Free Mba Semester 1 Solved Assignments For MB0040 -Q2. Explain the approaches to define probability.

Solutions: Explanation of the approaches to define probability

There are four approaches to probability. They are:

i)              Classical / Mathematical / Priori approach

ii)             Statistical / Relative frequency / Empirical / Posteriori approach

iii)            Subjective approach

iv)           Axiomatic approach

Classical / Mathematical / Priori approach Under this approach the probability of an event is known before conducting the experiment.

Statistical / Relative Frequency / Empirical / Posteriori approach Under this approach the probability of an event is arrived at after conducting an experiment. If we want to know the probability that a particular household in an area will have two earning members, then we have to gather data on all household in that area and arrive at the probability. The greater number of households surveyed, the more accurate will be the probability arrived.

Subjective approach

Under this approach the investigator or researcher assigns probability to the events either from his experience or from past records. It is more suitable when the sample size is ten or less than ten. The investigator has full knowledge about the characteristics of each and every individual. However, there is a chance of personal bias being introduced in such probability.

Axiomatic approach

This approach is based on set theory. The probability of an event is defined as:

Where, Ai is ‘n’ mutually exclusive and exhaustive events.