Calculate Conditional Probabilities
Bayes' Theorem is a fundamental formula in probability theory that allows us to update our beliefs based on new evidence. It calculates the probability of an event occurring given that another event has already occurred.
The formula is: P(A|B) = [P(B|A) × P(A)] / P(B)
Where:
Example: A disease test with 0.1% prevalence and 5% false positive rate shows that even with a positive test result, the actual probability of having the disease is only about 1.96% due to the high number of false positives.