1 - Basic Concepts
Published online by Cambridge University Press: 05 June 2012
Summary
In this chapter we introduce the basic terminology of probability theory. The notions of independence, distribution, and expected value are studied in more detail later, but it is hard to discuss examples without them, so we introduce them quickly here.
Outcomes, events, and probability
The subject of probability can be traced back to the 17th century when it arose out of the study of gambling games. As we see, the range of applications extends beyond games into business decisions, insurance, law, medical tests, and the social sciences. The stock market, “the largest casino in the world,” cannot do without it. The telephone network, call centers, and airline companies with their randomly fluctuating loads could not have been economically designed without probability theory. To quote Pierre-Simon, marquis de Laplace from several hundred years ago:
It is remarkable that this science, which originated in the consideration of games of chance, should become the most important object of human knowledge … The most important questions of life are, for the most part, really only problems of probability.
In order to address these applications, we need to develop a language for discussing them. Euclidean geometry begins with the notions of point and line. The corresponding basic object of probability is an experiment: an activity or procedure that produces distinct, well-defined possibilities called outcomes.
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- Elementary Probability for Applications , pp. 1 - 31Publisher: Cambridge University PressPrint publication year: 2009