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*another review sheet - Chapter Topics Types of Probability...

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1 Chapter 2 - Probability and Statistics 1 Types of Probability Fundamentals of Probability Statistical Independence and Dependence Expected Value The Normal Distribution Chapter Topics Chapter 2 - Probability and Statistics 2 Classical , or a priori (prior to the occurrence) probability is an objective probability that can be stated prior to the occurrence of the event. It is based on the logic of the process producing the outcomes. Objective probabilities that are stated after the outcomes of an event have been observed are relative frequencies , based on observation of past occurrences. Relative frequency is the more widely used definition of objective probability. Types of Probability Objective Probability Chapter 2 - Probability and Statistics 3 Subjective probability is an estimate based on personal belief, experience, or knowledge of a situation. It is often the only means available for making probabilistic estimates. Frequently used in making business decisions. Different people often arrive at different subjective probabilities. Objective probabilities used in this text unless otherwise indicated. Types of Probability Subjective Probability Chapter 2 - Probability and Statistics 4 An experiment is an activity that results in one of several possible outcomes which are termed events. The probability of an event is always greater than or equal to zero and less than or equal to one. The probabilities of all the events included in an experiment must sum to one. The events in an experiment are mutually exclusive if only one can occur at a time. The probabilities of mutually exclusive events sum to one. Fundamentals of Probability Outcomes and Events Chapter 2 - Probability and Statistics 5 A frequency distribution is an organization of numerical data about the events in an experiment. A list of corresponding probabilities for each event is referred to as a probability distribution. If two or more events cannot occur at the same time they are termed mutually exclusive. A set of events is collectively exhaustive when it includes all the events that can occur in an experiment. Fundamentals of Probability Distributions Chapter 2 - Probability and Statistics 6 State University, 3000 students, management science grades for past four years. Event Grade Number of Students Relative Frequency Probability A B C D F 300 600 1,500 450 150 3,000 300/3,000 600/3,000 1,500/3,000 450/3,000 150/3,000 .10 .20 .50 .15 .05 1.00 Fundamentals of Probability A Frequency Distribution Example
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2 Chapter 2 - Probability and Statistics 7 A marginal probability is the probability of a single event occurring, denoted P(A). For mutually exclusive events, the probability that one or the other of several events will occur is found by summing the individual probabilities of the events: P(A or B) = P(A) + P(B) A Venn diagram is used to show mutually exclusive events. Fundamentals of Probability
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*another review sheet - Chapter Topics Types of Probability...

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