FPT UNIVERSITY
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Chapter 4:
Basic Probability
Course Name: Applied Statistics for Business
Lecturer: Dr. Duong Thi Viet An
Hanoi, 2025
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Content
1 4.1 Basic Probability Concepts
2 4.2 Conditional Probability
3 4.3 Ethical Issues and Probability
4 4.4 Bayes’ Theorem
5 4.5 Counting Rules
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4.1 Basic Probability Concepts
4.1 Basic Probability Concepts
Random Experiment
A random experiment is an action or process that leads to one of several
possible outcomes.
Example 1.
Experiment: Toss a coin.
Outcomes: Heads and tails.
Experiment: Measure the time to assemble a computer.
Outcomes: Number whose smallest possible value is 0 seconds with
no predefined upper limit.
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4.1 Basic Probability Concepts
Sample Spaces
Sample Spaces
The set of all possible outcomes of a random experiment is called the
sample space, denoted as S.
Example 2.
Tossing a die. The sample space is
S = {1, 2, 3, 4, 5, 6}
Tossing a coin three times. The sample space is
S = {HHH, HHT, HTH, THH, TTH, THT, HTT, TTT}
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4.1 Basic Probability Concepts
Events
Events
An event is a subset of the sample space.
Simple event: An event described by a single characteristic.
Joint event: An event described by two or more characteristics.
The complement of the event A in the sample space S, denoted by
A0 , is the set of outcomes in S that are not in A.
A set of events are mutually exclusive if they cannot occur at the
same.
A set of events are collectively exhaustive if one of the events must
occur.
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4.1 Basic Probability Concepts
Events
Example 3.
Tossing a die. Let E denote the event ”getting an even value”.
E = {2, 4, 6}, E 0 = {1, 3, 5}
Tossing a coin three times. Let A denote the event that exactly 2
heads appear and B denote the event that at least 1 head appear.
A = { HHT, HTH, THH}
B 0 = {TTT}
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4.1 Basic Probability Concepts
Summarizing Sample Spaces
Sample spaces can be presented in tabular form using contingency tables
or visualized using Venn diagrams.
Example 4. The following table presents the results of the sample of
1,000 households surveyed in terms of purchase behavior for large TVs.
The sample space consists of the 1,000 households.
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4.1 Basic Probability Concepts
Summarizing Sample Spaces
A = planned to purchase
B = actually purchased
A0 = did not plan to purchase
B 0 = did not actually purchase
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4.1 Basic Probability Concepts
Probability of an Event
Probability of an Event
If the possible outcomes are equally likely to occur, then
The numbers of outcomes in E n(E)
P (E) = =
The numbers of possible outcomes n(S)
Note.
0 ≤ P (E) ≤ 1, P (impossible event) = 0, P (certain event) = 1
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4.1 Basic Probability Concepts
Example of a priori probability
When randomly selecting a day from the year 2018 what is the probability
the day is in January?
number of days in January
Probability of day in January =
total number of days in 2018
31
=
365
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4.1 Basic Probability Concepts
Example of empirical probability
Find the probability of selecting a male taking statistics from the
population described in the following table:
Taking Stats Not Taking Stats Total
Male 84 145 229
Female 76 134 210
Total 160 279 439
number of males taking stats 84
Probability of male taking stats = =
total number of people 439
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4.1 Basic Probability Concepts
Simple Probability: Definition & Computing
Simple Probability refers to the probability of a simple event.
P(Planned to purchase)
P(Actually purchased)
number of outcomes satisfying A
P (A) =
total number of outcomes
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4.1 Basic Probability Concepts
Joint Probability: Definition & Computing
Joint Probability refers to the probability of an occurrence of two or more
events (joint event).
ex. P(Plan to Purchase and Purchase).
ex. P(No Plan and Purchase).
number of outcomes satisfying A and B
P (A) =
total number of outcomes
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4.1 Basic Probability Concepts
Computing A Marginal Probability Via Joint
Probabilities
Computing a marginal (or simple) probability:
P (A) = P (A and B1 ) + P (A and B2 ) + ... + P (A and Bk )
where B1 , B2 , . . . , Bk are k mutually exclusive and collectively exhaustive
events.
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4.1 Basic Probability Concepts
Marginal & Joint Probabilities In A Contingency
Table
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4.1 Basic Probability Concepts
General Addition Rule
General Addition Rule
P (A or B) = P (A) + P (B) − P (A and B)
Note. If A and B are mutually exclusive, then
P (A or B) = P (A) + P (B)
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4.1 Basic Probability Concepts
Example 5: What is the probability that the household planned to
purchase or actually purchased a large TV?
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4.2 Conditional Probability
4.2 Conditional Probability
Definition
The conditional probability of B given A, denoted as P (B|A), is the
probability that the event B occurs given that the event A has already
occurred.
Example 6. A box of nine iPhone 7 cellphones contains two red
cellphones and seven black cellphones. If two cellphones are randomly
selected from the box, without replacement (the first cellphone is not
returned to the box after it is selected), what is the probability that
the second one selected is red given that the first one was red?
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4.2 Conditional Probability
4.2 Conditional Probability
Formula for Conditional Probability
If all outcomes are equally likely then
The numbers of outcomes in A ∩ B
P (B|A) =
The numbers of outcomes in A
P (A and B)
P (B|A) =
P (A)
P (A and B)
P (A|B) =
P (B)
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4.2 Conditional Probability
4.2 Conditional Probability
Example 7. The following table indicates the consumers’ responses to
whether the television purchased had a faster refresh rate and whether
they also purchased a streaming media player in the past 12 months.
If a household purchased a television with a faster refresh rate, what is the
probability that it also purchased a streaming media player?
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4.2 Conditional Probability
Decision Trees
Decision tree for purchased a television with a faster refresh rate and a
streaming media player
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4.2 Conditional Probability
Independence
Independence
Two events, A and B, are independent if and only if
P (A|B) = P (A)
General Multiplication Rule
P (A and B) = P (A|B)P (B)
Note. If A and B are independent, then
P (A and B) = P (A)P (B)
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4.2 Conditional Probability
Independence
Example 8. Consider the 80 households that purchased televisions that
had a faster refresh rate. The survey results show that 64 households
are satisfied with their purchase. Suppose 2 households are randomly
selected from the 80 households. Find the probability that both house-
holds are satisfied with their purchase.
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4.2 Conditional Probability
Marginal Probability
Marginal Probability
If B1 , B2 , . . . , Bk are k mutually exclusive and collectively exhaustive
events then
P (A) = P (A and B1 ) + P (A and B2 ) + . . . + P (A and Bk )
= P (A|B1 )P (B1 ) + P (A|B2 )P (B2 ) + . . . + P (A|Bk )P (Bk )
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4.3 Ethical Issues and Probability
4.3 Ethical Issues and Probability
Ethical issues can arise when any statements related to probability are
presented to the public.
Many people are not comfortable with numerical concepts and tend
to misinterpret the meaning of the probability.
In some instances, the misinterpretation is not intentional, but in
other cases, advertisements may unethically try to mislead potential
customers.
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4.4 Bayes’ Theorem
4.4 Bayes’ Theorem
• Bayes’ Theorem is used to revise previously calculated probabilities based
on new information.
• Developed by Thomas Bayes in the 18th Century.
• It is an extension of conditional probability.
Bayes’ Theorem
If B1 , B2 , . . . , Bk are k mutually exclusive and collectively exhaustive
events then
P (A|Bi )P (Bi )
P (Bi |A) =
P (A|B1 )P (B1 ) + P (A|B2 )P (B2 ) + . . . + P (A|Bk )P (Bk )
for P (A) > 0.
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4.4 Bayes’ Theorem
4.4 Bayes’ Theorem
Example 9. Consider a scenario in which an electronics manufacturer
is considering marketing a new model of television. In the past, 40% of
the new-model televisions have been successful, and 60% have been un-
successful. Before introducing the new-model television, the marketing
research department conducts an extensive study and releases a report,
either favorable or unfavorable. In the past, 80% of the successful new-
model television(s) had received favorable market research reports, and
30% of the unsuccessful new-model television(s) had received favorable
reports. For the new model of television under consideration, the mar-
keting research department has issued a favorable report. What is the
probability that the television will be successful?
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4.4 Bayes’ Theorem
4.4 Bayes’ Theorem
S = successful television
F = favorable report
S 0 = unsuccessful television
F 0 = unfavorable report
P (S|F ) =?
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4.4 Bayes’ Theorem
4.4 Bayes’ Theorem
S = successful television
F = favorable report
S 0 = unsuccessful television
F 0 = unfavorable report
P (S|F ) =?
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4.5 Counting Rules
4.5 Counting Rules
Counting Rule 1 (Multiplication Rule)
If an operation can be described as a sequence of k steps, and
if the number of ways of completing step 1 is n1
if the number of ways of completing step 2 is n2 , and so forth, The
total number of ways of completing the operation is
n1 × n2 × . . . × nk
Example 10. Suppose you roll a die 3 times. How many different possible
outcomes can occur?
Example 11. You would like to ”build-your-own-burger” at a fast-food
restaurant. There are five different breads, seven different cheeses, four
different cold toppings, and five different sauces on the menu. If you want
to include one choice from each of these ingredient categories, how many
different burgers can you build?
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4.5 Counting Rules
4.5 Counting Rules
Counting Rule 2
The number of ways that all n items can be arranged in order is n!
Example 12. If a set of six books is to be placed on a shelf, in how many
ways can the six books be arranged?
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4.5 Counting Rules
4.5 Counting Rules
Counting Rule 3 (Permutation)
The number of ways of arranging x objects selected from n objects in
order is
n!
n Px =
(n − x)!
Example 13. You have five books and are going to put three on a
bookshelf. How many different ways can the books be ordered on the
bookshelf?
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4.5 Counting Rules
4.5 Counting Rules
Counting Rule 4 (Combination)
The number of ways of selecting x objects from n objects, irrespective of
order, is
n!
n Cx =
x!(n − x)!
Example 14. There are 15 exercise bikes in a fitness store showroom. The
fitness store owner wishes to select three of them to display at a fitness
expo. How many ways can a group of three be selected?
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4.5 Counting Rules
Exercises
Chapter 4: 4.13, 4.14, 4.23, 4.25, 4.28, 4.30, 4.33, 4.36, 4.38, 4.46-4.48
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4.5 Counting Rules
Sample Questions
Question 1: The employees of a company were surveyed on questions
regarding their educational background (college degree or no college
degree) and marital status (single or married). Of the 600 employees,
400 had college degrees, 100 were single, and 60 were single college
graduates. The probability that an employee of the company is single
or has a college degree is......
a) 0.10
b) 0.25
c) 0.667
d) 0.733
e) None of the other choices is correct
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4.5 Counting Rules
Sample Questions
Question 2: Jake woke up late in the morning on the day that he has
to go to school to take an important test. He can either take the shuttle
bus which is usually running late 20% of the time or ride his unreliable
motorcycle which breaks down 40% of the time. He decides to toss a
fair coin to make his choice.
If Jake, in fact, gets to the test on time, what is the probability that he
rode his bike?
a) 0.43
b) 0.57
c) 0.39
d) 0.61
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4.5 Counting Rules
Sample Questions
Question 3: At the International Pancakes Hut, there are 4 different
ways to have an egg cooked, 7 different choices of pancakes, 5 different
types of syrups and 8 different beverages. How many different ways are
there to order an egg, a pancake with a choice of syrup and a beverage?
a) 1,120
b) 25
c) 980
d) 42
e) None of the other choices is correct
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4.5 Counting Rules
Sample Questions
Question 4: A certain type of new business succeeds 60% of the time.
Suppose that 3 such businesses open (where they do not compete, so it is
reasonable to believe that their relative successes would be independent).
The probability that all 3 businesses succeed is .......
a) 0.216
b) 0.364
c) 0.784
d) 0.636
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