MGMT 2340
Section
W01
Business Statistics I
Instructor:
E. Mark Leany
contact via
Blackboard
online.uen.org
alternately:
[email protected]
BASIC Probability
you may already know
Probability:
1/2 = 50%
1/6 = 17%
18/38 = 47%
18/38 = 47%
2/38 = 5%
Outcome:
Heads on a Coin
Rolling a 6 on a die
Red in Roulette
Black in Roulette
Everybody LOSES

A Survey of Probability Concepts
Chapter 5
140
GOALS
1.Defineprobability.
2.Describe the classical, empirical, and subjective
3.Explain the terms experiment, event, outcome, permutations, and combinations.
4.Define the terms conditional probability andjointprobability.
5.
Calculate probabilities using the
rules of addition
and
rules
of multiplication
.
6.
Apply a
tree diagram
to organize and compute
probabilities.
7.
Calculate a probability using
Bayes’ theorem
.
140

Refresher - Why Sample?
z
Sampling may destroy item
z
May not be possible to sample everything
Same Reasons for Probability
z
Seldom have complete information
Probability
PROBABILITY
A value between zero and one,
inclusive, describing the relative possibility
(chance or likelihood) an event will occur.
PROBABILITY
A value between zero and one,
inclusive, describing the relative possibility
(chance or likelihood) an event will occur.
142

Experiment, Outcome and Event
z
An
experiment
is a process that leads to the occurrence of one and only one of several
possible observations.
z
An
outcome
is the particular result of an experiment.
z
An
event
is the collection of one or more outcomes of an experiment.
143
Mutually Exclusive Events and
Collectively Exhaustive Events
z
Events are
mutually exclusive
if the
occurrence of any one
event means that none of the others can occur at the
same time.
z
Events are
collectively exhaustive
if at least one of the
events must occur when an experiment is conducted.
z
If exclusive and exhaustive:
The SUM of the Probabilities = 100%
144

Ways of Assigning Probability
There are three ways of assigning probability:
1. CLASSICAL PROBABILITY
Based on the assumption that the outcomes of an
experiment are
equally likely.
2. EMPIRICAL PROBABILITY
The probability of an event happening is the fraction
of the time similar events happened in the past.
3. SUBJECTIVE CONCEPT OF PROBABILITY
The likelihood (probability) of a particular event
happening that is assigned by an individual based on
whatever information is available.
147
Classical Probability
Consider an experiment of rolling a six-sided die. What is the
probability of the event “an
even number
of spots appear face
up”?
The possible outcomes are:
There are three “favorable” outcomes (a two, a four, and a six) in
the collection of six equally likely possible outcomes.
144

Empirical Probability
The empirical approach to probability is based on what
is called the law of large numbers. The key to
establishing probabilities empirically is that more
observations will provide a more accurate estimate of
the probability.

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- Spring '11
- Leany
- Conditional Probability, Probability, Survey of Probability Concepts