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Chapter 5

A Survey of Probability Concepts

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 Learning Objectives
LO5-1 Define the terms probability, experiment, event, and
outcome.
LO5-2 Apply the classical approach to assign probabilities.
LO5-3 Determine the number of outcomes using principles of
counting.
LO5-4 Apply the empirical approach to assign probabilities.
LO5-5 Apply the subjective approach to assign probabilities.
LO5-6 Calculate probabilities using the rules of addition.
LO5-7 Calculate probabilities using the rules of multiplication.
LO5-8 Compute probabilities using a contingency table.
LO5-9 Calculate probabilities using Bayes’ theorem.

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 Probability 1

Probability A value between 0 and 1 inclusive that

represents the likelihood a particular event happens.

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 Probability 2

Experiment A process that leads to the occurrence of one and

only one of several possible results.
Outcome A particular result of an experiment.
Event A collection of one or more outcomes of an experiment.

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 Approaches to Assigning Probabilities 1

• Classical probability is based on the assumption that the

outcomes of an experiment are equally likely.
Number of favorable outcomes
Probability of an Event =
Number of all possible outcomes
• Example: Roll a six-sided die once. What is the probability
of obtaining even number?

3
• Probability of event   0.50
6

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 Approaches to Assigning Probabilities 2

A challenge is determine the values in the numerator and

denominator.
A small number of outcomes is easy to count.
If the experiment is complex, there are many possible
outcomes.
There are three formulas to help determine the number of
outcomes.
• Multiplication formula.
• Permutation formula.
• Combination formula.

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 Approaches to Assigning Probabilities 3

Suppose there are m possible outcomes of an event.

Suppose there are n possible outcomes for another event.
The total number of arrangements of the two outcomes is (n)
(m).
This can be extended to any number of events.
Example: “Pick 3” lottery where three tumblers each with
balls 0 to 9. After tumbled, one ball is selected from each.
What is the number of possible outcomes?

• (10)(10)(10)=1000

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 Approaches to Assigning Probabilities 4

• Suppose there is a single group.

• We can determine the number of all possible
arrangements of an outcomes from the group.
Permutation Any arrangement of r objects selected from a
single group of n possible objects.
n! (n  1)(n  2) (n  (r  1))(n  r )!
n Pr  
(n  r )! (n  r )!
• This formula is determined by the multiplication formula!

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 Approaches to Assigning Probabilities 5

• Example: A media company is producing a 1-minute ad

video.
• In the production process, eight different video segments
were made.
• They can only select three segments.
• How many different ways can the eight video segments be
arranged?
• n = 8, r = 3.
n! 8! 8! (8)(7)(6)(5!)
• n Pr      336
(n  r )! (8  3)! 5! 5!

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 Approaches to Assigning Probabilities 6

If the order of the selected objects is not important, any

arrangement is called a combination.
• ABC is the same combination as BAC
The number of combinations is less than the number of
permutations.
Combination An event of outcomes when the order of the
outcomes does not matter.
The permutation formula overcounts the r! permutations,
divide out the overcounting.

n!
n Cr 
r ! n  r !
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 Approaches to Assigning Probabilities 7

• Example: The Grand 16 movie theater uses teams of

three employees to work the concession stand each
evening.
• There are seven employees available to work.
• How many different teams can be scheduled?
n! 7! 7!
• n Cr     35
r !(n  r )! 3!(7  3)! 3!4!

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 Approaches to Assigning Probabilities 8

• Empirical probability is the second type of probability.

• It is based on observation, counting and recording
experimental outcomes.

Empirical Probability The probability of an event based on

a collection of observations or data.

• An empirical probability is based on relative frequencies.

Number of times the event occurs

Total number of observations

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 Approaches to Assigning Probabilities 9

• The empirical approach is based on the law of large numbers.

Law of Large Numbers Over a large number of trials, the
empirical probability of an event will approach its true probability.
• The key is that more observations provide an accurate estimate
of the probability.
Number of Trials Number of Heads Relative Frequency of Heads
1 0 .00
10 3 .30
50 26 .52
100 52 .52
500 236 .472
1,000 494 .494
10,000 5,027 .5027

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 Approaches to Assigning Probabilities 10

• Example: The Standard & Poor’s (S&P) 500 stock index

was down four time over the course of the previous 20
years.
• What is the probability that the index will be down next
year?
• Let A represent the even of a negative yearly return.

Number of times the event occurs 4

P ( A)    0.20
Total number of observations 20

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 Approaches to Assigning Probabilities 11

• If there is little or no experience on which to base a

probability, it is estimated subjectively.
• An individual evaluates the available opinions and
information then assigns a probability.
Subjective Concept of Probabiltiy The likelihood
(probability) of a particular event happening that is
assigned by an individual based on whatever information
is available.

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 Approaches to Assigning Probabilities 12

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 Rules of Addition 1

Mutually Exclusive The occurrence of one event means

that none of the other events can occur at the same time.
Collectively Exhaustive At least one of the events must
occur when an experiment is conducted.

• If events are mutually exclusive, the special rule of

addition is: P(A or B) = P(A) + P(B).
• This works for any number of mutually exclusive events.

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 Rules of Addition 2

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 Rules of Addition 3

• Example: A machine fills plastic bags with a mixture of beans,

broccoli, and other vegetables.
• Most of the bags contain the correct weight.
• Because of the variation in the size of the beans and other
vegetables, a package might be underweight or overweight.
Weight Event Number of Probability of
Packages Occurrence
Underweight A 100 .025 100
Satisfactory B 3,600 .900

4,000
Overweight C 300 .075
4,000 1.000

• What is the probability that a particular package will be either

underweight or overweight?
• P(A or C) = 0.025 +0.075 = 0.10.

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 Rules of Addition 4

• The complement rule is used to determine the probability

of an event happening by subtracting the probability of an
event not happening from 1.
P  A   P  ~ A   1 so P  A   1  P  ~ A 

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 Rules of Addition 5

• Example: Refer to the previous example.

Weight Event Number of Probability of
Packages Occurrence
Underweight A 100 .025
100
Satisfactory B 3,600 .900 
4,000
Overweight C 300 .075
4,000 1.000

• P  B   1   P  A   P C   1  0.10  0.90

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 Rules of Addition 6

• The general rule of addition is used when the events are

not mutually exclusive.

Joint Probability A probability that measures the likelihood

two or more events will happen concurrently.

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 Rules of Addition 7

• General Addition Rule.

P  A or B   P  A   P  B   P  A and B 
• The use of “or” is inclusive: A or B or both.
• Account for the joint probability that is in both A and B.
• Subtract it out so it is not double counted.
• Note P(A or B) = 0 means events are mutually exclusive.

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 Rules of Addition 8

• Example: What is the probability that a card chosen at

random from a standard deck of cards will be either a king
or a heart?
Card Probability Explanation
King P(A) = 4/52 4 kings in a deck of 52 cards
Heart P(B) = 13/52 3 hearts in a deck of 52 cards
King of Hearts P(A and B) = 1/52 1 kings of hearts in a deck of 52 cards

• P  A or B   P  A   P  B   P  A and B 
4 13 1 16
     0.3077
52 52 52 52

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 Rules of Multiplication 1

Independence The occurrence of one event has no effect on

the probability of the occurrence of another event.
• A and B occur at different times, do not occur together.
• For two independent events: P ( A and B ) = P ( A ) P ( B ).
• This is the special multiplication rule.
• Works for more than two independent events.

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 Rules of Multiplication 2

• Example: A survey by the American Automobile Association (A A

A) revealed 60% of its members made airline reservations last
year.
• Two members are selected at random.
• What is the probability both made airline reservations last year?
• P (R1 and R2 )  P (R1 )P (R2 )  (.60)(.60)  .36.
Outcomes Joint Probability
R1 R2 (.60)(.60)  .36

R1  R2 (.60)(.40)  .24

 R1 R2 (.40)(.60)  .24

 R1  R2 (.40)(.40)  .16
Total 1.00

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 Rules of Multiplication 3

• If two events are not independent, they are dependent.

Conditional Probability The probability of a particular event
occurring, given that another event has occurred.
• The conditional probability is represented a P( B A).
• Read the “probability of B given A”.
• General multiplication rule: P( A and B) = P( A) P( B A).

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 Rules of Multiplication 4

• Example: A golfer has 12 golf shirts in his closet.

• Suppose 9 of these shirts are white and the others are
blue.
• He gets dressed in the dark, so he just grabs a shirt and
puts in on.
• He plays golf two days in a row and does not return the
shirts to the closet.
• What is the probability both shirts are white?
 9  8 
• P( W1 and W2 ) = P( W1 )P( W2 W1 ) =     =.55
 12   11 

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 Rules of Multiplication 5

Often we tally the results of a survey in a two-way table.

Contingency Table A table used to classify sample observations
according to two or more identifiable categories or classes.
• A cross-tabulation that simultaneously summarizes two
variables of interest and their relationship.
• Use the results to find probabilities.
Age Less than 30 Age 30 up to 60 Age 60 or Older
Movies per Month
B1 B2 B3 Total

0 A1 15 50 10 75

1 or 2 A2 25 100 75 200

3, 4, or 5 A3 55 60 60 175

6 or more A4 5 15 30 50

Total 100 225 175 500

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 Tree Diagrams
• A visual that is helpful in
organizing and
calculating probabilities
for problems with
several stages.
• Each stage of the
problem is represented
by a branch of the tree.
• Label the branches with
the probabilities.

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 Chapter 5 Practice Problems

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 Question 5 LO5-3

• An overnight express company must include five cities on

its route. How many different routes are possible,
assuming that it does not matter in which order the cities
are included in the routing?

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 Question 11 LO5-4

A survey of 34 students at the Wall College of Business

showed the following majors:
Accounting 10
Finance 5
Economics 3
Management 6
Marketing 10

From the 34 students, suppose you randomly select a

student.
• What is the probability he or she is a management major?
• Which concept of probability did you use to make this
estimate?

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 Question 13 LO5-2,4, 5

In each of the following cases, indicate whether classical,

empirical, or subjective probability is used.

1. A baseball player gets a hit in 30 out of 100 times at bat. The

probability is .3 that he gets a hit in his next at bat.
2. A seven-member committee of students is formed to study
environmental issues. What is the likelihood that any one of
the seven is randomly chosen as the spokesperson?
3. You purchase a ticket for the Lotto Canada lottery. Over five
million tickets were sold. What is the likelihood you will win
the $1 million jackpot?
4. The probability of an earthquake in northern California in the
next 10 years above 5.0 on the Richter Scale is .80.

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 Question 21 LO5-6

A study of 200 advertising firms revealed their income after taxes:

Income after Taxes Number of Firms

Under $1 million 102

$1 million to $20 million 61

$20 million or more 37

1. What is the probability an advertising firm selected at random

has under $1 million in income after taxes?
2. What is the probability an advertising firm selected at random
has either an income between $1 million and $20 million, or
an income of $20 million or more? What rule of probability
was applied?

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 Question 29 LO5-6

The aquarium at Sea Critters Depot contains 140 fish. Eighty

of these fish are green swordtails (44 female and 36 male)
and 60 are orange swordtails (36 female and 24 males). A
fish is randomly captured from the aquarium:

1. What is the probability the selected fish is a green

swordtail?
2. What is the probability the selected fish is male?
3. What is the probability the selected fish is a male green
swordtail?
4. What is the probability the selected fish is either a male
or a green swordtail?

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 Question 33 LO5-7

• A local bank reports that 80% of its customers maintain a

checking account, 60% have a savings account, and 50%
have both. If a customer is chosen at random:

1. What is the probability the customer has either a checking

or a savings account?
2. What is the probability the customer does not have either
a checking or a savings account?

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 Question 37 LO5-8

• Each salesperson at Puchett, Sheets, and Hogan Insurance Agency is rated

either below average, average, or above average with respect to sales ability.
Each salesperson also is rated with respect to his or her potential for
advancement—either fair, good, or excellent. These traits for the 500
salespeople were cross-classified into the following table.

Potential for Potential for Potential for

Sales Ability
Advancement Fair Advancement Good Advancement Excellent
Below average 16 12 22
Average 45 60 45
Above average 93 72 135

1. What is this table called?

2. What is the probability a salesperson selected at random will have above
average sales ability and excellent potential for advancement?
3. Construct a tree diagram showing all the probabilities, conditional
probabilities, and joint probabilities.

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