Lesson 7 of 20
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Joint probability refers to the multiplication rule of probability. This is the probability that both the events will occur.
Example
The probability that the price of oil will rise, P(B) = 0.5
The probability that the bus fare will increase if oil price rises, P(A|B) = 0.4
The probability that both oil prices and bus fares will rise, P(AB) = 0.4*0.5 = 0.2
This may look complex but the logic is actually quite straight forward. There is a 50% chance that oil price will rise and if it rises there is a 40% chance that the bus fair will also rise. So, the joint probability of both oil price rise and bus fare rise is 50% of 40%, i.e., 0.5*0.4 = 0.20 or 20%.