CHAPTER 5

ELEMENTARY PROBABILITY THEORY

Introduction
Statistical inference deals with inferences about a population based on a sample taken from that
population. Since there considerable uncertainty in decision making, it is important that all the known
risks involved be scientifically evaluated. Helpful in this is probability theory, which has often been
referred to as the science of uncertainty.
Probability theory is a necessary part of statistical inference, because it measures the uncertainties
involved in making generalizations from a sample.
The mathematical theory of probability is the basis for statistical applications in both social and
managerial researches.
Managers who have consistent record of correct decisions are said to have good judgment. And an
important part of that good judgment is the ability to properly assess probabilities.
Probability come into play when:
 Insurance companies establish the annual premium to be paid by the insured;
 Personnel managers use tests in the selection of employees;
 Managers decide to introduce a new product;
 Sales are forecast; and so on
Convenient and clear treatment of probability theory requires two types of basic knowledge:
 Counting rules, and
 Set theory
COUNTING PRINCIPLES
Generally, we cannot make intelligent predictions or decisions unless we know what is possible, i.e. we
must know what is possible before we can judge what is possible.
In most cases, we shall be interested in the problem of determining how many different things can
happen without actually listing everything that can happen in a given situation.
The principle of Multiplication
If a choice consists of two steps, of which the first can be made in m ways and for each of those the
second can be made in n ways, then the whole choice can be made in ways. That is, if a choice
consists of k-steps, of which the first can be made in , ways, the second in ways, the third in
ways, . . . , and the in ways, then the total number of ways can be performed is
( )( )( ) ( )
Example 1: a) If the store of a certain company has five entrances and six exits, in how many different
ways can one enter and leave the store?

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Solution: and
( )( )
b) Suppose in a medical study the employees of a company are classified according to their blood type as
A, B, AB, or O, according to their RH-factor as – and according to their blood pressure as high,
normal or low. Then in how many different ways can an employee be classified?
Solution: and .
An employee can be classified in
( )( )( )
FACTORIAL
If n is a positive integer, the symbol n! can be read as ‘n-factorial’ and denotes the product of all positive
integers less than or equal to n. That is,
( )( )( ) ( )
Note: For convenience, we define
Example 2: Find 3!, 4!, 7!, 8! and 10!
PERMUTATIONS
 An arrangement of objects with attention given to the order of arrangements is called a
permutation.
 A permutation of a number of objects is the arrangement of objects in a definite order.
The total number of arrangements of objects taken n at a time from N objects, with is denoted

by and is defined as ( )
.

Example 3: a) In how many ways can a sales man make visits to any 4 out of 10 cities?
Solution: A sales man can make visits to any 4 out of 10 cities in

( )
b) From a trade union of 30 members, a president, a vice president and a secretary can be selected in

( )

Note:1) If n=N, then ( )

COMBINATION
 In permutation we are interested in the order of arrangement of the objects.
 Our interest in combination is about the number of ways we may chose objects from N different
objects.
 A selection of objects considered without regarding to the order of arrangement is called a
combination.

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The number of combinations of objects taken n at a time from N objects is denoted by , ( ), or

and is equal to . That is, ( )

.

Example 6: a) The number of ways in which three individuals can be selected from a list of five people is

( )

b) The number of ways in which a committee of 5 people can be selected from 12 people is

( )

c) Out of 5 men and 3 women a committee of three is to be formed

i) Consisting of two men and one woman
ii) Without any restriction
In how many ways can this be done?
Solution: i) 2 men out of 5 can be selected in ways and 1 woman out of 3 can be selected in
ways.
By the multiplication principle, the committee can be formed in

( ) ( )

ii) 3 people can be selected out of a total of 8 in

( )
ways

d) Out of 10 male and 10 female employees a committee consisting of 3 male and 4 female
employees is to be selected. In how many ways can this be done if
i) Any male and any female employees can be selected?
ii) One particular male employee should not be selected?
Solution: i) 3 male employees out of 10 can be selected in ways
4 female employees out of 10 can be selected in ways
By the multiplication principle, the committee can be formed in

( ) ( )
ways.

ii) If one particular male employee should not be selected, we have

ways

e) Out of 15 items 2 are known to be defective. In how many ways can one choose 3 items so that
i) None of the defectives is included
ii) Only one defective is included
iii) Both defectives are included
Solution: i) If none of the defectives is to be included, then we will have

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 ways

ii) If only one defective is to be included, then we will have

ways

iii) If both defectives are to be included, then we will have

ways

PROBABILITY
The main purpose of introducing permutation and combination is to use them in computing probabilities
related to events that are associated with finite sample space. The terms such as probability, chance and
likelihood are often used interchangeably.
BASIC TERMS
1) An experiment
 It is any process of observation or measurement.
 It is something we plan to do whose outcome or result is uncertain.
 It is any trial whose outcome cannot be predicted.
E.g. a) Tossing a well-balanced fair coin b) Rolling a fair die
2) Sample space
 It is the collection or set of all possible outcomes of an experiment.
 It is denoted by S.
E.g. a) In tossing a well-balanced fair coin, the sample space * +
b) In rolling a fair die, the sample space * +
3. Sample points are elements of sample space.
4. Event is a subset of a sample space.
i. Simple event is an event containing one point in a sample space. It is also called an elementary
event or a fundamental event.
ii. Compound event is an event containing two or more points in a sample space. It is also called a
composite event.
iii. Impossible event is an event containing none of the points in a sample space.
iv. Sure/Certain event is an event containing all of the points of a sample space.
5. Complement of an event A, denoted by the A’, and consisting all points in the sample space that are
not in A.
 A probability is a number between 0 and 1 inclusive that measures one’s belief that a particular
event resulting from an experiment will occur.

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  Probabilities are numerical values that measure the occurrence (success) or non-occurrence
(failure) of events.
Three approaches to the concept of probability will be considered.
 The first approach requires that we think about what would happen if the experiment were to be
carried out, although we must be sure that the outcomes of the experiment are equally likely to
occur.
 The second approach requires that the experiment be repeated a large number of times.
 The third approach is based on the feelings or insights of the person determining the probability.
1) Classical (mathematical) definition of probability
The classical method of assigning probabilities based on the assumption that each outcome is equally
likely to occur. If an experiment has N possible outcomes and if n of these outcomes are favorable to an
event E, then the probability of occurrence of event E denoted by P(E) is given by

( )

The probability of non-occurrence of event A (called its failure) is denoted and given by

( ) ( )

Note: ( ) ( )

E.g. a) A fair coin is tossed once. What is the probability of getting head?
b) If we roll a die once, what is the probability that
i. An even number will be on the upper face of a die?
ii. A factor of 6 will be on the upper face of a die?
iii. 8 or 9 will be on the upper face of a die?
iv. A whole number less than 7 will be on the upper face of a die?
c) A coin and a die are tossed together. What is the probability of getting
i) a head and an even number?
ii) a head and a factor of 60?
iii) A tail and an integer less than 5?
2) Relative frequency (statistical definition) of probability
The statistical definition of probability is based on the relative frequency of the event or what is known
to have happened in the past. Thus,

( )

E.g. A shop assistant who tests light-bulbs for customers find that, of 200 tested 196 bulbs light and 4
bulbs do not light. Then

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 ( ) and

( ) .

3) Subjective probability
The subjective method of assigning probability is based on the feelings or insights of the person
determining the probability. The subjective method often is based on the accumulation of knowledge,
understanding in the mind. At times it is merely a guess. At other times subjective probability can
potentially yield accurate probabilities.
It can be potentially useful way of tapping a person’s experience, knowledge and insight and using
them to forecast the occurrence of some events.
Example: Physicians, sometimes assign subjective probabilities to the length of life expectance for people
having cancer.
Subjective probability can be used as a mechanism to utilize the background of experienced persons and
managers in decision making.
Example: Weather forecasting is a version of subjective probability when the forecast is based on an
educated guess.
Mutually Exclusive Events
Definition: If two or more events cannot occur at the same time, they are said to be mutually exclusive.
That is, the success of one necessitates the failure of the other.
Generally, two events are said to be mutually exclusive, if they have no sample

points in common.
Addition law for Mutually Exclusive Events
If two events A and B are mutually exclusive the probability that either A or B

will occur equals the sum of their probabilities. That is,

( ) ( ) ( )
Example: Suppose the probability that Nahom will receive a grade A in this course is 0.4 and that he will
receive C is 0.12. Then the probability that he will receive A or C is 0.4 + 0.12=0.52.
If two events are mutually exclusive and together they exhaust all the possibilities, they are

called complementary events. Since A and A’ are mutually exclusive,

( ) ( ) ( )
Example: If a weather forecaster says that the probability that it will rain tomorrow is 0.65, then the
forecaster’s probability that it will not rain is 0.35. Since rain and not rain are complementary
events.

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The above addition law can be generalized to more than two events. If k events are

mutually exclusive, the probability that either one of them will occur equals the sum of their

respective probabilities. That is,

( ) ( ) ( ) ( )
If the mutually exclusive events exhaust all the possibilities, they are called

collectively exhaustive events with ( ) ( ) ( ) .

Example: Suppose the probabilities that Yonas will receive grades of A, B, C, D or F in this course are given
by 0.3, 0.18, 0.22, 0.21 and 0.09 respectively. Then find
a) The probability that he will receive either A or B or C
b) The probability that he will receive A or B or C or D or F
Solution:
a) The probability that he will receive either A or B or C
( ) ( ) ( ) ( )
b) The probability that he will receive A or B or C or D or F
( ) ( ) ( ) ( ) ( ) ( )

Basic Rules of Probability

1) The probability of any sample space or sure event is 1. ( ) ( ) .
2) The probability of impossible event is 0. That is, ( ) .
3) The probability of any event A is a number between 0 and 1 inclusive. That is, ( ) .
4) If two events are mutually exclusive, then the probability that one or the other will occur is the sum of
the probabilities. That is, ( ) ( ) ( )
5) If k events are mutually exclusive, the probability that either one of them will occur
equals the sum of their respective probabilities. That is,
( ) ( ) ( ) ( )
6) The probability that an event will occur or not occur always add-up to 1. That is,
( ) ( ) ( ) .

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