Lesson 2. Probability.

Introduction to Probability Calculus Statistics I ~1~

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LESSON 2. PROBABILITY. INTRODUCTION TO PROBABILITY

CALCULUS

2.1. Deterministic phenomena and random phenomena

Observation: result of a phenomenon

Need of the human being to describe, analyze and synthesize search for techniques
in order to satisfy this necessity

STATISTICAL TECHNIQUES

Types of phenomena

Deterministic phenomenon

This phenomenon satisfies that when it is repeated several times and under
identical conditions, always provides with the same result.

Non-deterministic (random, stochastic, probabilistic) phenomenon

This phenomenon is characterized by the fact that, even if it is reproduced under

the same conditions, it can lead to different results. Example: throwing dice.
The features of a random phenomenon are:

o All possible results are known beforehand.

o The concrete result cannot be predicted.
o It can be indefinitely reproduced under identical conditions.

Random phenomena entail uncertainty and they are the subject under study in
Statistics.
As we cannot know the result of the random phenomenon beforehand it
generates uncertainty to the researcher need to measure uncertainty a value

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Degree in Economics / Estefana Mourelle Espasandn 2016/2017
Lesson 2. Probability. Introduction to Probability Calculus Statistics I ~2~
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indicating its likelihood of taking place is assigned to each possible result

probability: measure of the uncertainty.
Objective: to interpret observations statistical method stages:

1) Data collection; later information filtering.

2) Data organization and analysis (Descriptive Statistics).

3) Statistical analysis in order to verify hypotheses on possible behaviour regularities

that are supposed to underlie in the random phenomenon (Statistical Inference).

So as to go from the second to the third stage, we need to characterize the

behaviour regularities of the random phenomenon: Probability Calculus.

Random experiments and events

Sample space

It is associated with any random experiment (for instance, throwing dice). The set
of all basic outcomes from a random experiment is called the sample space.

Definitions

Elementary event: each one of the possible outcomes from a random experiment
basic outcomes.

Sample space (): set of all basic outcomes from a random experiment.

Event (E): any subset of basic outcomes from the sample space.

Complement of event E (
): set of basic outcomes of a random experiment

belonging to but not to E.

Sure event: it is the sample space .

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Degree in Economics / Estefana Mourelle Espasandn 2016/2017
Lesson 2. Probability. Introduction to Probability Calculus Statistics I ~3~
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Null or impossible event: it represents the absence of a basic outcome ()

the event does not have an element.

Operations with events

Union of events

Let A and B be two events in the sample space . Their union, A B, occurs if
and only if either A or B or both occur. That is,

A, B A B = { x x A or x B}

Particular cases: (event E) E

E = , E = E, E = and = .

Intersection of events

Let A and B be two events in the sample space . Their intersection, A B,

occurs if and only if both A and B occur. Thus,

A, B A B = { x x A and x B}

Particular cases: (event E) E

E = , E = , E = E and = .

Mutually exclusive events

Events A and B are mutually exclusive when they have no common basic outcomes, so
their intersection is the empty set: A, B A B = .

2.2. Probability: definition and postulates

Definition

We are interested in quantifying the uncertainty we have on the outcome of a

random experiment measure of the uncertainty: probability.

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Degree in Economics / Estefana Mourelle Espasandn 2016/2017
Lesson 2. Probability. Introduction to Probability Calculus Statistics I ~4~
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Classical probability

It is based on the fact that all outcomes in a sample space are equally likely to
occur all elementary events have the same probability
The probability of an event E is the division of the number of outcomes in the
sample space that satisfy this event by the total number of outcomes in the sample
space (classical definition or Laplaces Law):

() = =

Relative frequency probability

The relative frequency probability is the limit of the proportion of times that event
E occurs in a large number of trials, n:

() =

The probability is the limit as n becomes large (that is, approaches infinity).

Subjective probability

The probability is determined by the degree of belief about the chance that an
event will occur.

Axiomatic definition of probability. Kolmogorovs Axioms

The axiomatic definition of probability shows us the properties a probability

function should verify. Let be the sample space and A a collection of events
representing all the possible unions and intersections of elementary behaviours from
. The Kolmogorovs axiomatic system consists of the following three axioms:

Axiom 1. If E A, there exists a number P(E) 0, called probability of event E.

Axiom 2. P() = 1.

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Degree in Economics / Estefana Mourelle Espasandn 2016/2017
Lesson 2. Probability. Introduction to Probability Calculus Statistics I ~5~
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Axiom 3. Given a countable run of events Ei i1 A , two by two mutually

exclusive (Ei Ej = , i j), it is fulfilled

P Ei PEi
i 1 i 1

The list of three (, A, P) is called probability space.

These axioms are the foundations of the probability theory.

Some consequences of the axioms

1. The probability of the null or impossible event equals zero: P() = 0.

2. If Ei in1 is a finite set of two by two mutually exclusive events (Ei Ej = ,

i j ), therefore

n n
P
Ei
P E i
i 1 i 1

3. For any two events E1, E2 it is verified that

P(E1 E2) = P(E1) + P(E2) - P(E1 E2) [Addition rule of probabilities]

4. If an event E1 belongs to another, E, that is, (E1 E), then

P(E1) P(E)

5. The probability of any event E is lower than or equals one:

P(E) 1

, of another, E, is
6. The probability of the complementary event, E

) = 1 - P(E)
P(E

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Degree in Economics / Estefana Mourelle Espasandn 2016/2017
Lesson 2. Probability. Introduction to Probability Calculus Statistics I ~6~
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2.3. Conditional probability. Independence of events

Conditional probability

Being aware that certain event takes place can modify the probability of obtaining the
event of interest, as there exists more information. For example: which is the probability
of getting the value 2 when we throw the dice?; how much is this probability if we
previously know that an even number has been obtained?. Both situations are different
regarding uncertainty.

Definition

The probability of event E1 conditional to event E or, in other words, the probability
that E1 occurs, given that E has taken place, is defined as

P E1 E
P E1 E , provided that P(E) > 0
P E
Also,

P E E1
P E E1 , provided that P(E1) > 0
P E1

The probability of the intersection of events is worked out:

P E1 E P E P E1 E P E1 P E E1 [Multiplication rule of probabilities]

More generally, given n events, we have the following expression:

Theorem (Probability of an intersection of two or more events)

n 1
Given the set of events Ei i 1 so that P E 0 ; then, it is verified
n
i
i 1

n
E1 E2 P En Ei
n 1
P Ei P E1 P E2 E1 P E3
i 1 i 1

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Degree in Economics / Estefana Mourelle Espasandn 2016/2017
Lesson 2. Probability. Introduction to Probability Calculus Statistics I ~7~
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Independence of events

Definition

Two events, A and B, are said to be statistically independent if and only if

P A B P A P B

or, in the same way,

PA B P A , if P(B) > 0, or PB A PB , if P(A) > 0.

Generalization to n events: mutually statistically independent events

Events E1, ..., En are mutually (or simultaneously) statistically independent if and
only if given the subscripts j1, j2, ..., jh, so that 1 j1 < j2 < ... < jh n, it is satisfied that:

PE j1 E j 2 E jh PE j1 PE j 2 PE jh

Example: n=3 independence implies

P(E1 E2) = P(E1) P(E2)

P(E1 E3) = P(E1) P(E3)

P(E2 E3) = P(E2) P(E3)

P(E1 E2 E3) = P(E1) P(E2) P(E3)

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Degree in Economics / Estefana Mourelle Espasandn 2016/2017
Lesson 2. Probability. Introduction to Probability Calculus Statistics I ~8~
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2.4. Probability Theorems

TOTAL PROBABILITY THEOREM

Given an event A, which can appear under the mutually exclusive alternatives
E1, E2, ..., En (A Ei ), so that

1. P(Ei) > 0, i = 1, , n.

n

2. P Ei 1 .
i 1

PE P A E .
n
Then, P A i
i 1 i

E1 E2 E3 En

BAYES THEOREM

Given an event A, which can appear under the mutually exclusive alternatives
n

E1, E2, ..., En (A Ei ), so that P(Ei) > 0 ( i = 1, , n) and P Ei 1 , and
i 1

probabilities P A
are known. It is verified that

E i

P Ei P A
P i n
E Ei
A
P Ei P A
i 1 Ei

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Degree in Economics / Estefana Mourelle Espasandn 2016/2017