Step 1: Determine the total number of possible outcomes.
When selecting \( p \) and \( q \) from the set \( \{1, 2, 3, 4\} \) with replacement, the possible pairs are:
\[
S = \{(1, 1), (1, 2), \dots, (4, 4)\}.
\]
Thus, the total number of outcomes is:
\[
n(S) = 4 \times 4 = 16.
\]
Step 2: Identify the favorable outcomes where \( p^2 \geq 4q \).
List the pairs satisfying \( p^2 \geq 4q \):
\[
E = \{(2, 1), (3, 1), (3, 2), (4, 1), (4, 2), (4, 3), (4, 4)\}.
\]
The number of favorable outcomes is:
\[
n(E) = 7.
\]
Step 3: Calculate the probability.
The probability of the event \( E \) is given by:
\[
P(E) = \frac{n(E)}{n(S)} = \frac{7}{16}.
\]
Final Answer:
The probability is:
\[
\boxed{\frac{7}{16}}.
\]