Priori Probability

Posted in Finance, Accounting and Economics Terms, Total Reads: 338
Advertisements

Definition: Priori Probability

The term” A priori” is a Latin word meaning from what comes before. This implies the probability that is derived by logic without falling upon experimental facts. In other words the probability is deduced based on a logical hypothesis (from a general principle) or theory instead of calculating it from experimental data.

There are some limitations of calculation by “A Priori Probability”:

• it can only be calculated for elementary events which are independent in nature.

• it can only be applied to a finite set of events.

For example: The probability of getting a “1”, “2”,”3”,… “6” on tossing a die.

• In this case we do not construct an experiment to calculate the probability. Rather we based our logic on 2 important assumptions:

1. The die is unbiased

2. The event of getting “1”, “2,”…”6” are all independent of each other and are equally possible

Thus without even going into a formal experiment we can say that the result is 1/6

 

Advertisements



Looking for Similar Definitions & Concepts, Search Business Concepts


Similar Definitions from same Category: