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How to Use Probability Trees to Evaluate Conditional Probability

Posted by Rae on 5/3/17 6:01 PM

If you’re majoring in economics, you will likely also need to take a statistics course.  One of the trickiest concepts is dealing with conditional probabilities.  In most classes, they teach you a fairly complicated equation known as Bayes’ Theorem.

While this isn’t a hard formula to plug values into, it doesn’t give an intuitive understanding of what the conditional probability P(A|B) actually is.  Also, think about being a few years out of school – what are the chances you’ll remember Bayes’ Theorem and properly calculate a conditional probability?

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Tags: economics