Probability Rules

Basic Probability Rules (AND, OR, GIVEN)

 Learning Objectives

Understand the ‘AND’, ‘OR’ and ‘Given’ probability rules

AND (∩)

  • Also known as the intersection
  • The ‘overlap’ between two groups or events.
  • [latex]P(A \text{ and } B) = P(A|B) \times P(B) = P(B|A) \times P(A)[/latex]
  • It does not matter which event, A or B, ‘occurred’ first: [latex]P(A \text{ and } B)= P(B \text{ and } A)[/latex]

OR (∪)

  • Also known as the union
  • Includes all of both groups or events
  • [latex]P(A \text{ or } B) = P(A) + P(B) - P(A \text{ and } B)[/latex]
  • It does not matter which event, A or B, ‘occurred’ first: [latex]P(A \text{ or } B)= P(B \text{ or } A)[/latex]

Given (|)

  • Also known as a conditional probability
  • Is the odds of one event occurring given that another event has already occurred
  • The odds of ‘A’ occurring given that ‘B’ has already occurred: [latex]P(A | B) = \frac{P(A \text{ and } B)}{P(B)}[/latex]
  • The odds of ‘B’ occurring given that ‘A’ has already occurred: [latex]P(B | A) = \frac{P(A \text{ and } B)}{P(A)}[/latex]
  • The order of the events, A or B, matters: [latex]P(B | A) \neq P(A | B)[/latex]

A First BasiC Example

Example 15.1

Problem Setup: Let P(A) = 0.80, P(B) = 0.70, P(A|B) = 0.25

Questions: Can you solve for the following probabilities? And can you find the issue?

  1. P(A and B)
  2. P(A or B)
  3. P(not A)
  4. P(not B)

Solutions: Click here to download the written solutions. Click below to reveal the answers one at a time. Also see the next section for video solutions.

A second basic example

Example 15.2

Problem Setup: Let P(A) = 0.50, P(B) = 0.60, P(A and B) = 0.25

Questions: Can you solve for the following probabilities?

  1. P(A | B)
  2. P(B | A)
  3. P(A or B)
  4. P(not B)

Solution: Click here to download the written solutions. Click below to reveal the answers one at a time.  Also see the next section for video solutions.

Video Walkthrough of TWO BasiC ExampleS

Key Takeaways (EXERCISE)

Key Takeaways: Basic Probability Rules (AND, OR, GIVEN)

Your Own Notes (EXERCISE)

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License

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An Introduction to Business Statistics for Analytics (1st Edition) Copyright © 2024 by Amy Goldlist; Charles Chan; Leslie Major; Michael Johnson is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License, except where otherwise noted.

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