P[(6 or more) given (less than 30)] = 5 = 0.05

100
Because these two probabilities are not the same, the
number of movies attended and age are not independent.
 Self Review 5 - 7

Refer to Table (previous example) on page 151 to find the

following probabilities.
(a) What is the probability of selecting an adult that is 30 up
to 60 years old?
(b) What is the probability of selecting an adult who is
under 60 years of age?
(c) What is the probability of selecting an adult who is less
than 30 years old or attended no movies?
(d) What is the probability of selecting an adult who is less
than 30 years old and went to no movies?
 Solution to Self Review 5 - 7

a) P(B2) = 225 = 0.45

500
b) The two events are mutually exclusive, so apply the special
rule of addition

P(B1 or B2) = P(B1) + P(B2) = 100 + 225 = 0.65

500 500
c) The two events are not mutually exclusive, so apply the
general rule of addition,

P(B1 or A1) = P(B1) + P(A1) – P(B 1 and A1) = 100 + 75 – 15

500 500 500
= 0.32
d) Movies attended per month and age are not independent, so
100 15
P(B1 and A1) = P(B1) P(A1\ B1) = = 0.03
500 100
 LO5-5

Tree Diagrams

A tree diagram is:

1. Useful for portraying conditional and joint probabilities.
2. Particularly useful for analyzing business decisions
involving several stages.
3. A graph that is helpful in organizing calculations that
involve several stages.

Each segment in the tree is one stage of the problem. The

branches of a tree diagram are weighted by probabilities.
 LO5-5

Tree Diagram - Example

 LO5-5
Tree Diagram - Example
 Self Review 5 - 8

Consumers were surveyed on the relative number of visits

to a Sears store (often, occasional, and never) and if the
store was located in an enclosed mall (yes and no). When
variables are measured nominally, such as these data, the
results are usually summarized in a contingency table.
 Self Review 5 - 8

What is the probability of selecting a shopper who:

(a) Visited a Sears store often?
(b) Visited a Sears store in an enclosed mall?
(c) Visited a Sears store in an enclosed mall or visited a Sears
store often?
(d) Visited a Sears store often, given that the shopper went to a
Sears store in an enclosed mall?
In addition:
(e) Are the number of visits and the enclosed mall variables
independent?
(f) What is the probability of selecting a shopper who visited a
Sears store often and it was in an enclosed mall?
(g) Draw a tree diagram and determine the various joint
probabilities.
 Solution to Self Review 5 - 8

a) P(visited often) = 80 = 0.41

195
b) P(visited a store in an enclosed mall) = 90 = 0.46
195
c) The two events are not mutually exclusive, so apply the
general rule of addition.
P(visited often or visited a Sears in an enclosed mall)
= P(often) + P(enclosed mall) − P(often and enclosed mall)
= 80 + 90 – 60 = 0.56
195 195 195
d) P(visited often | went to a Sears in an enclosed mall) = 60 = 0.67
90
 Solution to Self Review 5 - 8

e) Independence requires that P(A | B) = P(A). One possibility is:

P(visit often | visited an enclosed mall) = P(visit often).
Does 60/90 = 80/195?
No, the two variables are not independent. Therefore, any
joint probability in the table must be computed by using the
general rule of multiplication.

f) As shown in part (e), visits often and enclosed mall are not
independent, so apply the general rule of multiplication.

P(often and enclosed mall) = P(often) P(enclosed ∣ often)

80 60
= = 0.31
195 80
 LO5-6

Bayes’ Theorem

Bayes’ theorem is a method for revising a probability given

additional information.
• It is computed using the following formula:

Generalized Bayes’ Theorem

 LO5-6
Bayes’ Theorem - Example
A manufacturer of cell phones purchases a microchip, called the LS-24,
from three suppliers: Hall Electronics, Schuller Sales, and Crawford
Components. 45% of the LS-24 chips are purchased from Hall Electronics,
30% from Schuller Sales, and the remaining 25% from Crawford
Components. The manufacturer has extensive histories on the 3 suppliers
and knows that 3% of the LS-24 chips from Hall
Electronics are defective, 6% of chips from Schuller
Sales are defective, and 4% of the chips purchased
from Crawford Components are defective.

When the LS-24 chips arrive from the three

suppliers, they are placed directly in a bin and not
inspected or otherwise identified by supplier. A
worker selects a chip for installation and finds it
defective. What is the probability that it was
manufactured by Schuller Sales?
 Bayes’ Theorem – Example LO5-6

Solution
• There are 3 mutually exclusive and collectively exhaustive events, that
is, 3 suppliers.
A1 The LS-24 was purchased from Hall Electronics.
A2 The LS-24 was purchased from Schuller Sales.
A3 The LS-24 was purchased from Crawford Components.

• The prior probabilities are:

P(A1) = 0.45 P(A2) = 0.30 P(A3) = 0.25
• The additional information can be either:
B1 The LS-24 is defective, or
B2 The LS-24 is not defective.

• The following conditional probabilities are given.

P(B1 | A1) = 0.03 P(B1 | A2) = 0.06 P(B1 | A3) = 0.04
 Bayes’ Theorem – Example LO5-6

Solution
• A chip is selected from the bin. Because the chips are not identified by
supplier, we are not certain which supplier manufactured the chip. We
want to determine the probability that the defective chip was
purchased from Schuller Sales. The probability is written P(A2 | B1).

Using Bayes’ theorem:

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