Theory of Probability
BBA (Fall - 2014)
Business Statistics
Theory of Probability
Ahmad
Jalil Ansari
Business Head
Enterprise Solution Division
Random Process
In a random process we know that what outcomes or events could happen; but we do not know which particular outcome or event will happen. For example tossing of coin, rolling of dice, roulette wheel, changes in valuation in shares, demand of particular product etc.
Probability
It is the numeric value representing the chance, likelihood, or possibility a particular event will occur
It is measured as the fraction between 0 & 1 (or 0%
&100%)
Probability can never exceed 1 and can never be negative
i.e. if P(x) is the probability of occurring event x then 0 ≤
P(x) ≤ 1
Probability = 0 No chance of occurrence of given event
(Impossible event)
Probability = 1 Given event will always occur (Certain event) Probability in Business
Betting / Speculation
Estimate the chances that the new product will be accepted by customers?
Possibility that the planned target will be met
The likelihood that the share prices of the portfolio will increase Likelihood of surviving a person till a particular age
Likelihood of surviving a person suffering from a particular disease etc. etc.
Probability
It is the numeric value representing the chance, likelihood, or possibility a particular event will occur
Calculating probability does not guarantee that a particular event will necessarily occur It only indicates likelihood of occurrence
Example - Tossing of Coin
If a coin is tossed there are two events that can occur either Head or Tail
If coin is unbiased then the chances of occurring Head & Tail are equal i.e.
Probability of occurrence of Head is
0.5
Probability of occurrence of Tail is 0.5
Probability of occurring either Head or
Tail is 0.5 + 0.5 = 1.0
Probability of neither occurring head nor tail = 0
Example - Rolling a dice
If a dice is tossed there are either of six events can
Business Statistics
Theory of Probability
Ahmad
Jalil Ansari
Business Head
Enterprise Solution Division
Random Process
In a random process we know that what outcomes or events could happen; but we do not know which particular outcome or event will happen. For example tossing of coin, rolling of dice, roulette wheel, changes in valuation in shares, demand of particular product etc.
Probability
It is the numeric value representing the chance, likelihood, or possibility a particular event will occur
It is measured as the fraction between 0 & 1 (or 0%
&100%)
Probability can never exceed 1 and can never be negative
i.e. if P(x) is the probability of occurring event x then 0 ≤
P(x) ≤ 1
Probability = 0 No chance of occurrence of given event
(Impossible event)
Probability = 1 Given event will always occur (Certain event) Probability in Business
Betting / Speculation
Estimate the chances that the new product will be accepted by customers?
Possibility that the planned target will be met
The likelihood that the share prices of the portfolio will increase Likelihood of surviving a person till a particular age
Likelihood of surviving a person suffering from a particular disease etc. etc.
Probability
It is the numeric value representing the chance, likelihood, or possibility a particular event will occur
Calculating probability does not guarantee that a particular event will necessarily occur It only indicates likelihood of occurrence
Example - Tossing of Coin
If a coin is tossed there are two events that can occur either Head or Tail
If coin is unbiased then the chances of occurring Head & Tail are equal i.e.
Probability of occurrence of Head is
0.5
Probability of occurrence of Tail is 0.5
Probability of occurring either Head or
Tail is 0.5 + 0.5 = 1.0
Probability of neither occurring head nor tail = 0
Example - Rolling a dice
If a dice is tossed there are either of six events can