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Statistics for Decision- Making in Business - Maricopa Community ...

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3.4 Conditional Probability<br />

In many cases, a probability depends on what we already know. For <strong>in</strong>stance, would we believe<br />

that the likelihood of a car accident changes, provided that the roads are slick from snow We<br />

would probably agree that the likelihood <strong>in</strong>creases if we already know the road conditions.<br />

Suppose a fair, two-sided co<strong>in</strong> is tossed. You are told that the outcome is not a head. What is the<br />

likelihood that the outcome is tails<br />

The answer is probably obvious… if you know the outcome was not heads, and the only two<br />

possibilities are heads and tails, then there is a 100% chance the outcome is tails.<br />

This is a conditional probability. That is, if<br />

Further, to <strong>in</strong>dicate that the outcome is not one of the above, we often put a bar on top of the<br />

event name:<br />

Then,<br />

̅<br />

̅<br />

( )<br />

However, given that we know the outcome was not tails, the probability of heads jumped to 1.<br />

We might write:<br />

( ̅)<br />

Instead of us<strong>in</strong>g the word “given” we often use a vertical l<strong>in</strong>e (called a “pipe”), |. That is,<br />

<strong>Statistics</strong> <strong>for</strong> <strong>Decision</strong>-<strong>Mak<strong>in</strong>g</strong> <strong>in</strong> Bus<strong>in</strong>ess © Milos Podmanik Page 107

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