- Classical Probability
- Relative Probability
- Subjective Probability
CLASSICAL PROBABILITY. Under this aproach, the probability of an event is the ratio of the number of favorable outcomes to the total number of possible outcomes. By formula the probability is: \[ \text{Probability of an Event} = \frac{\text{Number of Favorable Outcomes}}{\text{Number of All Possible Outcomes}} \]
RELATIVE PROBABILITY. In this approach, probability is equivalent to a relative frequency, that is: \[ \text{Probability} = \frac{\text{Frequency of Occurrences Favorable to the Event}}{\text{Total Frequency}} \]
SUBJECTIVE PROBABILITY. This probability is the chance of occurrence assigned by a person to an event based on personal experience, intuition and even beliefs. It is what is sometimes referred to as an educated guess. The person stating the probability uses whatever evidence is available and combines these with his personal feelings about the event. The subjective probability assigned to an event varies among persons who are evaluating the event. Managers and business executives who are faced with having to make decisions everyday and having only limited information at hand are often pressed to use subjective probabilities.
