Day 1 PDF

QUANTITATIVE
TECHNIQUES
Probability
7
Basic Concepts-I
• Random experiment:
• Sample Space (S):

8
Basic Concepts-I
• Random experiment:
A random experiment is an occurrence whose result, or
outcome, is uncertain.
• Sample Space (S):
The set of all possible outcomes is called the sample space
for the random experiment.
(Elementary) outcomes are the elements of the sample space.

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Example
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One Die
Two Dice
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Example 1
Two distinguishable balls (“a”, “b”) are randomly placed in two
distinguishable cells (“1”, “2”).
 What is the sample space associated with the experiment?
 What if the balls were not distinguishable?
 Now repeat for three balls being placed randomly in three
cells.
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Example 2
•A readership survey conducted among the adult
population showed that 35% read Times, 15% read
Express and 25% read Herald; 10% read both Times and
Express, 8% read both Express and Herald, 5% read both
Times and Herald; 4% read all three publications.
• Identify the elementary outcomes, and hence the sample

space.
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Basic Concepts-II
• Given a sample space S, an event E is a subset of S.
• The outcomes in E are called the favourable outcomes.
• We say that E occurs in a particular experiment if the

outcome of that experiment is one of the elements of E.
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Example 3
• When a die is rolled, probability of each outcome is
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Different Approaches to Probability I

• Classical Approach:
The oldest (Origin: 18th Century France)
Based on gambling ideas
“Fair game”: all elementary outcomes are assumed to be
equally likely
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Different Approaches to Probability II

• Relative Frequency Approach:
When an experiment can be repeated under identical
conditions, the probability of the event is equal to the
proportion of times it occurs as the number of repetitions
approach infinity
Both classical and relative frequency approaches are
known as objective approaches
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Different Approaches to Probability III

• Personal/Subjective Probability Approach:
When an event is not repeatable, its probability may be
given by some individual’s assessment of the probability
of the event
 Subjective opinion
A subjectivist assigns a weight between zero and one to
an event, according to his degree of belief in its possible
occurrence.
• Bayesian approach: start with subjective probability,

update with experiments
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Which approach to use?

• Each approach has its own utility.
• We shall use whichever is convenient and appropriate for

the problem under consideration.
• The discussion that now follows is applicable to all

approaches.
• However, as you will see, the examples may need to be
approached from different perspectives of probabilities.
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Mutually Exclusive Events I

• Two events A and B are mutually exclusive if they have no
common outcomes, i.e., A∩B = .
• Notice that it means that when A occurs then B cannot

occur, and vice-versa.
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Mutually Exclusive Events II

• In case of more than two events, events B1, B2, ..., Bn are
said to be mutually exclusive if the occurrence of any
one of them implies the non-occurrence of the
remaining n − 1 events.
 No two mutually exclusive events can occur
simultaneously.
• Example: when selecting an student of XLRI randomly,

selecting a BM student, an HRM student or a GMP
student are three mutually exclusive events.
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Partition of the Sample Space

• When we have events B1, B2, …, Bn such that they are
mutually disjoint and their union is equal to the sample
space, then B1, B2, …, Bn is a partition of the sample
space.
Examples:
• Randomly drawing from a deck of cards, one partition is
the division of the possible choices into the four suites.
• Randomly choosing a citizen of India, one possible
partition is to divide on the basis of mother tongue.
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Basic Concepts: “Axioms of Probability”

1. P(S) =1, P({}) =0
2. 0 ≤ P(A) ≤ 1 for any event A
3. For mutually exclusive events B1, B2, …

P(B1UB2 …) =P(B1)+P(B2)+…
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The Axioms tell us:

If A and B are two mutually exclusive events such that
P(A B)  1 then P(B) = 1- P(A).
A and B are called complements of each other. We

denote B as A or AC.
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General Formula
P(A  B)  P(A)  P( B)  P(A B)
What Happens With More Than 2 Events?
See Exercises 11 and 12, Pg. 31-32 from the text.

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Example 3 (restated)
• When a fair die is rolled, probability of each outcome is
• So probability of E: Even numbers is P(E) =?
• But a die does not need to be fair, and outcomes are not
always equally likely!
• So now suppose we have a loaded die with probabilities of 1,

2, 3, 4, 5 and 6 respectively 0.25, 0.125, 0.125, 0.125, 0.125
and 0.25. (See Examples 3 & 4, page 24, text)
• P(E) = ?
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Example 3 (continued)
• Consider the fair die being rolled twice
• P(sum is even) =
• P(product is odd) =
• P(sum is even, product is odd) =
• Re-compute the probabilities for the loaded die

(the shape).

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QUANTITATIVE

• Sample Space (S):

(Elementary) outcomes are the elements of the sample space.

• Identify the elementary outcomes, and hence the sample

• The outcomes in E are called the favourable outcomes.

• We say that E occurs in a particular experiment if the

Different Approaches to Probability I

Different Approaches to Probability II

Different Approaches to Probability III

• Bayesian approach: start with subjective probability,

Which approach to use?

• We shall use whichever is convenient and appropriate for

• The discussion that now follows is applicable to all

Mutually Exclusive Events I

• Notice that it means that when A occurs then B cannot

Mutually Exclusive Events II

• Example: when selecting an student of XLRI randomly,

Partition of the Sample Space

Basic Concepts: “Axioms of Probability”

2. 0 ≤ P(A) ≤ 1 for any event A

3. For mutually exclusive events B1, B2, …

The Axioms tell us:

A and B are called complements of each other. We

P(A  B)  P(A)  P( B)  P(A B)

What Happens With More Than 2 Events?

See Exercises 11 and 12, Pg. 31-32 from the text.

• So probability of E: Even numbers is P(E) =?

• So now suppose we have a loaded die with probabilities of 1,

• Re-compute the probabilities for the loaded die

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