Bayes Theorem is based on individual belief to capture probability and to revise it as new information arrives.
Posterior = (Prior)(Likelihood)/Marginal
- Prior - Before sample information is collected
- Posterior - A prior after sample information is collected and analyzed.
- Likelihood- Probability of sample information given the state of nature will take place.
- Marginal - Probability of observing data whether the state of nature is true or false.