Theory of

Probability
Probability Theory
UNIT - I
Probability Distributions

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Contents
1. Introduction
2. Simple Definitions
3. Types of Probability
4. Theorems of Probability
5. Probabilities under conditions of statistically
independent events
6. Probabilities under conditions of statistically
dependent events
7. Bayes Theorem
8. Glossary of Terms

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Introduction
 If an experiment is repeated under essentially
homogeneous & similar conditions we generally
come across 2 types of situations:

 Deterministic/ Predictable: - The result of what

is usually known as the ‘outcome’ is unique or
certain.

 Example:- The velocity ‘v’ of a particle after time ‘t’

is given by
v = u + at
Equation uniquely determines v if the right-
hand quantities are known.

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 Unpredictable/ Probabilistic: - The result is not
unique but may be one of the several possible
outcomes.

 Examples: -

(i) In tossing of a coin one is not sure if a head or a

tail will be obtained.

(ii) If a light tube has lasted for t hours, nothing

can be said about its further life. It may
fail to
function any moment.

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Simple Definitions
 Trial & Event

 Example: - Consider an experiment which, though

repeated under essentially identical conditions, does
not give unique results but may result in any one of the
several possible outcomes.

 Experiment is known as a Trial & the outcomes are

known as Events or Cases.
 Throwing a die is a Trial & getting 1 (2,3,…,6) is an
event.
 Tossing a coin is a Trial & getting Head (H) or Tail (T)
is an event.

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 Exhaustive Events: - The total number of possible
outcomes in any trial.
 In tossing a coin there are 2 exhaustive cases, head &
tail.
 In throwing a die, there are 6 exhaustive cases since
any one of the 6 faces 1,2,…,6 may come uppermost.

Experiment Collectively Exhaustive Events

In a tossing of an unbiased coin Possible solutions – Head/ Tail
Exhaustive no. of cases – 2
In a throw of an unbiased cubic Possible solutions – 1,2,3,4,5,6
die Exhaustive no. of cases – 6
In drawing a card from a well Possible solutions – Ace to King
shuffled standard pack of playing Exhaustive no. of cases – 52
cards

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 Favorable Events/ Cases: - It is the number of
outcomes which entail the happening of an event.
 In throwing of 2 dice, the number of cases favorable to
getting the sum 5 is:
(1,4), (4,1), (2,3), (3,2).
 In drawing a card from a pack of cards the number of
cases favorable to drawing an ace is 4, for drawing a
spade is 13 & for drawing a red card is 26.

 Independent Events: - If the happening (or non-

happening) of an event is not affected by the
supplementary knowledge concerning the occurrence
of any number of the remaining events.
 In tossing an unbiased coin the event of getting a head in
the first toss is independent of getting a head in the
second, third & subsequent throws.

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 Mutually exclusive Events: - If the happening of any one of
the event precludes the happening of all the others.
 In tossing a coin the events head & tail are mutually exclusive.
 In throwing a die all the 6 faces numbered 1 to 6 are mutually
exclusive since if any one of these faces comes, the possibility
of others, in the same trial, is ruled out.

Experiment Mutually Exclusive Events

In a tossing of an unbiased Head/ Tail
coin
In a throw of an unbiased Occurrence of 1 or 2 or 3 or 4 or 5 or
cubic die 6
In drawing a card from a well Card is a spade or heart
shuffled standard pack of Card is a diamond or club
playing cards
Card is a king or a queen

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 Equally likely Events: - Outcomes of a trial are said to be equally
likely if taken into consideration all the relevant evidences, there is no
reason to expect one in preference to the others.
 In tossing an unbiased coin or uniform coin, head or tail are equally likely
events.
 In throwing an unbiased die, all the 6 faces are equally likely to come.

Experiment Collectively Exhaustive Events

In a tossing of an unbiased Head is likely to come up as a Tail
coin
In a throw of an unbiased Any number out of 1,2,3,4,5,6 is
cubic die likely to come up
In drawing a card from a well Any card out of 52 is likely to come
shuffled standard pack of up
playing cards

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 Probability: Probability of a given event is an
expression of likelihood of occurrence of an event.
 Probability is a number which ranges from 0 to 1.
 Zero (0) for an event which cannot occur and 1 for an
event which is certain to occur.

 Importance of the concept of Probability

 Probability models can be used for making predictions.

 Probability theory facilitates the construction of
econometric model.
 It facilitates the managerial decisions on planning and
control.

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Types of Probability

There are 3 approaches to probability, namely:

1. The Classical or ‘a priori’ probability

2. The Statistical or Empirical probability
3. The Axiomatic probability

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Mathematical/ Classical/ ‘a priori’
Probability
 Basic assumption of classical approach is that the

outcomes of a random experiment are “equally

likely”.

 According to Laplace, a French Mathematician:

“Probability, is the ratio of the number of ‘favorable’ cases
to the total number of equally likely cases”.

 If the probability of occurrence of A is denoted by

p(A), then by this definition, we have:
Number of favorable cases m
p = P(E) = ------------------------------ = ----
Total number of equally likely cases n

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 Probability ‘p’ of the happening of an event is also known
as probability of success & ‘q’ the non-happening of the
event as the probability of failure.

 If P(E) = 1, E is called a certain event &

if P(E) = 0, E is called an impossible event

 The probability of an event E is a number such that

0 ≤ P(E) ≤ 1, & the sum of the probability that an event
will occur & an event will not occur is equal to 1.
i.e., p + q = 1

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Limitations of Classical definition
 Classical probability is often called a priori probability
because if one keeps using orderly examples of
unbiased dice, fair coin, etc. one can state the
answer in advance (a priori) without rolling a dice,
tossing a coin etc.

 Classical definition of probability is not very

satisfactory because of the following reasons:
 It fails when the number of possible outcomes of the
experiment is infinite.
 It is based on the cases which are “equally likely” and
as such cannot be applied to experiments where the
outcomes are not equally likely.

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 It may not be possible practically to enumerate
all the possible outcomes of certain experiments
and in such cases the method fails.

 Example it is inadequate for answering questions

such as: What is the probability that a man aged
45 will die within the next year?

Here there are only 2 possible outcomes, the

individual will die in the ensuing year or he
will live. The chances that he will die is of
course much smaller than he will live.

How much smaller?

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Combinations

 This counting rule for combinations allows us

to select r (say) number of outcomes from a
collection of n distinct outcomes without
caring in what order they are arranged. This
rule is denoted by

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 Example 5.1: Of 10 electric bulbs, 3 are defective but it is not known
which are defective. In how many ways can 3 bulbs be selected?
How many of these selections will include at least 1 defective bulb?

 Example 5.2: A bag contains 6 red and 8 green balls. (a) If one ball
is drawn at random, then what is the probability of the ball being
green? (b) If two balls are drawn at random, then what is the
probability that one is red and the other green?

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 2 A card is drawn from a well-shuffled deck of 52 cards.
Find the probability of drawing a card which is neither a
heart nor a king.
 5.3 In a single throw of two dice, find the probability of
getting (a) a total of 11, (b) a total of 8 or 11, and (c) same
number on both the dice.
 5.4 Five men in a company of 20 are graduates. If 3 men
are picked out of the 20 at random, what is the probability
that they are all graduates? What is the probability of at
least one graduate?
 A bag contains 25 balls numbered 1 through 25. Suppose an odd
number is considered a “success”. Two balls are drawn from the bag
with replacement. Find the probability of getting (a) two successes (b)
exactly one success (c) at least one success (d) no successes

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Permutations
 This rule of counting involves ordering or permutations.
This rule helps us to compute the number of ways in
which n distinct objects can be arranged, taking r of them
at a time. The total number of permutations of n objects
taken r at a time is given by

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 Example 5.3: Tickets are numbered from 1 to 100. They are
well shuffled and a ticket is drawn at random. What is the
probability that the drawn ticket has
(a) an even number? (b) the number 5 or a multiple of 5? (c) a
number which is greater than 75? (d) a number which is a
square?

 A bag contains 5 white and 8 red balls. Two drawings of 3

balls are made such that (a) the balls are replaced before the
second trial and (b) the balls are not replaced before the
second trial. Find the probability that the first drawing will give
3 white and the second will give 3 red balls in each case.

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Theorems of Probability

 There are 2 important theorems of probability

which are as follows:

 The Addition Theorem and

 The Multiplication Theorem

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Addition theorem when events are
Mutually Exclusive
 Definition: - It states that if 2 events A and B are
mutually exclusive then the probability of the occurrence
of either A or B is the sum of the individual probability of
A and B.
 Symbolically

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

 The theorem can be extended to three or more mutually

exclusive events. Thus,
P(A or B or C) = P(A) + P(B) + P(C)

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Addition theorem when events are not
Mutually Exclusive (Overlapping or
Intersection Events)
 Definition: - It states that if 2 events A and B are not
mutually exclusive then the probability of the occurrence
of either A or B is the sum of the individual probability of
A and B minus the probability of occurrence of both A
and B.
 Symbolically

P(A or B) or P(A U B) = P(A) + P(B) – P(A ∩ B)

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Q1 Example What is the probability that a
randomly chosen card from a deck of cards
will be either a king or a heart.
Q2 Example Of 1000 assembled components, 10 have a working
defect and 20 have a structural defect. There is a good reason to
assume that no component has both defects. What is the probability
that randomly chosen component will have either type of defect?

Q3 From a computer tally based on employer records, the personnel

manager of a large manufacturing firm finds that 15 per cent of the
firm’s employees are supervisors and 25 per cent of the firm’s
employees are college graduates. He also discovers that 5 per cent are
both supervisors and college graduates. Suppose an employee is
selected at random from the firm’s personnel records, what is the
probability of (a) selecting a person who is both a college graduate and
a supervisor? (b) selecting a person who is neither a supervisor nor a
college graduate?

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 An MBA applies for a job in two firms X and Y. The
probability of his being selected in firm X is 0.7 and being
rejected at Y is 0.5. The probability of at least one of his
applications being rejected is 0.6. What is the probability
that he will be selected by one of the firms?
 The probability that a contractor will get a plumbing
contract is 2/3 and the probability that he will not get an
electrical contract is 5/9. If the probability of getting at
least one contract is 4/5, what is the probability that he
will get both?

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Multiplication theorem
 Definition: States that if 2 events A and B are
independent, then the probability of the occurrence of
both of them (A & B) is the product of the individual
probability of A and B.
 Symbolically,
Probability of happening of both the events:
P(A and B) or P(A ∩ B) = P(A) x P(B)

 Theorem can be extended to 3 or more independent

events. Thus,
P(A, B and C) or P(A ∩ B ∩ C) = P(A) x P(B) x P(C)

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 Rules of Multiplication
 Statistically Independent Events When the occurrence of an event does not
affect and is not affected by the probability of occurrence of any other event,
the event is said to be a statistically independent event. There are three types
of probabilities under statistical independence: marginal, joint, and conditional.
 • Marginal Probability: A marginal or unconditional probability is the simple
probability of the occurrence of an event. For example, in a fair coin toss, the
outcome of each toss is an event that is statistically independent of the
outcomes of every other toss of the coin.
 • Joint Probability: The probability of two or more independent events
occurring together or in succession is called the joint probability. The joint
probability of two or more independent events is equal to the product of their
marginal probabilities. In particular, if A and B are independent events, the
probability that both A and B will occur is given by

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 Suppose we toss a coin twice. The
probability that in both the cases the coin will
turn up head is given by

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 Q1 The odds against student X solving a Business Statistics problem are 8
to 6 and odds in favour of student Y solving the problem are 14 to 16. (a)
What is the chance that the problem will be solved if they both try
independently of each other? (b) What is the probability that none of them
is able to solve the problem?
 Q2 The probability that a new marketing approach will be successful is
0.6. The probability that the expenditure for developing the approach can
be kept within the original budget is 0.50. The probability that both of these
objectives will be achieved is 0.30. What is the probability that at least one
of these objectives will be achieved. For the two events described above,
determine whether the events are independent or dependent.
 Q3 A piece of equipment will function only when the three components A,
B, and C are working. The probability of A failing during one year is 0.15,
that of B failing is 0.05, and that of C failing is 0.10. What is the probability
that the equipment will fail before the end of the year?

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 A company has two plants to manufacture scooters. Plant I manufactures
80 per cent of the scooters and Plant II manufactures 20 per cent. In plant I,
only 85 out of 100 scooters are considered to be of standard quality. In plant
II, only 65 out of 100 scooters are considered to be of standard quality.
What is the probability that a scooter selected at random came from plant I,
if it is known that it is of standard quality?
 The probability that a trainee will remain with a company is 0.6. The
probability that an employee earns more than Rs. 10,000 per month is 0.5.
The probability that an employee who is a trainee remained with the
company or who earns more than Rs. 10,000 per month is 0.7. What is the
probability that an employee earns more than Rs. 10,000 per month given
that he is a trainee who stayed with the company?

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 Two computers A and B are to be marketed. A salesman who is
assigned the job of finding customers for them has 60 per cent and
40 per cent chances of succeeding for computers A and B,
respectively. The two computers can be sold independently. Given
that he was able to sell at least one computer, what is the probability
that computer A has been sold?
 A committee of 4 persons is to be appointed from 3 officers of the
production department, 4 officers of the purchase department, two
officers of the sales department and 1 chartered accountant. Find
the probability of forming the committee in the following manner : (i)
There must be one from each category (ii) It should have at least
one from the purchase department (iii) The chartered accountant
must be in the committee.

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How to calculate probability in case of
Dependent Events
Case Formula

1. Probability of occurrence of at least A or B

1. When events are mutually P(A U B) = P(A) + P(B)

2. When events are not mutually exclusive P(A U B) = P(A) + P(B) – P(A ∩ B)

2. Probability of occurrence of both A & B P(A ∩ B) = P(A) + P(B) – P(A U B)

3. Probability of occurrence of A & not B P(A ∩ B) = P(A) - P(A ∩ B)

4. Probability of occurrence of B & not A P(A ∩ B) = P(B) - P(A ∩ B)

5. Probability of non-occurrence of both A & B P(A ∩ B) = 1 - P(A U B)

6. Probability of non-occurrence of atleast A or B P(A U B) = 1 - P(A ∩ B)

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How to calculate probability in case of
Independent Events
Case Formula
1. Probability of occurrence of both A & B P(A ∩ B) = P(A) x P(B)

2. Probability of non-occurrence of both A P(A ∩ B) = P(A) x P(B)

&B
P(A ∩ B) = P(A) x P(B)
3. Probability of occurrence of A & not B
P(A ∩ B) = P(A) x P(B)
4. Probability of occurrence of B & not A
P(A U B) = 1 - P(A ∩ B) = 1 – [P(A) x P(B)]
5. Probability of occurrence of atleast one
event

P(A U B) = 1 - P(A ∩ B) = 1 – [P(A) x P(B)]

6. Probability of non-occurrence of atleast
one event
P(A ∩ B) + P(A ∩ B) = [P(A) x P(B)] +
7. Probability of occurrence of only one
event [P(A) x P(B)]

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 Revising Prior Estimates of
Probabilities: Bayes’ Theorem
 A very important & useful application of conditional
probability is the computation of unknown probabilities,
based on past data or information.

 When an event occurs through one of the various

mutually disjoint events, then the conditional probability
that this event has occurred due to a particular reason or
event is termed as Inverse Probability or Posterior
Probability.

 Has wide ranging applications in Business & its

Management.

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 Since it is a concept of revision of probability based on
some additional information, it shows the improvement
towards certainty level of the event.

 Example 1: - If a manager of a boutique finds that most

of the purple & white jackets that she thought would sell
so well are hanging on the rack, she must revise her
prior probabilities & order a different color combination or
have a sale.

 Certain probabilities were altered after the people got

additional information. New probabilities are known as
revised, or Posterior probabilities.

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Bayes Theorem
 If an event A can occur only in conjunction with n mutually
exclusive & exhaustive events B1, B2, …, Bn, & if A actually
happens, then the probability that it was preceded by an event
Bi (for a conditional probabilities of A given B 1, A given B2 … A
given Bn are known) & if marginal probabilities P(B i) are also
known, then the posterior probability of event B i given that
event A has occurred is given by:

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 Example 5.24: Suppose an item is manufactured by three machines
X, Y, and Z. All the three machines have equal capacity and are
operated at the same rate. It is known that the percentages of
defective items produced by X, Y, and Z are 2, 7, and 12 per cent,
respectively. All the items produced by X, Y, and Z are put into one
bin. From this bin, one item is drawn at random and is found to be
defective. What is the probability that this item was produced on Y?
 Assume that a factory has two machines. Past records show that
machine 1 produces 30 per cent of the items of output and machine 2
produces 70 per cent of the items. Further, 5 per cent of the items
produced by machine 1 were defective and only 1 per cent produced
by machine 2 were defective. If a defective item is drawn at random,
what is the probability that the defective item was produced by
machine 1 or machine 2?
 In a bolt factory, machines A, B, and C manufacture 25 per cent, 35
per cent and 40 per cent of the total output, respectively. Of the total
of their output, 5, 4, and 2 per cent are defective bolts. A bolt is drawn
at random and is found to be defective. What is the probability that it
was manufactured by machines A, B, or C?
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 A petrol pump proprietor sells on an average Rs. 80,000 worth of
petrol on rainy days and an average of Rs. 95,000 on clear days.
Statistics from the Metrological Department show that the probability
is 0.76 for clear weather and 0.24 for rainy weather on coming
Monday. Find the expected value of petrol sale on coming Monday.
 (a) Given that four airlines provide service between Delhi and
Mumbai. In how many distinct ways can a person select airlines for a
trip from Delhi to Mumbai and back, if (i) he must travel both the
ways by the same airline and (ii) he travel from Delhi to Mumbai by
one airline and returns by another? (b) 6 coins are tossed
simultaneously. What is the probability that they will fall with 4 heads
and 2 tails up? (c) If A is the event of getting a prize on the first
punch and B the event of getting the prize on the second punch,
calculate the probability of getting two prizes taking two punches on
a punch board which contains 20 blanks and five prizes? (d) In how
many ways can the word ‘PROBABILITY’ be arranged? (e) What is
the probability of getting a number greater than two with an ordinary
dice?

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 A manufacturing firm produces steel pipes in three plants with daily
production volumes of 500, 1000, and 2000 units respectively.
According to past experience, it is known that the fractions of
defective output produced by the three plants are
respectively .005, .008, and .010. If a pipe is selected from a day’s
total production and found to be defective, find out (a) from which
plant the pipe comes? (b) What is the probability that it came from
the first plant?
 Two dice are thrown at a time. Let E1 be the event of getting 6 on
the first dice and E2 that of getting 1 on the second dice. Are the
events E1 and E2 independent?
 A card is drawn from a well-shuffled deck of 52 cards. Find the
probability of drawing a card which is neither a heart nor a king.

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 A can solve 90 per cent of the problems given in a book and B can
solve 70 per cent. What is the probability that at least one of them
will solve a problem selected at random?
 A bag contains 6 white, 4 red, and 10 black balls. Two balls are
drawn at random. Find the probability that they will both be black.
 (a) A problem of statistics is given to two students A and B. The odds
in favour of A solving the problem are 6 to 9 and against B solving
the problem 12 to 10. If A and B attempt, find the probability of the
problem being solved
 A committee of 4 people is to be appointed from 3 officers of the
production department, 4 officers of the purchase department, 2
officers of the sales department, and 1 chartered accountant. Find
the probability of forming the committee in the following manner : (a)
There must be one from each category. (b) It should have at least
one from the purchase department. (c) The chartered accountant
must be on the committee.

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Remarks: -

 The probabilities P(B1), P(B2), … , P(Bn) are termed as

the ‘a priori probabilities’ because they exist before we
gain any information from the experiment itself.

 The probabilities P(A | Bi), i=1,2,…,n are called

‘Likelihoods’ because they indicate how likely the
event A under consideration is to occur, given each &
every a priori probability.

 The probabilities P(Bi | A), i=1, 2, …,n are called

‘Posterior probabilities’ because they are determined
after the results of the experiment are known.

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Glossary of terms
 Classical Probability: It is based on the idea that certain
occurrences are equally likely.
 Example: - Numbers 1, 2, 3, 4, 5, & 6 on a fair die are

each equally likely to occur.

 Conditional Probability: The probability that an event
occurs given the outcome of some other event.
 Independent Events: Events are independent if the
occurrence of one event does not affect the occurrence of
another event.
 Joint Probability: Is the likelihood that 2 or more events will
happen at the same time.
 Multiplication Formula: If there are m ways of doing one
thing and n ways of doing another thing, there are m x n
ways of doing both.

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 Mutually exclusive events: A property of a set of categories
such that an individual, object, or measurement is included in
only one category.
 Objective Probability: It is based on symmetry of games of
chance or similar situations.
 Outcome: Observation or measurement of an experiment.
 Posterior Probability: A revised probability based on
additional information.
 Prior Probability: The initial probability based on the present
level of information.
 Probability: A value between 0 and 1, inclusive, describing
the relative possibility (chance or likelihood) an event will
occur.
 Subjective Probability: Synonym for personal probability.
Involves personal judgment, information, intuition, & other
subjective evaluation criteria.
 Example: - A physician assessing the probability of a

patient’s recovery is making a personal judgment based on

what they know and feel about the situation.

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