STATISTICS FOR

MANAGEMENT
CHAPTER 1 : PROBABILITY
Dr. Hafizah binti Zulkipli
Learning Outcomes
1. Understand and Use Probability Terminology:
• Define key terms such as experiment, outcome, sample space, event, mutually
exclusive events, and independent events.
2. Apply Probability Rules:
• Use the Addition Rule to calculate the probability of either of two events occurring.
• Use the Multiplication Rule to calculate the probability of both events occurring.
• Determine whether two events are mutually exclusive or independent.
3. Construct and Interpret Venn Diagrams:
• Visualize relationships between events using Venn diagrams.
• Calculate probabilities using Venn diagrams.
4. Construct and Interpret Tree Diagrams:
• Represent sequences of events using tree diagrams.
• Calculate joint and conditional probabilities using tree diagrams.
5. Understand and Apply Bayes' Law:
• Use Bayes' Law to update probabilities based on new information.
• Solve real-world problems involving conditional probabilities.
What is Probability?
• Probability is a measure of the
likelihood that an event will occur.
• Expressed as a number between 0
and 1 (or 0% to 100%).
• 0: Impossible event
• 1: Certain event
• Example: The probability of
flipping a fair coin and getting
heads is 0.5 (or 50%).
Thi s Photo by Unknown Author i s l icensed under CC BY-NC-ND
Key Terminology
Experiment: A process that leads to observable outcomes (e.g.,
rolling a die).
Outcome: A possible result of an experiment (e.g., rolling a 4).
Sample Space (S): The set of all possible outcomes (e.g., S = {1, 2,
3, 4, 5, 6} for a die).
Event: A subset of the sample space (e.g., rolling an even number
= {2, 4, 6}).
Probability: Let A be an event in sample space, S. The probability
of A occurring, P(A) is defined
𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑜𝑢𝑡𝑐𝑜𝑚𝑒𝑠 𝑖𝑛 𝐴 𝑛(𝐴)
𝑃 𝐴 = =
𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑜𝑢𝑡𝑐𝑜𝑚𝑒𝑠 𝑖𝑛 𝑆 𝑛(𝑆)
This Photo by Unknown Author is licensed under CC BY
Basic Law
Laws Description Formula
Range of Probability Probability of any event AA lies 0 ≤ 𝑃(𝐴) ≤ 1
between 0 and 1.
Complement Rule Probability of an event not 𝑃 𝐴′ = 1 − 𝑃(𝐴)
occurring.
Addition Rule Probability of either event A 𝑃 𝐴 𝑜𝑟 𝐵 = 𝑃 𝐴 + 𝑃 𝐵 − 𝑃 (𝐴 ∩ 𝐵)
or B occurring. 𝑃 𝐴 ∪ 𝐵 = 𝑃 𝐴 + 𝑃 𝐵 − 𝑃 (𝐴 ∩ 𝐵)
Mutually Exclusive Events If A and B cannot occur 𝑃 𝐴 𝑜𝑟 𝐵 = 𝑃 𝐴 + 𝑃 𝐵
together, P(A and B)=0 𝑃 𝐴 ∪ 𝐵 = 𝑃 𝐴 + 𝑃(𝐵)
Multiplication Rule Probability of both 𝑃 𝐴 𝑎𝑛𝑑 𝐵 = 𝑃 𝐴 × 𝑃 (𝐵|𝐴)
events A and B occurring. 𝑃 𝐴 ∩ 𝐵 = 𝑃 𝐴 × 𝑃 (𝐵|𝐴)
(Dependent Events)
Independent Events If A and B are independent, 𝑃 𝐴 ∩ 𝐵 = 𝑃 𝐴 × 𝑃 (𝐵)
P(B|A)=P(B)
Conditional Probability Probability of A given B has 𝑃 𝐴 𝑎𝑛𝑑 𝐵 𝑃 𝐴∩𝐵
occurred. 𝑃 𝐴𝐵 = =
𝑃(𝐵) 𝑃(𝐵)
Example 1
• A fair six-sided die is rolled. • Sample space (S) = {1, 2, 3, 4, 5, 6}.
What is the probability of rolling: • Event A:
• an even number ? • Rolling an even number = {2, 4, 6}.
3
• a number greater than 4? 𝑃 𝐴 = = 0.5
6
1 • Event B:
2
3
• Rolling a number greater than 4 = {5, 6}.
6 5 1
4
𝑃 𝐵 = ≈ 0.333
A
B 6
Mutually Exclusive Events
• Two events are mutually
exclusive if they cannot occur at
the same time.
• Example: Rolling a die and
getting a 1 OR a 2 (cannot
happen simultaneously).
• Notation: P(A and B) = 0.
• This Photo by Unknown Author is licensed under CC BY
Example Mutual and Non-Mutual Exclusive
• Mutual • Non-Mutually Exclusive
• A fair six-sided die is rolled. What is the probability of rolling • A fair six-sided die is rolled. What is the probability of rolling an even
a 2 or a 5? number or a number greater than 4?
• Sample space (S) = {1, 2, 3, 4, 5, 6}.
• Sample space (S) = {1, 2, 3, 4, 5, 6}. • Event A:
• Rolling an even number = {2, 4, 6}.
• Event A: Rolling a 2 = {2}. 3
1 𝑃 𝐴 = = 0.5
• 𝑃 𝐴 = 6
6

• Event B: Rolling a 5 = {5}. • Event B:

1
• Rolling a number greater than 4 = {5, 6}.
• 𝑃 𝐵 = 1
6
𝑃 𝐵 = ≈ 0.333
6
• Event A and B: Rolling a number that is both even and greater than 4 =
4 1 {6}.
1 1
2 5 3 2 𝑃 𝐴∩𝐵 =
6 6 5 3 6
A B 4 • Since these events are not mutually exclusive, use the Addition Rule:
A B 𝑃 𝐴 ∪ 𝐵 = 𝑃 𝐴 + 𝑃 𝐵 − 𝑃 (𝐴 ∩ 𝐵)
3 1 1 3
𝑃 𝐴 ∪ 𝐵 = + − =
6 6 6 6
Multiplication Rule
• Used to calculate the probability
of both events occurring.
• For independent events:
• P(A and B) = P(A) × P(B). Source: [Link]

• For dependent events:

• P(A and B) = P(A) × P(B|A).

Source:[Link]
Examples
• A fair coin is tossed, and a fair six-sided die is • The probability of rain on a given day is 20%.
rolled. What is the probability of If it rains, the probability of heavy traffic
getting heads on the coin and a 5 on the die? congestion is 70%. If it does not rain, the
• Event A: Getting heads on the coin. probability of heavy traffic congestion is 40%.
What is the probability that it rains and there
1 is heavy traffic congestion?
• 𝑃 𝐴 =2
• Event B: Rolling a 5 on the die. • Event A: It rains.
1
𝑃 𝐴 = 0.2
• 𝑃 𝐵 = 6 Event B: Heavy traffic congestion (given that it
• Since the coin toss and die roll rains).
are independent events, use the 𝑃 𝐵 𝐴 = 0.7
Multiplication Rule for independent events:
𝑃 𝐴 ∩ 𝐵 = 𝑃 𝐴 × 𝑃 (𝐵) Since the events are dependent, use the
1 1 1 Multiplication Rule for dependent events:
𝑃 𝐴 ∩ 𝐵 = × =
2 6 12
(8.33%) 𝑃 𝐴 ∩ 𝐵 = 𝑃 𝐴 × 𝑃 (𝐵|𝐴)
𝑃 𝐴 ∩ 𝐵 = 0.2 × 0.7 = 0.14 (14%)
Venn Diagram
• 𝑃 𝐴 =
• 𝑃 𝐵 =
• 𝑃 𝐴′ =
• 𝑃 𝐵′ =
A B
• 𝑃 𝐴∩𝐵 =
• 𝑃 𝐴∪𝐵 =
8 12 13
• 𝑃 𝐴∩𝐵 =
• 𝑃 𝐴′ ∩ 𝐵′ =
• 𝑃 𝐴′ ∩ 𝐵 =
• 𝑃 𝐴 ∩ 𝐵′ =
7
• 𝑃 𝐴′ ∪ 𝐵′ =
• 𝑃 𝐴 ∪ 𝐵′ =
• 𝑃 𝐴′ ∪ 𝐵 =
 Exercises
• A company has 50 employees. The skills
of the employees are as follows:
• 30 employees are skilled in programming,
• 25 employees are skilled in data analysis,
A B
• 10 employees are skilled in both
programming and data analysis.
[Link] the Venn diagram.
[Link] many employees are skilled in only
programming?
[Link] many employees are skilled in only
data analysis?
[Link] many employees are skilled
in neither programming nor data
analysis?
Marginal Probability
• Marginal probability is the probability of an event occurring without considering the outcome of
another variable.
• It is calculated by summing the joint probabilities over all possible outcomes of the other variable.
• A joint probability table displays the probabilities of all possible combinations of two or more events.
𝐵1 𝐵2 Marginal Probability
𝑨𝟏 𝑷(𝑨𝟏 ∩ 𝑩𝟏) 𝑷(𝑨𝟏 ∩ 𝑩𝟐) 𝑷 𝑨𝟏
= 𝑷 𝑨𝟏 ∩ 𝑩𝟏
+ 𝑷(𝑨𝟏 ∩ 𝑩𝟐)
𝑨𝟐 𝑷(𝑨𝟐 ∩ 𝑩𝟏) 𝑷(𝑨𝟐 ∩ 𝑩𝟐) 𝑷 𝑨𝟐
= 𝑷 𝑨𝟐 ∩ 𝑩𝟏
+ 𝑷(𝑨𝟐 ∩ 𝑩𝟐)

Marginal Probability 𝑷 𝑩𝟏 𝑷 𝑩𝟐
= 𝑷 𝑨𝟏 ∩ 𝑩𝟏 = 𝑷 𝑨𝟏 ∩ 𝑩𝟐 𝑻𝒐𝒕𝒂𝒍 = 𝟏
+ 𝑷(𝑨𝟐 ∩ 𝑩𝟏 ) + 𝑷(𝑨𝟐 ∩ 𝑩𝟐)
Example
• In a survey of 200 people: 120 people like coffee, 80 people like tea, 50 people like both coffee and tea.
1. Create a joint probability table.
2. Calculate the marginal probability that a randomly selected person likes tea.

𝑩𝟏 𝑩𝟐 Total 𝑩𝟏 𝑩𝟐 Marginal
Probability

𝑻𝒆𝒂 𝟓𝟎 𝟑𝟎 𝟖𝟎 𝑻𝒆𝒂 𝟎. 𝟐𝟓 𝟎. 𝟏𝟓 𝟎. 𝟒𝟎
𝑵𝒐 𝑻𝒆𝒂 𝟕𝟎 𝟓𝟎 𝟏𝟐𝟎 𝑵𝒐 𝑻𝒆𝒂 𝟎. 𝟑𝟓 𝟎. 𝟐𝟓 𝟎. 𝟔 𝑷(𝑨𝟏 ) = 𝑷 𝑨𝟏 ∩ 𝑩𝟏 + 𝑷 𝑨𝟏 ∩ 𝑩𝟏
= 𝟎. 𝟐𝟓 + 𝟎. 𝟏𝟓 = 𝟎. 𝟒
Marginal
Total Probability 𝟎. 𝟔𝟎 𝟎. 𝟒𝟎 𝟏
𝟏𝟐𝟎 𝟖𝟎 𝟐𝟎𝟎
Exercises
• A movie theater analyzed ticket sales and determined
the relationship between the type of movie (action,
comedy, or drama) and the time of day (afternoon or • P(Comedy) = 0.3
evening). The joint probabilities are given in the
following table: • 𝑃 𝐸𝑣𝑒𝑛𝑖𝑛𝑔 𝐷𝑟𝑎𝑚𝑎 =
𝑃 𝐸𝑣𝑒𝑛𝑖𝑛𝑔 𝑎𝑛𝑑 𝐷𝑟𝑎𝑚𝑎 0.25
Afternoon Evening
𝑃(𝐷𝑟𝑎𝑚𝑎)
= 0.3 ≈
𝑨𝒄𝒕𝒊𝒐𝒏 𝟎. 𝟏𝟓 𝟎. 𝟐𝟓
𝑪𝒐𝒎𝒆𝒅𝒚 𝟎. 𝟏𝟎 𝟎. 𝟐𝟎
0.8333 (83.33%)
Drama 0.05 0.25 • P( Action or Afternoon)= P
(Action)+ P(Afternoon)- P(Action
a. What proportion of tickets was sold for comedy
movies?
and Afternoon)
b. Find the probability that a drama movie ticket was • P(Action or Afternoon)= 0.4+0.3-
sold during the evening 0.15=-.55
c. Determine the proportion of tickets sold for action
movies or during the afternoon.
Exercises
• An online retailer analyzed customer purchases
and determined the relationship between
the category of product (electronics, clothing, or
home goods) and the shipping method (standard
or express). The joint probabilities are given in the
following table:
Standard Express
𝑬𝒍𝒆𝒄𝒕𝒓𝒐𝒏𝒊𝒄𝒔 𝟎. 𝟐𝟎 𝟎. 𝟏𝟎
𝑪𝒍𝒐𝒕𝒉𝒊𝒏𝒈 𝟎. 𝟏𝟓 𝟎. 𝟐𝟓
Home Goods 0.10 0.20

a. What proportion of purchases was for clothing?

b. Find the probability that a home goods purchase
used express shipping.
c. Determine the proportion of purchases made
for electronics or using standard shipping.
Tree Diagram
• A tree diagram is a visual representation of all possible outcomes of a
series of events.
• Each branch of the tree represents a possible outcome, and the
probabilities are written along the branches.
• Uses of Tree Diagrams:
[Link] calculate probabilities of multiple events.
[Link] visualize dependent and independent events.
[Link] solve problems involving conditional probability.
Example 1(Independent Event)
A fair six-sided die is rolled, and a fair coin is tossed. Construct a tree diagram
and calculate the probability of:
Let Event of roll a 3= A
[Link] a 3 and getting heads. Let Event of getting heads = H
[Link] an even number and getting tails.
1 1 1 1
𝑃 𝐻 = 𝐺𝑒𝑡𝑡𝑖𝑛𝑔 𝐻𝑒𝑎𝑑𝑠 𝑃 𝐴 ∩𝐻 =𝑃 𝐴 ×𝑃 𝐻 = × =
2 6 2 12
1
𝑃 𝐴 = 𝑅𝑜𝑙𝑙 𝑎 3
6

1 𝐺𝑒𝑡𝑡𝑖𝑛𝑔
𝑃 𝑇 =
3 2 𝑇𝑎𝑖𝑙𝑠 𝑃 𝐵 ∩ 𝑇 = 1
𝑃 𝐵 = 𝑅𝑜𝑙𝑙 𝑎𝑛 𝑒𝑣𝑒𝑛 4
6
Let Event of roll an even number = B number
Let Event of getting tails = T
Example 2 ( Dependent Event)
•A company has 100 employees. The HR department is analyzing the effectiveness of a training program.
60 employees completed the training program. 40 employees did not complete the training program.
Among those who completed the training, 70% received a promotion. Among those who did not
complete the training, 40% received a promotion.
[Link] a tree diagram.
[Link] the probability that a randomly selected employee: 𝑃 𝐵|𝐴 = 0.7 𝐵 𝑃 𝐴∩𝐵
a. Completed the training and received a promotion.
60
b. Did not complete the training but received a promotion. 𝑃 𝐴 = = 0.6 𝐴
100

Let A= event completed training program. 𝐵′ 𝑃 𝐴 ∩ 𝐵′

Let B= event received a promotion.
𝑃 𝐴′ = 0.4
𝑃 𝐴∩𝐵 𝐵 𝑃 𝐴′ ∩ 𝐵
𝑃 𝐵𝐴 = 𝑃 𝐵|𝐴′ = 0.4
𝑃(𝐴)
𝐴’
𝑃 𝐴 ∩ 𝐵 = 𝑃 𝐵 𝐴 × 𝑃 𝐴 = 0.7 0.6 = 0.42
𝐵′ 𝑃 𝐴′ ∩ 𝐵′
𝑃 𝐴′ ∩ 𝐵 = 𝑃 𝐵 𝐴′ × 𝑃 𝐴′ = 0.4 0.4 = 0.16
 Exercise
• A medical test for a disease has the
following characteristics: 5% of the
population has the [Link] a person has
the disease, the test is 90% accurate (i.e.,
90% chance of testing positive). If a
person does not have the disease, the
test is 95% accurate (i.e., 95% chance of
testing negative).
[Link] a tree diagram.
[Link] the probability that a randomly
selected person;
a. Has the disease and tests positive.
b. Does not have the disease but tests
positive (false positive).
•
Bayes’ Law
• Bayes' Law (or Bayes' Theorem) is a way to update the probability of an
event based on new information.
• It relates the conditional and marginal probabilities of two events.

𝑃 𝐴 𝐵 : Probability of event A given

𝑃 𝐵 𝐴 × 𝑃(𝐴) that B has occurred.
𝑃 𝐴𝐵 = 𝑃 𝐵 𝐴 : Probability of event B given
𝑃(𝐵)
that A has occurred.
𝑃(𝐴) : Prior probability of event A
𝑃(𝐵) : Prior probability of event B

𝑃 𝐵
= 𝑃 𝐵 𝐴1 × 𝑃 𝐴𝑛1 : Total
+ 𝑃number
𝐵 𝐴2of × 𝑃 probability
prior 𝐴2 + ⋯event+ 𝑃 𝐵 𝐴𝑛 × 𝑃 𝐴𝑛
Example
• In a semiconductor factory in Penang, chips are sourced from three suppliers: Supplier A provides
50% of the chips, Supplier B provides 30%, and Supplier C provides 20%. The defect rates for each
supplier vary, with Supplier A producing 2% defective chips, Supplier B producing 3%, and Supplier
C producing 5%. If a chip is randomly selected and found to be defective, what is the probability
that it came from Supplier B?
𝑃 𝐴 = 0.5, 𝑃 𝐵 = 0.3, 𝑃 𝐶 = 0.2 𝑆𝑢𝑝𝑝𝑙𝑖𝑒𝑟 𝑝𝑟𝑜𝑏𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝑃 𝐷|𝐴 = 0.02, 𝑃 𝐷|𝐵 = 0.03, 𝑃 𝐷|𝐶 = 0.05 𝑆𝑢𝑝𝑝𝑙𝑖𝑒𝑟 𝑝𝑟𝑜𝑏𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝑃 𝐷 =? : 𝑇𝑜𝑡𝑎𝑙 𝑝𝑟𝑜𝑏𝑎𝑏𝑖𝑙𝑖𝑡𝑦 𝑜𝑓 𝑠𝑒𝑙𝑒𝑐𝑡𝑖𝑛𝑔 𝑎 𝑑𝑒𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝑐ℎ𝑖𝑝.
𝑃 𝐷 = 𝑃 𝐴 ∩ 𝐷 + 𝑃(𝐵 ∩ 𝐷)+ 𝑃 𝐶 ∩ 𝐷
= 𝑃 𝐷|𝐴 × 𝑃 𝐴 + 𝑃 𝐷|𝐵 × 𝑃 𝐵 + 𝑃 𝐷|𝐶 ×
𝑃 𝐶
= 0.5 0.02 + 0.3 0.03 + 0.2 0.05
= 0.01 + 0.009 + 0.01 = 0.029
𝑃 𝐷 𝐵 × 𝑃(𝐵) 0.03(0.3)
𝑃 𝐵𝐷 = = ≈ 0.3103 (31.03%)
𝑃(𝐷) 0.029
 Exercise
• A Malaysian bank uses an AI system to
detect fraudulent transactions. The
system has: 90% probability of
detecting fraud correctly, 5%
probability of falsely flagging a
legitimate transaction as fraud , and 1%
of all transactions are actually
fraudulent. If a transaction is flagged as
fraud, what is the probability that it is
actually fraudulent?
𝑃 𝐹 = 0.01 𝑝𝑟𝑖𝑜𝑟 𝑝𝑟𝑜𝑏𝑎𝑏𝑖𝑙𝑖𝑡𝑦 𝐹𝑟𝑎𝑢𝑑 ,
𝑃 𝐹′ = 0.99 𝑝𝑟𝑖𝑜𝑟 𝑝𝑟𝑜𝑏𝑎𝑏𝑖𝑙𝑖𝑡𝑦 𝑛𝑜𝑡 𝐹𝑟𝑎𝑢𝑑 ,
𝑃 𝐷 𝐹 = 0.90 𝑝𝑟𝑜𝑏𝑎𝑏𝑖𝑙𝑖𝑡𝑦 𝑜𝑓 𝑑𝑒𝑡𝑒𝑐𝑡𝑖𝑜𝑛 𝑔𝑖𝑣𝑒𝑛 𝐹𝑟𝑎𝑢𝑑
𝑃 𝐷 𝐹′ = 0.05(𝐹𝑎𝑙𝑠𝑒 𝑑𝑒𝑡𝑒𝑐𝑡𝑖𝑜𝑛)

𝑃 𝐷 𝐹 × 𝑃(𝐹)
𝑃 𝐹𝐷 =
𝑃(𝐷)
 Summary
In this chapter, you learned:
The fundamentals of probability, including terminology and rules.
How to use Venn diagrams and tree diagrams to visualize and solve
probability problems.
How to apply Bayes' Law to update probabilities based on new
information.
How to solve real-world problems using probability concepts.