BSAFC4_PPT_ch04.pptVIP

Chapter 4 Basic Probability Learning Objectives In this chapter, you learn: Basic probability concepts and definitions Conditional probability To use Bayes’ Theorem to revise probabilities Various counting rules Important Terms Probability – the chance that an uncertain event will occur (always between 0 and 1) Event – Each possible outcome of a variable Simple Event – an event that can be described by a single characteristic Sample Space – the collection of all possible events Assessing Probability There are three approaches to assessing the probability of an uncertain event: 1. a priori classical probability 2. empirical classical probability 3. subjective probability an individual judgment or opinion about the probability of occurrence Events Simple event An outcome from a sample space with one characteristic e.g., A red card from a deck of cards Complement of an event A (denoted A’) All outcomes that are not part of event A e.g., All cards that are not diamonds Joint event Involves two or more characteristics simultaneously e.g., An ace that is also red from a deck of cards Visualizing Events Contingency Tables Tree Diagrams Visualizing Events Venn Diagrams Let A = aces Let B = red cards Mutually Exclusive Events Mutually exclusive events Events that cannot occur together example: A = queen of diamonds; B = queen of clubs Events A and B are mutually exclusive Collectively Exhaustive Events Collectively exhaustive events One of the events must occur The set of events covers the entire sample space example: A = aces; B = black cards; C = diamonds; D = hearts Events A, B, C and D are collectively exhaustive (but not mutually exclusive – an ace may also be a heart) Events B, C and D are collectively exhaustive and also mutually exclusive Probability Probability is the numerical measure of the likelihood that an event will occur The probability of any event must be between 0 and 1, inclusively The sum of the probabilities