Probability Theory: Terms, Definitions, and Concepts, Quizzes of Economics

Download Probability Theory: Terms, Definitions, and Concepts and more Quizzes Economics in PDF only on Docsity! TERM 1 Experiment DEFINITION 1 a process (usually random) that generates an outcome TERM 2 Outcome DEFINITION 2 specific result that comes from the experiment TERM 3 Sample Space DEFINITION 3 the set of all outcomes in an experimenttotal of the set must equal 1 TERM 4 Event DEFINITION 4 outcomes that the experimenter is interested in measuring TERM 5 Notation for Probability DEFINITION 5 P(A) = na = # of ways A can occur N Total # of possible outcomes TERM 6 Complement A^(c) DEFINITION 6 the set of all outcomes that are not A TERM 7 Theoretical Probability DEFINITION 7 suppose we consider tossing a fair die. There are six possible numbers that could come up ("outcomes"), and, since the die is fair, each one is equally likely to occur. So we say each of these outcomes has probability 1/6. Since the event "an odd number comes up" consists of exactly three of these basic outcomes, we say the probability of "odd" is 3/6, i.e. 1/2. TERM 8 Empirical Probability DEFINITION 8 The empirical probability, also known as relative frequency, or experimental probability, is the ratio of the number of outcomes in which a specified event occurs to the total number of trials, not in a theoretical sample space but in an actual experiment.Calculated from sample data TERM 9 Subjective Probability DEFINITION 9 Bayesian probability is one interpretation of the concept of probability. The Bayesian interpretation of probability can be seen as an extension of propositional logic that enables reasoning with hypotheses, i.e., the propositions whose truth or falsity is uncertain. TERM 10 Laws of Large Numbers DEFINITION 10 In probability theory, this is a theorem that describes the result of performing the same experiment a large number of times.As the total number of events increases, the relative frequencies of events converges to the true relative frequencies