Maths for Economics 6: Probability and Economics Topic 2 - From Uncertainty to Probability

Question 1

Introduce probabilities

Answer 1

Suppose that there is some way of assigning weighting numbers to
the simple outcomes, so that
(1) the weights are all .
(2) the weights add to 1.
(3) the weights ‘represent’ (in some sense) how likely the simple
outcomes are to occur. (Can we think of them as degrees of
belief? A controversial question.)
Then the weights are called probabilities of the simple outcomes.
The probability of a particular simple outcome, for instance alpha, is
written P(alpha)

Question 2

What is the law of addition for any case?

Answer 2

If X,Y are any two events, mutually exclusive or not, then P(XUY) = P(X) + P(Y) - P(XY)