In the previous class, we learned the concept of Probability in Data Analytics. We also learned why probability is important to decision-making. I still remember the instances that the faculty used to emphasize the importance of the knowledge of probability. Business managers are always responsible for making plans and decisions. They draw estimates which are mostly uncertain. The knowledge of probability helps business managers to understand uncertainty and plan with it.
In my previous article, I wrote about probability; in today’s article, I am writing about the methods of assigning probability.
Before I delve into the topic, I would like to mention that Data Analytics course has an inclination to Mathematics and Statistics. Being an Average student in Mathematics, I struggle with keeping up with the Data Analytics course. In any case, I have a strong belief that I will succeed in the course.
Why do I believe so?
I do because I had an opportunity to go over the recording of a previous session. This helped me understood the session. As I mentioned earlier, I have had some difficulty keeping up with the pace of the faculty during the classes but the recordings always came to my rescue.
If like me, you also struggle with the course, I would suggest that you make good use of the recordings.
Now, going back to the topic, I find Probability to be an interesting topic. It is amazing what we can achieve with Probability. We only need to understand the topic well enough to use it.
In my previous article on Probability, I wrote that Probability is a numerical measure of the likelihood that an event will occur. I also wrote that Probability values are always assigned from 0 to 1. I learned from this class, some basic rules or requirements I need to know about probability.
Let me share with you these requirements:
- An experimental outcome must have values between 0 and 1. That is to say, the value cannot be greater than 1.
- When I sum up the values of each experimental outcome, it must be equal to 1.
Now, let us talk about the methods we can use to assign a probability.
There are 3 methods or ways to assign probability. They are the classical method, relative frequency method, and subjective method.
Classical method: We can use this method to assign probabilities based on the assumption of equally likely outcomes. Let me use dice as an example; when you roll a dice, the possibility of a getting a 2 is 1/6, the possibility of getting a 5 is also 1/6, and the possibility of getting a 4 is 1/6. We can see from the example that the outcomes are the same.
Relative frequency method: We can use this method to assign probabilities based on experimentation or historical data. Here, we use a frequency – that is the highest number of occurrences. For us to achieve this, we will divide the total number by the frequency of each data point.
Subjective method: We can use this method to assign probabilities based on judgment. However, the course does not focus on this.
I am glad that I have understood probability and the methods for assigning probability. With the knowledge I have gained so far, I am ready to try my hands at some real-world scenarios.
Let me try some exercises.