PPF.501.F.10.powerpoint.1

# PPF.501.F.10.powerpoint.1 - PPF501 PART 1 PROBABILITY...

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11 PPF501 PART 1 – PROBABILITY ANALYSIS

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22 PROBABILITY Basic Definition: CLASSICAL INTERPRETATION: Number of outcomes favorable to A Total number of outcomes when each outcome has an equal chance to occur, and one and only one outcome can occur. EX: 3R, 2B, 1G One random draw - P(R) = 3/6 P(R or B) = 5/6 P(A) =
33 RELATIVE FREQUENCY INTERPRETATION: Same as classical interpretation, except that values are EMPIRICALLY BASED EX: Over a large number of trials, a certain procedure has been successful 96.3% of the time. Hence, we say: P(successful) = .963

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44 SUBJECTIVE PROBABILITY INTERPRETATION: for ONE-TIME EVENTS No repetition of exact circumstances - Probability reflects DEGREE OF BELIEF EX: P(This specific marketing program will be successful) =.75 This means that the person(s) “assigning” this probability believes that fair betting odds are 75:25, or 3:1, in favor of the marketing program being successful
55 ALL INTERPRETATIONS LEND THEMSELVES TO THE SAME SET OF “RULES” “FORMULAS” “RELATIONSHIPS”

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66 WE HAVE: Number of outcomes favorable to A Total number of outcomes P(A) 0 (Number of outcomes favorable to A cannot be negative) P(A) 1 (Number of outcomes favorable to A cannot exceed the total number of outcomes) P(A) =
77 P(A) + P(A) = 1, where P(A) = P(A does NOT occur) VENN DIAGRAM A A

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88 P(A or B) = P(A alone, or B alone, or both) Typical Venn diagram: A P(A or B) = P(A) + P(B) - P(A and B) P ( ) Double counted, and hence, subtract ed once ADDITION RULE:
99 Putting the two formulae together, to form another formula: P(A or B) + P(A and B) = 1

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## This note was uploaded on 03/02/2011 for the course PPF 501 taught by Professor Keating during the Spring '11 term at Bentley.

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PPF.501.F.10.powerpoint.1 - PPF501 PART 1 PROBABILITY...

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