Probability Basics

Probability is one of the main mathematical tools we use later in statistics and econometrics, so it is worth getting a few basic ideas straight first.

We begin with the simplest idea of classical probability, before looking at some useful rules for combining probabilities. We then introduce conditional probability – what happens to a probability when we are given some extra information – and finally the law of total probability.

None of these ideas is especially difficult on its own. However, they appear again and again later on, so a good understanding of them now will save us a lot of trouble!