Business Statistics I

Chapter 4

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Calendar
Today 10/09 10/11 10/16 Chapter 4 Retest Chaps 1-3: 9 topics Chapter 4 & 5 Chapter 5 Homework Chapter 4 - Delayed

11/13 Veterans Day no class

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Definitions
Probability: likelihood of an event happening Experiment: a process that generates well defined outcomes With any ONE repetition of an experiment, you can only get ONE outcome Sample Space: set of all experimental outcomes
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Counting
Multiple Step Experiments A sequence of k steps with n1 possible outcomes in the first step, n2 possible outcomes in the second step, etc. (n1)(n2)(n3)(nk)
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Counting
Combinations The process of selecting n objects from N objects WITHOUT concern for their sequence

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Counting
Permutations The process of selecting n objects from N objects WITH concern for their sequence

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Requirements for Probabilities

1) Ei is the ith experimental outcome and P(Ei) is its probability, then

2) The total probability for all possible outcomes must equal 1

= 1
=1
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Examples
1) One die Typically assume that there is an equal chance for any side P(i) = 1/6 and P(1) + P(2) + P(3) + P(4) + P(5) + P(6) = 1 2) Sample data estimating a population See p 156 3) KP&L (p 157)
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Definition
Event: a collection of sample points Ex: KP&L project 10 months Probability of an event: the sum of the probabilities of the sample points in the event

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Relationships of Probability
Complement of an Event Complement of event A (Ac) is the event of all sample point NOT in A See Fig 4.4 (p 165) P(A) = 1 P(Ac)

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Definition
Union of two events (A and B): All sample points in A or B or both AUB Fig 4.5 (p 166)

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Definition
Intersection of two events (A and B): All sample points in both A and B AB Fig 4.6 (p 166)

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Addition Law
Computes the probability that event A or event B or both occurs (i.e., the probability of the union of A and B)

P(A U B) = P(A) + P(B) P(A B)

Why subtract the intersection?

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Mutually Exclusive Events

When events A and B have no sample points in common Fig 4.7 (p 168) P(A U B) = P(A) + P(B) What happened to the intersection?
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Joint and Marginal Probabilities

Tables 4.4 (p 171) and 4.5 (p 172) Joint Probabilities: the probabilities in the cells; represents P(A | B) Marginal Probabilities: the probabilities in the margins or row and column totals; represent P(A), or P(B)
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Conditional Probability
The probability of event A given that event B has already happened P(A | B) Ex: Table 4.4 (p 171) and 4.5 (p 172)

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Conditional Probability
Ex: Table 4.4 (p 171) & bottom of p 172 P(A | M) = 288 / 960 = 30% i.e., Column Percentage P(A | M) = 960 =
288 1200 1200

.24 .80

= .30

( ) ()
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Conditional Probability
P(M | A) = 288 / 324 = 88.889% i.e., Row Percentage P(M | A) = 324 =
288 1200 1200

.24 .27

= .88889

( ) ()

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Conditional Probability
P(A | B) =
( ) () ( ) ()

P(B | A) = Fig 4.8 (p 173)

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Questions?

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