Topic 4 QBA241 2015

4. Basic Probability

What is the probability that

I got an A for Mathematics, what
the UAE housing market will
are the chances that I will get an
crash tomorrow?
A in Statistics?

2 out of 5 drivers in UAE refuse

to wear seat belt. (The National
UAE, 13 Mar 2013)

Probability is a numerical value describing the likelihood or chance that an uncertain event will occur
such as the probability that it will rain next week or the price of a stock increasing tomorrow.

The numerical value (probability) is measured between 0 to 1. A value of 0 indicates impossibility

while 1 indicates certainty.

Probability theory is applied in everyday life in risk assessment and in trade on financial markets.
Governments apply probabilistic methods in environmental regulation, where it is called pathway
analysis. A good example is the effect of the perceived probability of any widespread Middle East
conflict on oil prices—which have ripple effects in the economy as a whole.

Another significant application of probability theory in everyday life is reliability. Many consumer
products, such as automobiles and consumer electronics, use reliability theory in product design to
reduce the probability of failure. Failure probability may influence a manufacturer's decisions on a
product's warranty.

Formula to Compute Probability

𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑤𝑎𝑦𝑠 𝑖𝑛 𝑤ℎ𝑖𝑐ℎ 𝑡ℎ𝑒 𝑒𝑣𝑒𝑛𝑡 𝑜𝑐𝑐𝑢𝑟𝑠 𝑋

𝑃𝑟𝑜𝑏𝑎𝑏𝑖𝑙𝑖𝑡𝑦 = =
𝑡𝑜𝑡𝑎𝑙 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑝𝑜𝑠𝑠𝑖𝑏𝑙𝑒 𝑜𝑢𝑡𝑐𝑜𝑚𝑒𝑠 𝑇

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Topic 4 QBA241 2015

Example 4 (a)

A fair coin is tossed once. What is the probability of obtaining tail?

Solution

A fair coin has two possible outcomes: head or tail. So, total number of possible outcomes is two
(T = 2). The interest is on obtaining tail.

1
𝑃𝑟𝑜𝑏𝑎𝑏𝑖𝑙𝑖𝑡𝑦 (𝑇𝑎𝑖𝑙) = 𝑃(𝑇𝑎𝑖𝑙) = = 0.50
2

Example 4 (b)

There are 3 red and 4 blue balls in a jar. One ball is drawn out of the jar. What is the probability of
drawing a red ball?

Solution

Total number of possible outcomes is 3 red + 4 blue = 7 balls. The interest is on obtaining a red
ball.

3
𝑃(𝑅𝑒𝑑) = = 0.43
7

Example 4 (c)

There are 25 students in a Statistics class. 18 of them are female students. A student is selected at
random. What is the probability that the student is female?

Solution

Total number of possible outcomes is 20 students. The interest is on selecting a female student.

18
𝑃(𝐹𝑒𝑚𝑎𝑙𝑒 𝑠𝑡𝑢𝑑𝑒𝑛𝑡) = = 0.72
25

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4.1 Visualizing Events in a Sample Space

There are two methods to visualize events in a sample space.

4.1.1 Contingency Table

He is a Smoker He is a Non-Smoker Total

He Has Lung Disease 0.10 0.03 0.13
He Does Not Have Lung Disease 0.21 0.66 0.87
Total 0.31 0.69 1.00

4.1.2 Tree Diagram

P( D | O)  0.23 D

P (O) = ¼ = 0.25 O P( D | O)  0.77 D

O = Older machine
N = New machine
D = Defective widgets
P (N) = ¾ = 0.75 N P( D | N )  0.08 D
D = Non-defective widgets

P( D | N )  0.92 D

4.2 Key Concepts in Probability

There are basic elements of probability theory which are important to understand probabilities.

4.2.1 Event and Sample Space

Each possible outcome of a variable is referred to as an event. A simple event (marginal event) is
described by a single characteristic.

A sample space is the collection of all possible events.

Suppose a fair dice is rolled. The sample space is {1, 2, 3, 4, 5, 6}. A simple (marginal) event is
obtaining one of these events, for example, “4”. The probability of obtaining number “4” is 1/6. This
is called the simple (marginal) probability.

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4.2.2 Joint Event

Each joint event is when there are two or more characteristics occurring at the same time. For
example, getting two heads when you toss a coin twice is an example of a joint event. The probability
of a joint event is called a joint probability.

Example: P(Smoker and Has Lung Disease) is also the same as to P(Smoker  Has Lung Disease)

4.2.3 Complement Event

The complement of event A (represented by the symbol, 𝐴̅) includes all events that are not part of A.

P(A) + P(𝐴̅) = 1
A 𝐴̅
P(A) = 1 – P(𝐴̅)

4.2.4 Mutually Exclusive Events

Two events are mutually exclusive if they cannot occur at the same time. For example, a coin can
either land on “head” or “tail”.

P(A) + P(𝐵) = 1
A B
P(A and B) = 0

Alternatively, it can be written as such:

P(A  B) = 0

For example, the outcome of a coin toss is mutually exclusive. This is because P(Head  Tail) = 0. This
means both outcomes can’t occur simultaneously. Only one outcome can occur at a time.

4.2.5 Marginal Probability

A marginal probability is a probability of a simple event.

For example, usually 70% of patients at a private clinic on a first day of the week are males. 30% of
the males are actually not ill (they only come to obtain the medical certificate). Hence, P(male
patients) = 0.70 is a marginal probability.

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Topic 4 QBA241 2015

The P(males  only to obtain the medical certificate) = 0.30 is the joint probability.

Example 4.2
The following table lists the probabilities associated with smoking and lung disease among 60 to
65 year old men.

He is a Smoker He is a Non-Smoker Total

He Has Lung Disease 0.10 0.03 0.13
He Does Not Have Lung Disease 0.21 0.66 0.87
Total 0.31 0.69 1.00

One 61 year old man is selected at random. What is the probability of the following events?
a) He is a smoker
b) He does not have lung disease
c) He has lung disease and he is a smoker

Solution

a) P(He is a smoker) = 0.31. This is a marginal probability.

b) P(He does not have lung disease) = 0.87. This is a marginal probability.
c) P(He has lung disease  he is a smoker) = 0.10. This is a joint probability.

4.3 Union Events

The union of events A and B is the event that occurs when either A or B or both occur. It is denoted
as (A or B). It can be also written as (A  B).

There are two possible methods compute the probability of a union, P(A or B).

Non-Mutually Exclusive Events A B

P(A or B) = P(A) + P(B) – P(A and B)

Intersection between events A and B = P(A and B)

Mutually Exclusive Events

A B
P(A or B) = P(A) + P(B)

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Example 4.3
The following table lists the probabilities associated with smoking and lung disease among 60 to
65 year old men.

He is a Smoker He is a Non-Smoker Total

He Has Lung Disease 0.10 0.03 0.13
He Does Not Have Lung Disease 0.21 0.66 0.87
Total 0.31 0.69 1.00

One 61 year old man is selected at random. What is the probability that he has lung disease or he
is a smoker?

Solution

P(He has lung disease  he is a smoker) = 0.10. This is a joint probability.

P(He has lung disease  he is a smoker)

= P(He has lung disease) + P(He is a smoker) – P(He has lung disease  he is a smoker)
= 0.13 + 0.31 – 0.10
= 0.34.
This is a union probability for non-mutually exclusive events.

4.4 Conditional Probability

A conditional probability is the probability of one event given the occurrence of another related
event.

The conditional probability is represented by: P(A | B)

where “|” represents the word “given”.

P(A | B) indicates that the probability of event A given that even B has occurred first.

𝑷(𝑨  𝑩)
𝑷(𝑨 | 𝑩) =
𝑷(𝑩)

or

𝑷(𝑨  𝑩)
𝑷(𝑩 | 𝑨) =
𝑷(𝑨)

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Topic 4 QBA241 2015

Example 4.4 (a)

The following table lists the probabilities associated with smoking and lung disease among 60 to
65 year old men.

He is a Smoker He is a Non-Smoker Total

He Has Lung Disease 0.10 0.03 0.13
He Does Not Have Lung Disease 0.21 0.66 0.87
Total 0.31 0.69 1.00

One 61 year old man is selected at random. What is the probability that he has lung disease given
that he is a smoker?

Solution

𝑃(𝐻𝑒 ℎ𝑎𝑠 𝑙𝑢𝑛𝑔 𝑑𝑖𝑠𝑒𝑎𝑠𝑒  ℎ𝑒 𝑖𝑠 𝑎 𝑠𝑚𝑜𝑘𝑒𝑟)

𝑃(𝐻𝑒 ℎ𝑎𝑠 𝑙𝑢𝑛𝑔 𝑑𝑖𝑠𝑒𝑎𝑠𝑒 | ℎ𝑒 𝑖𝑠 𝑎 𝑠𝑚𝑜𝑘𝑒𝑟) =
𝑃(ℎ𝑒 𝑖𝑠 𝑎 𝑠𝑚𝑜𝑘𝑒𝑟)
0.10
𝑃(𝐻𝑒 ℎ𝑎𝑠 𝑙𝑢𝑛𝑔 𝑑𝑖𝑠𝑒𝑎𝑠𝑒 | ℎ𝑒 𝑖𝑠 𝑎 𝑠𝑚𝑜𝑘𝑒𝑟) = = 0.3226
0.31

Example 4.4 (b)

The probability that it is Monday and that a student is absent is 0.03. Since there are 5 school days
in a week, the probability that it is Monday is 0.2. What is the probability that a student is absent
given that today is Monday?

Solution

P(Absent  Monday) = 0.03, P(Monday) = 1 day / 5 days a week = 0.2

𝑃(𝐴𝑏𝑠𝑒𝑛𝑡  𝑀𝑜𝑛𝑑𝑎𝑦) 0.03

𝑃(𝑆𝑡𝑢𝑑𝑒𝑛𝑡 𝑖𝑠 𝑎𝑏𝑠𝑒𝑛𝑡 | 𝑀𝑜𝑛𝑑𝑎𝑦) = = = 0.15
𝑃(𝑀𝑜𝑛𝑑𝑎𝑦) 0.2

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4.5 Statistical Independence

A conditional probability is the probability of one event given the occurrence of another related
event.

Events A and B are independent when the probability of one event is not affected by the other event.

In order to prove their statistical independence, the following must be proven.

How to Prove Statistical Independence

Statistical Independence
Compute the left-hand side (LHS) and the
𝑷(𝑨 | 𝑩) = 𝑷(𝑨) right-hand side (RHS) values separately.
Then check if LHS value is equal to RHS
or
value.
𝑷(𝑩 | 𝑨) = 𝑷(𝑩) If they are equal, the events are
independent. Otherwise, the events are
dependent.

Example 4.5

Of the cars on a parking lot, 70% have air conditioning (AC) and 40% have a CD player (CD). 20%
of the cars have both. Are the AC and CD events statistically independent?

Solution

P(AC) = 0.7, P(CD) = 0.40, P(AC  CD) = 0.2

𝑃(𝐴𝐶  𝐶𝐷) 0.2

𝑃(𝐴𝐶 | 𝐶𝐷) = = = 0.5 (𝐿𝐻𝑆)
𝑃(𝐶𝐷) 0.4

P(AC) = 0.7 (RHS)

Since, P(AC | CD) ≠ P(AC), both events are dependent.

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4.6 Multiplication Rule

The multiplication rule is used to calculate the join probability of two events. It is based on the
formula for the conditional probability supplied in section 4.4 above.

𝑷(𝑨  𝑩)
𝑷(𝑨 | 𝑩) =
𝑷(𝑩) 𝑷(𝑨  𝑩) = 𝑷(𝑨 | 𝑩)𝑷(𝑩)

or

𝑷(𝑨  𝑩)
𝑷(𝑩 | 𝑨) =
𝑷(𝑨) 𝑷(𝑨  𝑩) = 𝑷(𝑩| 𝑨)𝑷(𝑨)

If A and B are independent events, then a special multiplication rule is applied.

Special Multiplication Rule for Independent Events

𝑷(𝑨  𝑩) = 𝑷(𝑨)𝑷(𝑩)

Example 4.6

Of the cars on a parking lot, 70% have air conditioning (AC) and 40% have a CD player (CD). 20%
of the cars have both. Are the AC and CD events statistically independent?

Solution

P(AC) = 0.7, P(CD) = 0.40, P(AC  CD) = 0.2

𝑃(𝐴𝐶  𝐶𝐷) 0.2

𝑃(𝐴𝐶 | 𝐶𝐷) = = = 0.5 (𝑳𝑯𝑺)
𝑃(𝐶𝐷) 0.4

P(AC) = 0.7 (RHS)

Since, the LHS value is not equal to the RHS value (0.7 ≠ 0.5), which means that P(AC | CD) ≠ P(AC),
both events are dependent.

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Example: Big-Ten University

An awareness task force at a Big-Ten university sampled 200 students after the midterm to ask
them whether they went partying the weekend before the midterm or spent the weekend studying,
and whether they did well or poorly on the midterm. The following result was obtained.

Event Did Well on Midterm Did Poorly on Midterm Total

Studying for Exam 80 20 100
Went Partying 30 70 100
Total 110 90 200

a) Create a table of probabilities based on the above result.

One student was randomly selected. Find the probability of the following.
b) The student did well on the midterm
c) The student went partying and did well on the midterm
d) The student did well on the midterm or went partying the weekend before the midterm
e) The student who studied for the exam and did well on the midterm
f) The student did well on the midterm given that he/she studied for the exam

Solution
a) Table of Probabilities

Event Did Well on Midterm Did Poorly on Midterm Total

Studying for Exam 80/200 = 0.40 20/200 = 0.10 100/200 = 0.5
Went Partying 30/200 = 0.15 70/200 = 0.35 100/200 = 0.5
Total 110/200 = 0.55 90/200 = 0.45 200/200 = 1.0

b) P(did well on the midterm) = 110/200 = 0.55  marginal probability

c) P(went partying  did well on the midterm) = 30/200 = 0.15  joint probability
d) P(did well on the midterm or went partying) = 110/200 + 100/200  30/200 = 0.90  union
probability
e) P(studied for exam  did well on the midterm) = 80/200 = 0.40  joint probability
f) P(did well on the midterm | studied for exam)

𝑃(𝑑𝑖𝑑 𝑤𝑒𝑙𝑙 𝑜𝑛 𝑡ℎ𝑒 𝑚𝑖𝑑𝑡𝑒𝑟𝑚  𝑠𝑡𝑢𝑑𝑖𝑒𝑑 𝑓𝑜𝑟 𝑒𝑥𝑎𝑚) 0.4

= = = 0.8
𝑃(𝑠𝑡𝑢𝑑𝑖𝑒𝑑 𝑓𝑜𝑟 𝑒𝑥𝑎𝑚) 0.5

This is a conditional probability.

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SELF-TEST EXERCISES

1. There were 30 students in a Statistics course. 10 of them were male students. 7 students scored
an A in the test of which 2 of them were male students. Suppose that a student is randomly
selected from the course.
a) Construct a contingency probability table and complete the table with the associated
probabilities.
Event Scored an A Did Not Score an A Total
Male
Female
Total
b) Are the “scored an A” and “did not score an A” mutually exclusive events?
c) What is the probability that the selected student is a male?
d) What is the probability that the selected student is a female?
e) What is the probability that the selected student is a male and scored an A in the test?
f) What is the probability that the selected student scored an A in the test given that the student
is a female?

2. Credit scorecards are used by financial institutions to help decide to whom loans should be
granted. An analysis of the records of one bank produced the following probabilities.
Credit Score
Loan Performance Under 400 400 or more
Fully Repaid 0.17 0.66
Defaulted 0.13 0.04

a) What proportion of loans are fully repaid?

b) What proportion of loans are given to scorers under 400?
c) What proportion of loans are defaulted given the scores are 400 or more?

3. Professor Thor is in charge of a program to prepare students for a college entrance exam. Records
show that, in the program, 80% of the students need work in mathematics, 70% need work in
English, and 55% need work in both areas. One person is to be randomly selected from this
population of all students in the program. Let
a) Construct a contingency probability table and complete the table with the associated
probabilities.
Event Need Work in English No Need Work in English Total
Need Work in Math
No Need Work in Maths
Total

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b) Compute the probability that the selected person does not need work in English and in
Mathematics.
c) Compute the probability that the selected person needs work in English or in Mathematics.
d) Are the events “need work in English” and “need work in Mathematics” independent?
4. The probability of events A1 and A2 are 0.4 and 0.6 respectively. It is also known that P(A1  A2)
= 0. Suppose that P(B  A1) = 0.2 and P(B  A2) = 0.05
a) Are A1 and A2 mutually exclusive events? Explain why or why not?
b) Compute P(A1  B)
c) Compute P(A2  B)

5. In a certain corporation, there are 300 male employees and 100 female employees. It is known
that 20% of the male employees have advanced degrees and 40% of the females have advanced
degrees.
a) If one of the 400 employees is chosen at random, what is the probability this employee has
an advanced degree and is female?
b) If one of the 400 employees is chosen at random, what is the probability this employee has
an advanced degree or is female?

6. Olive Construction Company is determining whether it should submit a bid for a new shopping
center. In the past, Olive's main competitor, Base Construction Company, has submitted bids 70%
of the time. If Base Construction Company does not bid on a job, the probability that Olive
Construction Company will get the job is 0.50. If Base Construction Company does bid on a job,
the probability that Olive Construction Company will get the job is 0.25.
a) What is the probability that Olive Construction Company will get the job?
b) If Olive Construction Company gets the job, what is the probability that Base Construction
Company did not bid?

7. Approximately 8% of men are color blind. If two men are independently and randomly chosen,
find the probability of the following events.
a) Both are color blind
b) Both are not color blind
c) One is color blind and the other is not color blind

8. In a four-cylinder engine there are four spark plugs. If any one of them malfunctions, the car will
idle roughly and power will be lost. Suppose that for a certain brand of spark plugs, the
probability that a spark plug will function properly after 10,000 km is 0.90. Assuming that the
spark plugs operate independently, what is the probability that the car will idle roughly after
10,000 km?

Basic Probability 42 HH