CHAPTER FOUR

4. INTRODUCTION TO PROBABILITY

4.1. Basic Definitions of Probability

First, think of some event where the outcome is uncertain.

Examples of such outcomes would be:-

 The roll of a die,

 The amount of rain that we get tomorrow.

In each case, we don't know what will happen. For example, we don't know exactly how
much rain we will get tomorrow.

 A probability is a numerical measure of the likelihood of the event. It is a number

that we attach to an event, say the event that we'll get over an inch of rain tomorrow,
which reflects the likelihood that we will get this much rain.

4.2. Approaches to Probability Study

Historically, three different conceptual approaches have been developed for defining probability
values:

 The classical,
 Relative frequency, and
 Subjective approaches.

A. The Classical Approach

By the classical approach to probability, if there are a possible outcomes favorable to the
occurrences of an event A and B possible outcomes unfavorable to the occurrence of A, and all
outcomes are equally likely and mutually exclusive, then the probability that A will occur is

The classical approach to probability is based on the assumption that each outcome is equally
likely. Because this approach (when it is applicable) permits determination of probability values
before any sample events are observed, it has also been called the a priori approach.
Example 4-1: In a well-shuffled deck of cards which contains four aces and 48 other cards, the
probability of an ace (A) being obtained on a single draw is

B. The Relative Frequency Approach

By the relative frequency approach, the probability is determined on the basis of the proportion
of times that a favorable outcome occurs in a number of observations or experiments. No prior
assumption of equal likelihood is involved. Because determination of the probability values is
based on observation and collection of data, this approach has also been called the empirical
approach.

Example 8-2: Before including coverage for certain types of dental problems in health insurance
policies for employed adults, an insurance company wishes to determine the probability of
occurrence of such problems, so that the insurance rate can be set accordingly. Therefore, the
statistician collects data for 10,000 adults in the appropriate age categories and finds that 100
people have experienced the particular dental problem during the past year. The probability of
occurrence is thus

C. The Subjective Approach

Both the classical and relative frequency approaches yield objective probability values, in the
sense that the probability values indicate the relative rate of occurrence of the event in the long
run. In contrast,

 The subjective approach to probability is particularly appropriate when there is only one
opportunity for the event to occur, and it will either occur or not occur that one time.
 By the subjective approach, the probability of an event is the degree of belief by an
individual that the event will occur, based on all evidence available to him.
 Because the probability value is a personal judgment,
 the subjective approach has also been called the personalistic approach.

4.3. Expressing Probability

The symbol P is used to designate the probability of an event. Thus P(A) denotes the probability
that event A that will occur in a single observation or experiment. The smallest value that a
probability statement can have is 0 (indicating the event is impossible) and the largest value it
can have is 1 (indicating the event is certain to occur). Thus, in general:

0 < P(A) < l

In a given observation or experiment, an event must either occur. Therefore, the sum of the
probability of occurrence plus the probability of non-occurrence always equals 1. Thus, where A'
indicates the non-occurrence of event A, we have:

P(A) + P(A') = 1

As an alternative to probability values, probabilities can also be expressed in terms of odds. The
odds for the occurrence of an event are

Odds = No. of favorable out comes: No. of unfavorable outcomes

For instance, Odds of 5 ive to two") indicate that for every five elementary events constituting
success there are two elementary events constituting failure. Note that by the classical approach
to probability discussed in Section 8.5(a)the probability value equivalent to an odds ratio of 5:2

is

Example 4- 4: Suppose success is defined as drawing any face card or an ace from a well
shuffled deck of 52 cards. The odds associated with success are 16:36,4:9 the probability of
success is

4.4. Mutually Exclusive & Nonexclusive Events

Two or more events are mutually exclusive, or disjoint if they can’t occur together. That is, the
occurrence of one event automatically precludes the occurrence of the other event (or events).
For instance, suppose we consider the two possible events "ace" and "king" in respect to a card
being drawn from a deck of playing cards. These two events are mutually exclusive, because any
given card cannot be both an ace and a king.

Two or more events are nonexclusive, or joint, when it is possible for them to occur together.
Note that this definition does not indicate that such events must necessarily always occur
together. For instance, suppose we consider the two possible events "ace "spade." These events
are not mutually exclusive, because a given card can be both an ace and a spade; however, it
does not follow that every ace is a spade or every spade is an ace.
Example 4- 5. In a study of consumer behavior, an analyst classifies the people who enter a
stereo shop according to sex ("male or female") and according to age ("under 30" or "30 and
over’’). The two events, or classifications, ‘’male" and "female" are mutually exclusive, since
any given person would be classified in one category or the other. Similarly the events ‘’under
30 and 30 and over" are also mutually exclusive. However, the events "male" and "under 30" are
not mutually exclusive, because a randomly chosen person could have both characteristics.

4.5. The Rules of Addition

The rules of addition are used when we wish to determine the probability of one event or another
(or both) occurring in a single observation. Symbolically, we can represent the probability of
event A or event B by P (A or B). In language of the set theory, this is called the union of A and
B and the probability is designated by P (AUB)

There are two variations of the rule of addition, depending on whether the two events are
mutually exclusive. The rule of addition for mutually exclusive events is

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

Example 4- 6: When drawing a deck of playing cards, the events ‘’ace’’ (A) and "king" (K) are
mutually exclusive the probability of drawing either an ace or a king in a single draw is

For events that are not mutually exclusive, the probability of the joint occurrence of the two
events is subtracted from the sum. We can represent the probability of joint occurrence by B). In
the language of set theory this is called the intersection of A and B and the probability is
designated by P(A B). Thus, the rule of addition for events that are not mutually exclusive is

The above formula is also often called the general rule of addition, because for events that are
mutually exclusive the last term would always be equal to zero. Thus, the formula of

Example 4- 7: When drawing a card from a deck of playing cards, the events "ace" and "spade"
are not mutually exclusive. The probability of drawing an ace (A) or spade (S) or (both) in a
single draw is
4.9. Permutations and Combinations

By the classical approach to determining probabilities presented in Section 5.1, the probability
value is based on the ratio of the number of equally likely outcomes that are favorable to the total
number of outcomes that are possible. When the problems are simple, the number of outcomes
can be counted directly. However, for more complex problems the methods of permutations and
combinations are required to determine the number of possible outcomes.

A. Permutations

The number of permutations of n objects is the number of ways in which the objects can be
arranged in terms of order:

The symbol n! is read "n factorial." In permutations and combinations problems, n is always
positive. Also, note that by definition 0! = 1 in mathematics.

Example 4- 11: Three members of a social organization have volunteered to serve as officers for
the following year, to take positions as President, Treasurer, and Secretary. The number of ways
(permutations) in which the three can assume the positions is

Typically, we are concerned about the number of permutations of some subgroup of the n
objects, rather than all n objects as such. That is, we are interested in the number of permutations
of n objects taken r at a time, where r is less than n:

Example 4- 1:. In Example 4- 11 above, suppose there are 10 members in the social organization
and no nominations have yet been presented for the offices of President, Treasurer, and
Secretary. The number of different arrangements of three officers elected from the 10 club
members is
B. Combinations

In the case of permutations, the order in which the objects are arranged is important. In the case
of combinations, we are concerned with the number of different groupings of objects that can
occur without regard to their order. Therefore, an interest in combinations always concerns the
number of different subgroups that can be taken from n objects. The number of combinations of
n objects e is taken r at a time is

Example 4- 13: Suppose that three members from a small social organization containing a total
of 10 members are to be chosen to form a committee. The number of different groups of three
people which can be chosen, without regard to the different orders in which each group might be
chosen, is

The methods of permutations and combinations provide a basis for counting the possible
outcomes in relatively complex situations. In terms of combinations, we can frequently
determine the probability of an event by determining the number of combinations of outcomes
which include that event as compared with the total number of combinations which are possible.
Of course, this again represents the classical approach to probability and is based on the
assumption that all combinations are equally likely.

Example 4- 1:. Continuing with Example 4- 13, if the group contains six women and four men,
what is the probability that a random choice of the committee members will result in two women
and one man being selected? The basic approach is to determine the number of combinations of
outcomes which contain exactly two women (of the six women) and one man (of the four men)
and then to take the ratio of this number to the total number of possible combinations: