Module 4 Review of Basic Probabilities and Probability Rules-Converted (2) - Merged

REVIEW OF BASICS OF
PROBABILITIES AND PROBABILITY

RULES
Learning Objectives
At the end of this module, learners are expected to:
1. Describe probability concepts.
2. Describe the sample space and events of a statistical experiment.
3. Distinguish categories of probabilities.
4. Apply the definitions and the rules of probability on simple
probabilities.
5. Distinguish different event possibilities.
Probability P(E) (Jaggia et al, 2021)
Probability – is a numerical value that measures the

likelihood that an event occurs whose value
ranges between zero and one.
0 ≤ P(X) ≤ 1
where:
0 = indicates impossible event
1 = indicates definite events
Probability Concepts (Jaggia et al, 2021)
Sample Space (S) (Walpole et al, 1998)
Sample Space (S) – is the set of all possible outcomes

resulting from an experiment (or statistical
experiment).
An experiment (or statistical experiment) – is a process
that leads to one of several possible outcomes.
Example of experiment:
• Tossing a coin whose possible outcomes are head or
tail.
Example of experiment:
• Tossing a single die whose possible outcomes are 1, 2, 3,
4, 5, or 6.
• Tossing a pair of dice (say red and green) whose possible
outcomes are (1, 2), (2, 2), (2, 3), … (6, 6).
• Giving birth to a child either male or female.
• Demand which could be low, medium, or high.
• A proposal that could either be approved or not
approved.
• Competitors’ action as to whether they will expand their
product or not.
Event (E) (Walpole et al, 1998)
Event (E) – is the subset of the sample space.

- is the set of the desired outcome of an
experiment.
Examples of Probability: Finding the Sample Space
Example 1:
Find the sample space for rolling
two dice.
Solution:
Since each die can land in six
different ways, and two dice are
rolled, the sample space can be
presented by a rectangular array.
The sample space is the list of pairs
of numbers in the chart.
https://www.storyofmathematics.com/sample-space
Example 2:
Find the sample space for drawing
one card from an ordinary deck of
cards.
Solution:
Since there are 4 suits (hearts,
clubs, diamonds, and spades) and
13 cards for each suit (ace through
king), there are 52 outcomes in the
sample space.
https://www.mathgoodies.com/lessons/vol6/sample_spaces
Example 3:
Find the sample space for the gender of the children if a family has
three children. Use B for boy and G for girl.
Solution:
There are two genders, male and female, and each child could be either
gender. Hence there are eight possibilities, as shown below:
BBB, BBG, BGB, GBB, GGG, GGB, GBG, BGG
http://www2.hawaii.edu/~hile/probb.htm
Elementary Statistics by A. G. Bluman

The Tree Diagram
A tree diagram is a device consisting of line segments emanating
from a starting point and also from the outcome point. It is to
determine all possible outcomes of a probability experiment.

Examples of Probability: A tree diagram
Example 4:
Use a tree diagram to find the
sample space for the gender of
three children in a family.
Solution:
There are two genders, male and
female, and each child could be
either gender. Hence there are
eight possibilities, as shown below:
BBB, BBG, BGB, GBB, GGG, GGB, GBG, BGG
http://www2.hawaii.edu/~hile/probb.htm
Examples of Probability:
Example 1:
For a card drawn from an ordinary deck, find the probability of getting a queen.
Solution:
Since there 52 cards in a deck and there are four queens,
4 1
P(Queen ) = =
52 13

Example 2:
If a family has three children, find the probability that all the children are girls.
Solution:
The sample space for the gender of children for a family that has three children is
BBB, BBG, BGB, GBB, GGG, GGB, GBG, BGG. Since there is one way, (GGG),
in eight possibilities for all three children to be girls,
1
P(GGG ) =
8
Elementary Statistics by A. G. Bluman https://www.slideshare.net/getyourcheaton/intro-to-probability-57576766

Example 3: Solution:
A card is drawn from an ordinary deck. Find these a. Refer to the sample
probabilities. space of a deck of 52 p.c.
a. Getting a Jack There are four Jacks so
there are 4 outcomes in
b. Getting the 6 of clubs event E and 52 possible
c. Getting a 3 or a diamond outcomes in the sample
d. Getting a 3 or a 6 space S, hence,
4 1
P( jack ) = =
52 13

A card is drawn from an ordinary deck. Find these b. Since there is only one 6
probabilities. of clubs in event E, the
a. Getting a Jack probability of getting a 6 of
clubs is,
b. Getting the 6 of clubs
1
c. Getting a 3 or a diamond P(6 of c lub s) =
d. Getting a 3 or a 6 52

A card is drawn from an ordinary deck. Find these c. Since there are four 3s
probabilities. and 13 diamonds, but the 3
a. Getting a Jack of diamonds is counted
twice in this listing. Hence,
b. Getting the 6 of clubs there are 16 possibilities of
c. Getting a 3 or a diamond drawing a 3 or a diamond,
d. Getting a 3 or a 6 so,
16 4
P(3 or diamond) = =
52 13
This is an example of the

“inclusive or”.
A card is drawn from an ordinary deck. Find these d. Since there are four 3s
probabilities. and four 6s, so
a. Getting a Jack 8 2
P(3 or 6) = =
b. Getting the 6 of clubs 52 13
c. Getting a 3 or a diamond
d. Getting a 3 or a 6 This is an example of the
“exclusive or”.

The following illustrates experiments, sample space, events,
and probabilities:
Experiment Sample Space S Suppose Event E is Probability of E
Tossing a coin {H, T} {H} P(E) = ½
Tossing a single die {1, 2, 3, 4, 5, 6} {5, 6} P(E) = 1/3
{low (20%), medium (30%),
Demand {high} P(E) = 50%
high (50%)}
{approved (60%), not
Proposal {not approved} P(E) = 40%
approved (40%)}
{retain price (60%), increase
{competitor
Competitors price (25%), lower price P(E) = 15%
lowered price}
(15%)}
The following illustrates experiments, sample space, events,
and probabilities:
{exactly no heads} =
Tossing 2 coins {HH, TH, HT, HH} P(E) = ¼
{TT}
{doubles} =
Tossing a two dice {(1,1), (1,2), (1,3), …, (6,6)} P(E) = 1/6
{(1,1), (2,2), …, (6,6)}
A card from 52 p.c. {x/x is a card in 52 deck of pc} {getting a diamond} P(E) = 1/4
{(blue, blue), (green, green),
Getting 2 red balls {(red, red)} P(E) = 1/3
(red, red)}
Selecting a male {4 males, 5 females} {M1, M2, M3, M4} P(E) = 4/5
The following illustrates experiments, sample space, events, and
probabilities:
Sales: {high sales (0.75),
{high sales} P(E) = 0.75
High = 0.75, low= 0.25 low sales (0.25)}
{low (20%), moderate
Company backlog {moderate backlog} P(E) = 45%
(45%), high, worst (35%)}
{ 0 defective (10%), 1
defective (15%), 2
Defective Items {getting 3 defective
defectives (25%), 3 P(E) = 30%
Testing items}
defectives (30%), 4
defectives (20%) }
Probability Rules:
Probability Rule 1:
The probability of any event E is a number (either a fraction or decimal) between
and including 0 and 1, denoted by
0  P(E)  3
Rule 1 states that probabilities cannot be negative or greater than 1.

Probability Rules:
Probability Rule 2:
If an event E cannot occur (i.e., the event contains no members in the sample
space), its probability is 0.
1. When a single die is rolled, find the probability of getting a 9.

P(9) = 0
2. If there are 5 males and 6 females in the set of officers who are enrolled in
ELE BA or Internship only, what is the probability of selecting a female
enrolled in Business Ethics?
P(female enrolled in BE) = 0

Probability Rules:
Probability Rule 3:
If an event E is certain, then the probability of e is 1.
When a single die is rolled, what is the probability of getting a number less than
7?
Solution:
Since all outcomes --- 1, 2, 3, 4, 5, and 6 --- are less than 7, then the probability is
given by
P(1, 2, 3, 4, 5, or 6) =6/6 = 1.
The probability of getting a 7 is certain to happen. This indicates that the
probability of a sample space is 1.
Probability Rules:
Probability Rule 4:
The sum of the probabilities of all outcomes in the sample space is 1.
In the roll of a fair dice, each outcome in the sample space has a probability of
1/6. Hence , the sum of the probabilities of the outcomes is as shown.
Outcome 1 2 3 4 5 6 Sum
Probability 1/6 1/6 1/6 1/6 1/6 1/6 1

Probability Rules:
In General, probability values range from 0 to 1. When the probability
of an event is close to 0, its occurrence is highly unlikely. When the
probability of an event is near 0.5, there is about 50-50 chance that the
event will occur, and When the probability of an event is close to 1, the
event is highly likely.

Categories of Probability (Jaggia & Kelly, 2021)
1. Subjective Probability
2. Empirical Probability
3. Classical Probability
Subjective Probability (Jaggia & Kelly, 2021)
Subjective Probability – is based on an individual’s personal judgement or
experience. This personal assessment of probability does not explicitly
reference any data. It differ from person to person and may contain a high
degree of personal bias.
Example:
• A manager may instinctively feel that 14% of consumers will respond
positively to the to the firm’s social media campaign.
• An expert assess that the Dow Jones Industrial Average (DJIA) might
change in the next year.
• An analyst thinks that pandemic will end in 6 to 8 months.
Empirical Probability (Jaggia & Kelly, 2021)
Empirical Probability – is a probability based on referenced data on the
observed outcomes of an experiment. It is calculated as a relative
frequency of occurrence. This probability is based on a sample data that it
is called empirical.
Example:
• If over a ten year period in a particular city, 152 restaurants out of 180
opened and closed within one year, and closure within 1 year is our
benchmark for failure, we can determine the empirical probability of
restaurant failures for the city as 152/180 = 0.84.
Note that the empirical probability is reliable if the experiment is run with a
very large number of times (trials is done n number of times).
Classical Probability (Jaggia & Kelly, 2021)
Classical Probability – is based on logical analysis rather than on
observation or personal judgement. Classical probabilities are based on the
assumption that all outcomes of an experiment are equally likely.
The classical probability of an event is computed as the number of
outcomes belonging to the event divided by the total numbers of
outcomes.
The illustrations presented on the next slide are examples of classical
probability.
Classical Probabilities:
Probability
Experiment Sample Space S Suppose Event E is
of E
Tossing 2 coins {HH, HT, TH, TT} {HH} P(E) = ¼
Tossing two dice {(1, 1), (1, 2), (1, 3), …, (6,6)} {x/x is doubled} = {(1, 1), (2, 2)…(6, 6)} P(E) = 6/36 = 1/6
Drawing a single
{13 hearts, 13, diamonds,
heart in 52 deck of {13 clovers} P(E) = 13/52=1/4
13 spades, 13 clovers}
p.c.
A roulette
consisting of {1, 2, 3, 4, 5 ,6} {numbers less than 3} P(E) = 2/6 = 1/3
numbers 1-6
{HHH, HHT, HTH, THH, TTH,
Tossing 2 coins {exactly 1 tail} P(E) = 3/8
THT, HTT, TTT}
Exhaustive Events (Jaggia et al, 2021)
Exhaustive events – are events that includes all outcomes

in the sample space.
Example:
• Suppose Student grades S = {A, B, C, D}
• If the grades given to the students ranges between A
to D, then the event E is exhaustive.
• However, if the students grades turned to be ranging
from A to B only, then event E is not exhaustive
https://www.youtube.com/watch?v=f7agTv9nA5k
Exhaustive Events (Jaggia et al, 2021)
Example:
• Suppose Student final grade remark S = {Passed,
Failed}
• If some students passed and some failed, then the
event E is exhaustive.
• However, if all students passed the course, then
event E is not exhaustive.
Equally Likely Events
• The outcomes in a sample space S are equally likely if each outcome
has the same probability of occurring. In general, if outcomes in
a sample space S are equally likely, then computing the probability of
a single outcome or an event is very straightforward.
• In many situations, outcomes are equally likely
(e.g., flipping coins, throwing dice, drawing a card etc.).
• Many probabilities, particularly in games of chance, can be calculated
by using an equally likely argument.
• However, many other probabilities, especially those in business
situations, cannot be calculated by equally likely arguments, simply
because the possible outcomes are not equally likely.
Mutually Exclusive Events (Jaggia & Kelly, 2021)
Mutually Exclusive Events – the occurrence of one event precludes the occurrence of
the other or events cannot can not happen together.
Example:
• A student cannot receive an A and a B on the same course, so A and B are mutually
exclusive events.
• A student can receive an A and a B on different courses, say A in ELE BA and B in
Economics, so A and B are non-mutually exclusive events.
• When drawing a single card in a deck of 52 playing cards, it is not possible to draw a
Jack and a Queen in just one draw, so Jack and Queen are mutually exclusive events.
• When drawing a single card in a deck of 52 playing cards, it is possible to draw a Jack
and a Diamond in just one draw of a card, so Jack and Diamond are non-mutually
exclusive events.
Mutually Exclusive Events (Jaggia & Kelly, 2021)
Example:
• From an experiment of tossing one die, if event A = {1, 2, 3} and event B = {4, 5,
6}, then when a die is tossed both A and B cannot happen at the same time,
thus, A and B are mutually exclusive events.
• From an experiment of tossing one die, if event A = {1, 2, 3} and event C = {2, 3,
4, 5, 6}, then when a die is tossed both A and C can happen at the same time
when 2 or 3 faces up, thus, A and C are non-mutually exclusive events.
• High demand and low demand are mutually exclusive events because only one
of these two possibilities can occur at one time.
• Approved and not approved proposal are mutually exclusive events.
• A government regulation may be amended or not amended are mutually
exclusive events.
Mutually Exclusive Events and Exhaustive Events
• The experiment on grades distribution in a particular course where the
grades are ranging from A to B are non-exhaustive and mutually exclusive
events.
• The experiment on grades distribution in a particular course where the
grades are ranging from A to D are exhaustive and mutually exclusive events.
• If there are three states of nature in a decision making problem: high,
moderate, low, then only one of them is possible to happen. So these events
are non-exhaustive and mutually exclusive events.
Combining Events (Jaggia & Kelly, 2021)
Union of Events A ꓴ B (Jaggia & Kelly, 2021)
The union of two events denoted by A ꓴ B – is the event consisting of all
the outcomes in A or B. The elements contained in A or B are the combined
elements of the two events.
The rectangle represents the sample space S and the two circles
represents events A and B.
Union and Intersection of Events A Ո B
(Jaggia & Kelly, 2021)
The intersection of two events denoted by A Ո B – is the event consisting
of all the outcomes in A and B. The elements in A and B are the common
outcomes of the two events.
The rectangle represents the sample space S and the two circles
represents events A and B.
Complement of Event A (Jaggia & Kelly, 2021)
The Complement of event A denoted by Ac or A’ – is the event consisting of
all outcomes in the sample space S that are not in A.
Ac
The rectangle represents the sample space S and the circle represents
event A.
Two Defining Properties of Probability (Jaggia & Kelly, 2021)
20 item - Quick assessment
After studying this module, a 20 item – quick assessment must be
accomplished in the blackboard on Sept. 11, 2021, 8 pm.
Reference
Business Analytics: Communicating with Numbers by Jaggia, S., Kelly, A.,
Lertwachara, K. and Chen, L.
Copyright 2021 by McGraw-Hill Education.
Probability and Statistics by Walpole, R., Myers R., and Myers S. Prentice Hall
International, Inc., 1998.
Elementary Statistics by Allan G. Bluman. McGraw Hill International Edition, 2010
APPROACHES TO AND
ESSENTIALS OF PROBABILITIES
Learning Objectives
At the end of this module, learners are expected to:
1. Familiarize with and apply approaches to probabilities.
2. Apply probability essentials to calculate different event possibilities.
Approaches of Probability (Jaggia & Kelly, 2021; Walpole et
al., 1998)
1. Marginal Probability
2. Conditional Probability
3. Mutually Exclusive and Non-Mutually Exclusive Events
4. Dependent and Independent Events
Marginal Probability (Walpole, et al., 1998 )
Marginal Probability – is the probability of a single event without
consideration of any other event. Marginal probability is also called
Simple Probability.
Suppose a group of students are ask on their opinion about
online learning being part of regular teaching and learning modalities
during post pandemic. The following gives the distribution of the
responses.
In favor (I) Against (A) Total
Male (M) 10 11 21
Female (F) 16 13 29
Total 26 24 50
Marginal Probability
The following are examples of marginal probability:
Male (M) 10 11 21
Female (F) 16 13 29
Total 26 24 50
1. P(Male) = 21/50
2. P(In favor) = 26/50 or 13/25
3. P(Female) = 29/50
4. P(against) = 24/50 or 12/25
Conditional Probability (Jaggia & Kelly, 2021, Walpole, et al., 1998)
Conditional Probability – is the probability that an event will occur given that
another event has already occurred. If A and B are two events, then conditional
probability of A is written as P(A/B) and read as “ the probability of A given that
B has already occurred.” P(M/I) = P(M)
Example:
• The probability that a customer will make an online purchase conditional on
receiving an e-mail with a discount offer.
• The probability of making a 6-figure salary conditional on getting an MBA.
• The probability that sales will improve conditional on the firm launching a new
innovative product.
• The probability that an individual will shop online given that the individual is
female.
Conditional Probability (Walpole, et al., 1998 )
Suppose a group of students are asked on their opinion about online learning being part of regular teaching and
learning modalities during post pandemic. The following gives the distribution of the responses.

Male (M) 10 11 21
Female (F) 16 13 29
Total 26 24 50
Example 1:
1. What is the probability that from those of male students, the student selected is in favor online learning
during post pandemic?
2. What is the probability that from those of male students, the student selected is against online learning
during post pandemic?
3. Given that a student selected is In favor of online learning during post pandemic, find the probability that
the student is male.
4. Find the probability that the student selected is female on the condition that the student selected is In
favor online learning during post pandemic.
Conditional Probability
Male (M) 10 11 21
Female (F) 16 13 29
Total 26 24 50
2. What is the probability of selecting a student who is against online
learning during post pandemic, given that the student is female?
P(A/F) = 13/29 P(A and F)/ P(F) = 13/29
3. Among the males interviewed, determine the probability that he is in
favor of online learning during post pandemic. P(I/M) = 10/ 21
4. Given: P(A and F) = 0.26 P(A) = 0.48 ,
Find P(F/A) = P(A and F)/P(A) = 0.26/0.48 = 0.54
Conditional Probability
Male (M) 10 11 21
Female (F) 16 13 29
Total 26 24 50
4. What is the probability of selecting a female given that the student is
against online learning during post pandemic?
P(F/A) = 13/24
5. Of all those who are in favor of online learning during post pandemic,
find the probability that the student is male.
P(M/I) = 10/26 = 5/13
Conditional Probability Example (Jaggia & Kelly, 2021)
Example 2:
Suppose the probability that a recent business college graduate finds
a suitable job is 0.80. The probability of finding a suitable job if the recent
business college graduate has prior work experience is 0.90.
If A represents finding a job and B represents prior work experience, then
P(A) = 0.80 and P(A/B) = 0.90. DE
In this example, the probability of finding a suitable job increases
from 0.80 to 0.90 when conditioned on prior work experience.
Example 3:
The probability that a student will pass a major course 0.70, while
the probability that the same student will pass a major course is 0.85
given that he also pass an elective course.
If M represents passing the major course and E represents passing an
elective course, then P(M) = 0.70 and P(M/E) = 0.85. DE
In this example, the probability of passing a major course increases
from 0.70 to 0.85 when conditioned passing an elective course.
Example 4:
The probability that a student will pass a major course 0.90, while
the probability that the same student will pass a major course is 0.75
given that he fail an elective course.
If M represents passing the major course and E’ represents not passing an
elective course, then P(M) = 0.90 and P(M/E’) = 0.75. DE
In this example, the probability of passing a major course decreases
from 0.90 to 0.75 when conditioned to failing an elective course.
Conditional Probability (Jaggia & Kelly, 2021)
• In general, the conditional probability P(A/B) is greater than the
unconditional probability (marginal probability) P(A), if B exerts positive
influence on A.
• Consequently, P(A/B) is less than P(A), if B exerts negative influence on
A.
• Finally, if B exerts no influence on A, then P(A/B) = P(A).
P(A) = 65%, P(A/B) = 65% IE
• It is common to refer to “unconditional probability” as “marginal
probability”, “simple probability”, or simply “probability”.
• Conditional probabilities of mutually exclusive events equals 0.
P(M/F) = 0 P(J/Q) = 0 P(H/L) = 0 P(P/F) = 0
We rely on the Venn diagram on the right
to explain conditional probability. Because
P(A/B) represents the probability of A
conditional on B (B has occurred), the original
sample space S is reduced to B. The conditional
probability P(A/B) is based on the portion of A
that is included in B. It is derived as the ratio of
the probability of the intersection of A and B to
the probability of B.
Dependent and Independent Events (Jaggia & Kelly, 2021)
Two events A and B are independent events if the occurrence of one event does not
affect the probability of the occurrence of the other event. That is, two events are
independent if either
P(A/B) = P(A) or P(B/A) = P(B)
Two events A and B are dependent events if the occurrence of one event affects the
probability of the occurrence of the other event. That is, two events are dependent if either
P(A/B) ≠ P(A) or P(B/A) ≠ P(B)
Example:
1. The probability of the event of drawing each of the two green balls (G1, G2) from a box of
2 green and 3 yellow balls;
a) with replacement of the first ball. b) without replacement of the first ball.
Answer: P(G1) = P (G1/G2) Answer: P(G1)  P (G1/G2)
2/5 = 2/5 2/5  1/4
⸫ Events G1 and G2 are independent ⸫ Events G1 and G2 are dependent
Definition:
Two events A and B are independent if and only if,
P(A/B) = P(A) and P(B/A) = P(B).
Otherwise, A and B are dependent.
Therefore;
1. If one event does not affect the occurrence of another event, then it is an
Independent event.
2. If one event affects the occurrence of another event, then it is dependent
event.
3. Two events are independent if and only if the drawing is done with
replacement.
4. Two events are dependent if the first element is not replaced before the
second element is drawn.
Exercise:
Tell whether the following are dependent or independent events:
1. The operation of each of the pairs of escalator in a certain mall.
2. Landing on heads after tossing a coin AND rolling a 5 on a single 6-sided die.
3. Drawing red card and a black card with replacement.
4. The life span of each of the love birds.
5. Choosing a marble from a jar AND landing on heads after tossing a coin.
6. If the mother and father is diabetic, offspring will also be diabetic.
7. Choosing a 3 from a deck of cards, replacing it, AND then choosing an ace as the second
card.
8. The event of getting 2 laptops when the first is replaced.
9. Rolling a 4 on a single 6-sided die, AND then rolling a 1 on a second roll of the die.
Dependent and Independent Events Example:
1. Refer to the information on 50 students in the table below, determine

whether the following events dependent or independent?;
a) female (F) and in favor (I)
b) In favor (I) and female (F)
c) Against (A) and Male (M)
d) Male (M) and Against (A)
e) Against (A) and female (F)

Male (M) 10 11 21
Female (F) 16 13 29
Total 26 24 50
Answers: P(A/B) = P(A) and P(B/A) = P(B) IE.
P(A/B) ≠ P(A) or P(B/A) ≠ P(B) DE
a. Female and In favor b. In favor and Female c. Against and Male d. Against and Female
P(F)  P(F / I) P(I)  P(I / F) P(A)  P(A / M ) P(A)  P(A / F)
29 16 26 16 24 11 24 13
   
50 26 50 29 50 21 50 29
29 8 13 16 12 11 12 13
   
50 13 25 29 25 21 25 29
In favor (I) Against (A) Total Each pair of the events are not
Male (M) 10 11 21 equal which means that the
events are dependent. This
Female (F) 16 13 29 indicates that the opinion of the
Total 26 24 50 students is dependent on gender.
2. An accounting firm was able to finish a total caseload of 50 financial reports

accomplished from two branches, Makati and Manila. Of them 30 were
accomplished in Makati. Of the total financial reports finished, 10 has
balancing errors. Of the 30 financial reports finished in Makati, 6 are has
balancing errors. Let E be the event that a randomly selected financial
reports has balancing errors and X be the event that a randomly selected
financial report was accomplished in Makati. Tell whether the following
events are dependent or independent? Interpret the result.
a) E and X b) E and Y c) B and X d) B and Y
Construct a contingency table to solve the problem.

Let Y = branch in Manila and B = balanced financial report.
Construct a contingency table to solve the problem
Let Y = branch in Manila and B = balanced financial report.
Balancing Errors (E) Balanced (B) Total
Makati (X) 6 24 30
Manila (Y) 4 16 20
Total 10 40 50
a. Error and Makati b. Error and Manila c. Balanced and Makati d. Balanced and Manila
P(E )  P(E / X) P(E )  P(E / Y) P(B)  P(B / X) P(B)  P(B / Y)
10 6 10 4 40 24 40 16
   
50 30 50 20 50 30 50 20
1 1 1 1 4 4 4 4
   
5 5 5 5 5 5 5 5
Since the conditional and unconditional probabilities are

equal, 0.20 for Error and Makati and Error and Manila; and 0.10
for balanced and Makati and balanced and Manila, the
probability of any financial report to incur balancing errors is the
same, regardless of the branch where it was
balanced/accomplished. This means that the two branches are
producing the same proportion of errors in financial reporting.
The Complement Rule (Jaggia & Kelly, 2021, Albright & Winston 2013)
The Complement Rule – is the event that A does not occur. The sum of
probabilities assigned to simple events in a sample space must equal one.
Let A be the given event, the Ac (or A’) will denote the complement of A,
thus the P(A) + P(Ac ) = 1.
The Complement Rule is a simple, straightforward, powerful and widely

used probability formula.
Example of Complement Rule (Jaggia & Kelly, 2021)
Mutually and Non-Mutually Exclusive Events
Definition:
Two events A and B are mutually exclusive, or disjoint if
A  B = Ø, that is, if A and B have no elements in common.
Two events A and B are non-mutually exclusive, or joint
events if A  B = Ø’, that is, if A and B have elements in
common.
Tell whether the statement indicates MEE or NMEE:
1. Rolling a number less than 5 and a number greater than 3.
2. The event of passing English, Statistics or both.
3. Getting a total of 7 and 8 in one roll of two dice.
4. Obtaining a heart and spade in drawing a single card.
5. Beauty and brains.
6. Sending a single message to a globe and a smart user.
7. Choosing a weekday and choosing a weekend day.
8. Choosing a T or choosing a consonant.
9. Choosing a college student and over 15 years of age.
10. High demand and Low demand of school supplies on the same period.
The Addition Rule (Jaggia & Kelly, 2021)
The Addition Rule – is the probability of the union of two events denoted
by P(A ꓴ B). If two events are mutually exclusive, then
P(A ꓴ B) = P(A) + P(B)
If two events are non-mutually exclusive, then
P(A ꓴ B) = P(A) + P(B) – P(A Ո B) ,
• These formulas can also extend to more than 3 events:
P(A ꓴ B ꓴ C) = P(A) + P(B) + P(C)
P(A ꓴ B ꓴ C) = P(A) + P(B) + P(C) - P(A Ո B) - P(A Ո C) - P(B Ո C) + P(A ꓴ B ꓴ C)
Example of the Addition Rule
A. Suppose an experiment is consisting of tossing a single die:
Then S = {1, 2, 3, 4, 5, 6}
Let the event A = {1, 2, 3}, B = {5, 6}, C = {2, 3, 4}
1. P(A ꓴ B) = P(A) + P(B) = 3/6 + 2/6 = 5/6
2. P(A ꓴ C) = P(A) + P(C) – P(A Ո C) = 3/6 + 3/6 – 2/6 = 4/6 or 2/3
3. P(B ꓴ C) = P(B) + P(C) – P(B Ո C) = 2/6 + 3/6 – 0 = 5/6
B. Suppose an experiment is consisting of tossing 2 coins:
Then S = {TT, TH, HT, HH} , X = 0, 1, 2
1. What is the probability of getting at least 1 head?
P(at least 1 head) = P(1 head) + P(2 heads) = 2/4 + ¼ = ¾, let the random variable = be the number
of heads, X = 1, 2
2. What is the probability of getting at most 2 heads?
P(at most 2 heads) = P(no heads) + P(1 head) + P(2 heads) = ¼ + 2/4 + ¼ = 1
Example of the Addition Rule
(Jaggia & Kelly, 2021)
The Multiplication Rule P(A and B) (Jaggia & Kelly, 2021)
The probability that events A and B can happen together is called the Joint
Probability of A and B.
The Joint Probability of A and B is the intersection of two events.
Multiplication Rule for Dependent Events:
P(A  B)  P(B / A) P(A) or P(B  A)  P(A / B) P(B)
Multiplication Rule for Independent Events:
P(A  B)  P(A)  P(B)

The Multiplication Rule P(A and B) (Albright & Winston, 2013)
To illustrate Multiplication Rule:

• If X is the amount of rain in City A in March and Y is the
amount of rain in City A in June, it might be realistic to assume
that X and Y are independent. March weather doesn’t have
much effect on June weather.
• If X and Y are the changes in stock prices of two companies in
the same industry from one day to the next, it might not be
realistic to assume that X and Y are independent. The reason
is that they might both be subject to the same economic
influences.
Multiplication Rule (Jaggia & Kelly, 2021)
Multiplication Rule Examples:
1. A clothing manufacturer has two branches. The probability that branch A will be
successful is 0.73 and the probability that branch B is 0.60. Find the probability that
both branches will be successful? Assuming that the two branches are
independent.
P(A) = 0.73 P(B) = 0.60 P(A and B) = P(A)*P(B) = 0.73 * 0.60 = 0.438 or 43.8%
2. Suppose that 20% of personnel in a company has advanced studies. Of those

personnel which has advanced studies, 60% enrolled in a business program. Find
the probability that a personnel randomly selected has advanced studies and is
enrolled in a business program.
Let A = the event that a personnel has advanced studies.
B = the event that a personnel took a business program.
P(A) = 0.20, P(B/A) = 0.60 , NMEE and DE
P(A and B) = P(A) P(B/A)= (0.20)(0.60) = 0.12
Multiplication Rule Example:
3. The chief analyst of a bag manufacturing company is interested whether a
customer will purchase a shoulder bag and a hand bag. The probability that a
customer will purchase a shoulder bag is 0.12 and the probability that a customer
will purchase a hand bag is 0.16. What is the probability that a customer will
purchase both a shoulder bag and a hand bag?
P(A and B) = 0.12*0.16 = 0.0192 or 1.92%
Multiplication Rule Example:
4. Two financial reports will be selected from 20 files of financial reports for the presentation of
the company monthly status to the BOD. Suppose 3 of those financial reports are not yet
balanced and assuming the first selected Financial report is not returned in the file, what is the
probability that
P(B) = 17/20, P(B’) = 3/20, DE P(A and B) = P(B/A)P(A)
a. the selected reports are balanced?
P(B1 and B2) = P(B1/B2)P(B2) =(16/19)(17/20) = 68/95 or 0.7159
b. the selected reports are unbalanced? (neither balanced)
P(B’1 and B’2) = P(B’1/B’2)P(B’2) = 2/19*3/20 = 0.1579
c. one is balanced and one is unbalanced?
P(B and B’) = P(B/B’)P(B’) = 17/19*3/20 = 0.1342 or 13.42%
5. Suppose 3 financial reports in number 4 will be selected, what is the probability that
a. the 3 financial reports selected are unbalanced?
P(B’1 and B’2 and B’3) = P(B’1) P(B’2/ B’1) P(B’3/ B’1 B’2) = 3/20*2/19*1/18= 0.0009
b. the first 2 are balanced and the third is unbalanced?
P(B1 and B2 and B’3) = P(B1) P(B2/ B1) P(B’3/ B1 B2) = 17/20*16/19*3/18 =0.1193
Exercise:
1. The table below shows the classification of all employees of a company by gender and by
employee status.
Tenured(T) Non-Tenured (N) Total
Female 6 12 18
Male 10 12 22
Total 16 24 40
If one of these employees is selected at random for membership on the employee management
committee, what is the probability that this employee is;
a. A female and tenured? P(F and T) =P(F)P(T/F) = 18/40* 6/18 = 6/40 0.15 or 15%
18/40 = 6/16 or 0.45 = 0.375
P(F) /= P(F/T) DE
b. A female and non-tenured? P(F and N)=P(F)*P(N/F)
c. A tenured on the condition he is male? P(T/M) = 10/22 = 0.45
d. A tenured or a male? P(T or M) = P(T) + P(M) – P(T and M) = 16/40 + 22/40 – 10/40 = 0.70
e. Not Male? P(Female) = 18/40 or P(F) = 1 – P(M) = 1- 22/40 = 18/40
2. The probability that a randomly selected employee has an international
certification is 0.35, and the joint probability that the employee is a
board passer and has an international certification is 0.25. Find the
conditional probability that the employee selected at random is a board
passer given that he/she has an international certification.
P(C) = 0.35, P(B and C) = 0.25 ; P(B/C) = P(B and C)/P(C) = 0.25/0.35 = 0.7143
3. An owner of a fine dining restaurant estimates that the probability that
his company application with CSR will be approved is 0.55; the
probability that the application with the DOH will be approved is 0.65,
and the probability that it will pass with both CSR and DOH is 0.45.
Determine the probability that the application with CSR will be approved
given that the application with DOH will also be approved.
P(CSR) = 0.55, P(DOH) = 0.65 , P(CSR and DOH) = 0.45
P(CSR/DOH) = P(CSR and DOH)/P(DOH) = 0.45/0.65 =0.6923
Reference
Business Analytics: Communicating with Numbers by Jaggia, S., Kelly,
A., Lertwachara, K. and Chen, L.
Probability and Statistics by Walpole, R., Myers R., and Myers S.

Prentice Hall International, Inc., 1998.
RANDOM VARIABLES,
PROBABILITY DISTRIBUTIONS,
AND SUMMARY MEASURES
Learning Objectives:
At the end of the discussion, the student should be able to;
1. Distinguish a discrete random variable from a continuous variable.
2. Describe the probability distributions of a discrete random
variable.
3. Calculate the cumulative probability of a random variable.
4. Calculate the summary measures of a probability distribution of
random variables.
5. Become familiar with the continuous distributions and density
functions.
Random Variable (Albright and Winston, 2020)
• A key aspect of solving real business problem is dealing
appropriately with uncertainty.
• This involves recognizing explicitly that uncertainty exists
and using quantitative methods to model uncertainty.
• In many situations, the uncertain quantity is a numerical
quantity. In the language of probability, it is called a Random
Variable, usually denoted by uppercase letters like X, Y, M.
A Random Variable is a function that associates a real number
with each element in the sample space.
X = 0, 1, 2, ….
Random Variable (Walpole, et al., 1998)
Consider the experiment is Tossing 2 coins whose sample
space is given by S = {TT, TH, HT, HH}.
If we let X = be the random variable for the number of getting
heads, the value of X depends on the number of heads that
occur in each of the outcomes of the experiment. That is, if the
outcome is: {TT}, X = 0; {TH} or {HT}, X = 1; {HH}, X = 2
Therefore, X = 0, 1, 2
Random Variable (Walpole, et al., 1998)
Consider for example the random experiment of drawing two
balls in succession from an urn without replacement. Suppose the urn
contains 4 red balls and 3 black balls. Find the possible outcomes
(sample space) and the values y of the random variable Y, where Y is
the number of red balls.
Sample Space Y Y = 0,1,2
RR 2
RB 1
BR 1
BB 0
Discrete and Continuous Random Variables
(Walpole et al., 1998)
Definition:
If a sample space contains a finite, COUNTABLE number of possible values
or an unending sequence with as many elements as there are whole numbers, it is
called a DISCRETE SAMPLE SPACE.
Example: Sum of 6 = {(1,5), (5,1), (2,4), (4, 2), (3,3)}
1. The sum of the numbers between 5 and 7 facing up when 2 dice are thrown.
2. Four balls drawn from a box of 5 red and 6 green balls where x is the number
of green balls. X = 3, 2, 1, 0
3. The number of females from three children. GGG, GGB, GBG, BGG,…BBB
4. The total number of employees in a corporation given the health benefits.
(Walpole et al., 1998)
Definition:
If a sample space contains an infinite number of possible values equal to the
number of points on a line segment, it is called CONTINUOUS SAMPLE SPACE.
The outcomes of some statistical experiments may be neither finite nor countable.
1. When one conducts an investigation measuring the distance that a certain make of
automobile will travel over a prescribed test on 5 liters of gasoline. X = 1.5, 2.26
2. If one were to record the length of time in a manufacturing process, the possible
time intervals making up the sample space are infinite in number and are
uncountable.
3. An operations engineer measuring the rate at which the machine is producing tons
of oil per hour.
4. A company financial analyst calculating the cost it will take before they could reach
their target profit. C = 1.5m, 2.3m
Statistics by Walpole
(Albright and Winston, 2020)
• Usually a discrete distribution results from a count, whereas
a continuous distribution results from a measurement.
• This distinction between counts and measurements is not
always clear-cut.
• Mathematically, there is an important difference between
discrete and continuous probability distributions.
• Specifically, a proper treatment of continuous
distributions requires calculus.
• The normal distribution learned in Statistics is a type of
continuous distribution.
Example:
3. The sample space giving a detailed description of each possible outcome when three
electronic components are tested may be written
S = { NNN, NND, NDN, DNN, DDN, DND, NDD, DDD} 2*2*2 = 8 ELEMENTS
Where: N denotes non-defective and D denotes defective
Let M = be the random variable for THE NUMBER OF defective item
Each point in the sample space will be assigned a numerical value called the random
number m:
m = 0 – for no defective occur E={NNN} P(NNN) = 1/8
m = 1 – for 1 defective occur E={NND, NDN, DNN} = P(1D) = 3/8
m = 2 - for 2 defective occur E={NDD, DND, DDN} = 3/8
m = 3 - for 3 defective occur E={DDD} = 1/8
Thus, the variable M is a discrete random variable. M = 0, 1, 2, 3
4. Consider for example the random experiment of drawing two balls
in succession from an urn without replacement. Suppose the urn
contains 4 red balls and 3 black balls. Find the possible outcomes
(sample space) and the values y of the random variable Y, where Y
is the number of red balls.
Sample Space Y Y = 0, 1, 2
Since the values of the random
RR 2
variable Y are whole number that
RB 1
BR 1
represents the number of red
BB 0 balls drawn, then Y is a discrete
random variable.
Probability Distributions (Albright and Winston, 2020)
• A probability distribution lists all of the possible values of the
random variable and their corresponding probabilities.
• The essential properties of a discrete random variable and its
associated probability distribution are quite simple.
• To specify the probability distribution of X, we need to specify its
possible values and their probabilities.
• We assume that there are k possible values, denoted
x1, x2, … , xk.
• The probability of a typical value xi is denoted in one of two
ways, either P(X = xi) or p(xi).
Probability Distribution of a Discrete Random Variable
Probability distributions must satisfy two criteria: Sample Space Y Y = 0, 1, 2
RR 2
• The probabilities must be nonnegative.
RB 1
• They must sum to 1. BR 1
Example: BB 0
Let us again consider the experiment of drawing two balls in succession from
an urn without replacement. Suppose the urn contains 4 red balls and 3 black
balls. We have listed the sample space of the experiment and identified the
random value of Y (red) = 0, 1 , 2. We now find the probability distributions of
this experiments as follows:
Y 0 1 2
P(Y=2) 1/4 2/4 or 1/2 1/4
Observe that all probabilities are positive and adding all the probabilities equals 1 .
Probability Distribution of a Discrete Random Variable
Example:
Consider the experiment of three electronic components tested,
S = {NNN, NND, NDN, DNN, NDD, DND, DDN, DDD}
If M is the random variable for a defective item and each point in the sample space will
be assigned a numerical value of 0, 1, 2, 3:
m = 0 – for no defective occur E={NNN}
m = 1 – for 1 defective occur E={NND, NDN, DNN}
m = 2 - for 2 defective occur E={NDD, DND, DDN}
m = 3 - for 3 defective occur E={DDD}
Then the probability distribution is:
M 0 1 2 3
P(M = m) 1/8 3/8 3/8 1/8
P(M<=m) 1/8 4/8 or 1/2 7/8 1
Cumulative Probability (Albright and Winston, 2020)
• A cumulative probability is the probability that the random variable is
less than or equal to some particular value.
1. Assume that 10, 20, 30, and 40 are the possible values of a random
variable X, with corresponding probabilities 0.15, 0.25, 0.35, and 0.25.
X 10 20 30 40
P(X) 0.15 0.25 0.35 0.25
P(X<=x) 0.15 0.40 0.75 1
Find the cumulative probability P(X≤30).
• From the addition rule, the cumulative probability P(X≤30) can be calculated as:
• P(X<30) = P(X=10) +P(X =20) = 0.40, P(X<30) = 1 – P(X>=30) = 1 – 0.60 = 0.40

Cumulative Probability
2. Consider again the experiment of three electronic components tested,
If M is the random variable for a defective item and each point in the sample
space will be assigned a numerical value of 0, 1, 2, 3:
M 0 1 2 3
P(M = m) 1/8 3/8 3/8 1/8
a. What is the probability that at most 2 of the components tested are

defective?
P(M = 0) + P(M = 1) + P(M = 2) = 1/8 + 3/8 + 3/8 = 7/8 or 87.5%
This means that when three electronic components are tested, 87.5% of the
distribution has at most 2 components defective.
Continuation of testing electronic components:
M 0 1 2 3
P(M = m) 1/8 3/8 3/8 1/8
b. What is the probability of testing 3 components with more than 2

defectives?
The complement rule can be used in this problem since we know that
P(X <= 2) = 87.5%:
P(X <= 2) + P(X > 2) = 1, since P(X <= 2) = 87.5%, then
P(X > 2) = 1 - P(X <= 2) = 1 – 0.875 = 0.125 or 12.5%
Alternatively, since the experiment is discrete,
P(X > 2) refers to P(X = 3), since P(X = 3) = 1/8 = 0.125 or 12.5%
This means that when three electronic components are tested, 1 out of 8
possibilities or 12.5% of the distribution has 3 components defective.
3. A box contains 500 envelopes of which 75 contain $100 in cash, 150
contain $25, and 275 contain $10. An envelope may be purchased for $25.
What is the sample space for the different amounts of money? Assign
probabilities to the sample points and then find the probability that the
first enveloped purchased contains less than $100.
Probability distribution: Let X = be the random variable of cash contained
in an envelope.
X $10 $25 $100
P(X) 275/500 150/500 75/500
275 150 425 17

P(x<$100) = P(x = $10) + P(x = $25) = + = = or 85%
500 500 500 20
4. Let us again consider the experiment of drawing two balls in succession
from an urn without replacement. Suppose the urn contains 4 red balls
and 3 black balls. We have listed the sample space of the experiment and
identified the random value of Y (red) = 0, 1 , 2. What is the probability of
drawing 2 balls in succession with 1 or 2 red balls on it?
Y 0 1 2
P(Y) 1/4 1/2 1/4
P(Y = 1) + P(Y = 2) = 2/4 + ¼ = ¾ or 75% chance that there will be 1 or 2

red balls when 2 balls are drawn in succession from an urn containing 4 red
and 3 black balls.
5. A committee of size 5 is to be selected at random from 3 chemists and 5
physicists. The table below shows the probability distribution for the
number of chemists on the committee.
Let C = be the random variable for the number of chemists in the
committee.
C 0 1 2 3
P(C) 0.0179 0.2679 0.5357 0.1786
a) Find the probability that exactly 1 chemist is on the committee.

b) Find the probability that no chemist is on the committee.
c) Find the probability that at most 2 chemists are on the committee.
d) Find the probability that at least 2 chemists is on the committee.
C 0 1 2 3
P(C) 0.0179 0.2679 0.5357 0.1786
P(C = 1) = 0.2679 or 26.79%

P(C = 0) = 0.0179 or 1.79%
P(C = 0 or C = 1 or C = 2 ) = 0.0179 + 0.2679 + 0.5357 = 0.8215 or 82.15%
P(C = 2 or C = 3) = 0.5357 + 0.1786 = 0.7143 or 71.43%
Exercise on Cumulative Probability:
1. A stockroom clerk returns three safety helmets Solution:
at random to three steel mill employees who
had previously checked them. If Smith, Jones,
a. List all possible outcomes
& Brown, in that order, receive one of the and determine the
three hats, list the sample points for the random value m.
possible orders of returning the helmets, and Sample Space M = 0, 1, 3
find the value m of the random variable M
SJB 3
that represents the number of correct
SBJ 1
matches. For the random variable M,
BSJ 0
determine the probability that at least there is
BJS 1
one correct match of helmet made.
JBS 0
M 0 1 3
JSB 1
P(M=3) 1/3 1/2 1/6
P(M<=3) 1/3 5/6 1
b. Based on the stockroom clerk problem in the previous slide,
construct the probability distribution for the random variable M.
c. Find the cumulative probability for P(M  0).
2. A survey was given to 200 companies to determine their motivation
about the newly implemented government policy. Company
completing the survey could choose from 1 to 5 with qualitative
description from least motivated to greatly motivated, respectively. The
survey shows that 18% of the people rated 1, 11% rated 2, 12% rated 3,
36% rated 4, and 23% rated 5.
a. Construct the probability distribution for the survey using X as the
random variable.
b. Find the probability of finding a respondent who rated at least 3.
3. A manufacturing facility needs to open a new product line. Based on
experience, the manager of this project believes that at most four
possible deliberations his proposal will undergo before it will be
approved by the board of directors. It is currently believed that the
probabilities of these four possibilities are 0.143, 0.263, 0.401, and
0.193. Let V be the random variable that represents the number of
deliberations that will take place before the proposal is approved.
a. What is the sample space V for this experiment?
b. Construct the probability distribution for the random variable V.
c. What is the probability that the proposal will undergo at most 2
deliberations only?
Cumulative Distribution Using Excel:
1. Two dice are rolled where the sum of all possible outcomes is recorded.
Use excel construct the probability distribution and the cumulative
probability distribution.
2. Based on the probability distribution generated in #1, determine the
probability of
a. Rolling a 6 or less.
b. Rolling a 7 or more.
c. Rolling a number between 4 and 8 or 4  P(X)  8.
3. Create the line chart to illustrate the trend.
Source: Business Analytics by James Evans, p 169

Steps in constructing cumulative probability using excel for Rolling Two Dice:
1. Enter the outcomes on cell C4:M4 from the lowest value 2 to the highest 12,
where 2 corresponds to sum of 2 for (1, 1); 3 for the sum (1, 2), (2, 1); 4 for
the sum of (1, 3), (3, 1), (2, 2), …, 12 for the highest possible sum for (6, 6)
(see the diagram on slide 28 showing the sample points).
2. Enter the number of ways that the sum of each outcome could occur, say for
a sum of 2, 1 way; for sum of 3, 2 ways; for sum of 4, 3 ways,…, for sum of 6,
1 way. Get the sum of the number of ways.
3. Calculate the probability by dividing C5/total number of ways. The sum of all
the probability must be 1.
4. Calculate the cumulative probability for each outcome by the formula =C6
on cell C7, =C7+D6 on cell D7. Click D7 to drag the formula to the right to
compute for the rest of the cumulative probability.
SUMMARY MEASURES OF
PROBABILITY DISTRIBUTIONS
Mean of the Random Variable (Albright and Winston, 2020)
The mean, often denoted μ, is a weighted sum of the

possible values, weighted by their probabilities:
It is also called the expected value of X and denoted

E(X).
© 2020 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website or school-approved learning management system for classroom use.
Variance and Standard Deviation of a Random Variable
• To measure the variability in a distribution, we calculate its variance or
standard deviation.
• The variance, denoted by σ2 or Var(X), is a weighted sum of the squared
deviations of the possible values from the mean, where the weights are
again the probabilities.
• Variance of a probability distribution, σ2, is:

• Variance (computing formula) is:
• A more natural measure of variability is the standard deviation,

denoted by σ or Stdev(X). It is the square root of the variance:
© 2020 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website or school-approved learning management system for classroom use.
Mean of a Discrete Random Variable for Two fair coins
1. If two fair coins are tossed where X is the r.v. for number heads that occur
per toss, then the values of X can be 0, 1, or 2.
S = {TT, TH, HT, HH} X 0 1 2
P(X) 1/4 2/4 1/4
Find the average number of heads per toss in an experiment.

Since the 4 sample points are all equally likely, it follows that;
1 1 1 2 1 1
P(X = 0) = P(TT ) = , P(X = 1) = P(TH ) + P(HT ) = + = or , P(X = 2) = P(HH ) =
4 4 4 4 2 4
Therefore, This result means that, a person who
1  2 1 tosses 2 coins over and over will, on the
 = E(X) = (0)  + (1)  + (2)  = 1
 4  4  4 average, get 1 head per toss.
Variance and Standard Deviation of a Discrete Random Variable
for Two fair coins
If two fair coins are tossed where X is the number heads that occur per toss,
then the values of X can be 0, 1, or 2.
S = {TT, TH, HT, HH} X 0 1 2
1  2 1
 = E(X) = (0)  + (1)  + (2)  = 1
P(X) 1/4 2/4 1/4  4  4  4
Find the variance and standard deviation for the number of heads per
toss in an experiment.
1 2 1  2 1 
 = Var (X) = (0 − 1)   + (1 − 1)   + (2 − 1)   = 0.50
2 2
 4 2 4
 = STdev (X) = Var (X) = 0.50 = 0.7071
Mean of a Discrete Random Variable for 7 Components
2. A lot containing 7 components is sampled by a quality inspector; the lot
contains 4 good components and 3 defective components. A sample of 3
is taken by the inspector. Find the expected value of the number of good
components in this sample. The following table gives the probability
distribution of the random variable X, where X represents the number of
good components in this sample.
X 0 1 2 3
P(X) 1/35 12/35 18/35 4/35
1  12   18   4  12
 = E(X) = (0)  + (1)  + (2)  + (3)  = or 1.7  2 components are good
 35   35   35   35  7
Variance and Standard Deviation of a Random Variable
for 7 Components
 2 = Var (X)
3
=  [ x i − E(X)]2 p( x i )
i =0
2 1  2  12  2  18  2 4 
= (0 − 1.7143)   + (1 − 1.7143)   + (2 − 1.7143)   + (3 − 1.7143)  
2
 =  x i2 p( x i ) −  2
2
 35   35   35   35  i =0
= 0.0839 + 0.1749 + 0.0419 + 0.1889   1     12     18     4  

=  0 2    + 12    +  2 2    +  32    − 2 2
= 0.4896   35     35     35     35  
 = 0.4896 = 0.6997  12 72 36 
=  0 + + +  − 1.71432
 35 35 35 
= 0.4896
 = 0.4896 = 0.6997
X 0 1 2 3
P(X) 1/35 12/35 18/35 4/35
Mean of a Discrete Random Variable for Gambling game
4. In gambling game a man is paid $5 if he gets all heads or all tails when three
coins are tossed, and he will pay out $3 if either one or two heads show. What
is his expected gain?
Solution:
Let Y = be the random variable of the amount the gambler can win.
The sample space for the possible outcomes when three coins are tossed
simultaneously, or equivalently if 1 coin is tossed three times, is
S = {HHH, HHT, HTH, THH, HTT, THT, TTH, TTT}
• One can argue that each of these probabilities is equally likely and occurs with
probability equal to 1/8.
• An alternative approach would be to apply the multiplicative rule of probability
for independent event to each element of S.
Mean of a Discrete Random Variable
P(H  H  T ) = P(HHT ) For the random variable Y, the amount the
= P(H )P(H )P(T ) gambler can win, the possible values of Y are $5 if
 1  1  1  event E1 = {HHH, TTT} occurs and -$3 if event E2 =
=    
 2  2  2  {HHT, HTH, THH, HTT, THT, TTH} occurs. Thus the
1 probability table is given by,
=
8 Y E1 = 0 heads or 3 heads E2 = 1 or 2 heads
P(Y) 2/8 6/8
 2  3
It follows that,  = E(Y) = (5)  + (−3)  = −1, lose $1 per toss of the three coins.
8  4
In this game, the gambler will, on average, lose $1 per toss of the three coins.
Therefore, the expected gain of the gambler will be zero.
Variance and standard deviation of a Discrete Random Variable
3. In gambling game a man is paid $5 if he gets all heads or all tails when
three coins are tossed, and he will pay out $3 if either one or two heads
show. What is the variance and the standard deviation? Use alternative
formulas.
For the random variable Y, the amount the gambler can win, the possible
values of Y are $5 if event E1 = {HHH, TTT} occurs and -$3 if event E2 = {HHT,
HTH, THH, HTT, THT, TTH} occurs. Given the probability distribution below
and the computed expected mean equals μ = 0 solve for variance and
standard deviation using alternative formulas:
Y E1 = 0 heads or 3 heads (x1 = $5) E2 = 1 or 2 heads (x2 = -$3)
P(Y) 2/8 6/8

Variance and standard deviation using alternative formulas:
Y E1 = 0 heads or 3 heads (x1 = $5) E2 = 1 or 2 heads (x2 = -$3)
P(Y) 2/8 6/8
 2 = Var (X) 2
 =  x i2 p( x i ) −  2
2
3 i =0
=  [ x i − E(X)] p( x i )
2
  2    6 
=  5 2    +  (-3)2   
i =0
2 2 6
= (5 − 0 )   + (− 3 − 0 )  
2   8    8 
8 8  50 54 
= + −0
=
50 54
+  8 8
8 8 = 13
= 13
 = 13 = 3.61
 = 13 = 3.61
Reference
Business Analytics: Data Analysis and Introduction to Decision Making
by Albright, C. and Winston, W. 5th Edition
Copyright 2020 by Cengage Learning.
Statistics and Probability by Walpole, R., Myers, R., and Myers, S.

Prentice Hall (2019)
CALCULATING SUMMARY MEASURES USING
EXCEL SPREADSHEET and INTRODUCTION
TO SIMULATIONS
1. Calculate summary measures of a probability distribution of
random variables using excel spreadsheet.
2. Use simulation to incorporate uncertainty into spreadsheet models.
Cumulative Probability and Summary Measures using
Excel Spreadsheet (Albright and Winston, 2020)
Refer to the following problems presented in module 4C for excel
spreadsheet modeling:
1. If two fair coins are tossed where X is the number heads that occur
per toss, then the values of X can be 0, 1, or 2.
S = {TT, TH, HT, HH} X 0 1 2
P(X) 1/4 2/4 1/4
a. Find the probability of getting at least 1 head.

b. Calculate the mean and standard deviation. mean= 1 , s =
Cumulative Probability and Summary Measures using Excel Spreadsheet
2. A lot containing 7 components is sampled by a quality inspector; the lot
contains 4 good components and 3 defective components. A sample of 3
is taken by the inspector. Find the expected value of the number of good
components in this sample. The following table gives the probability
distribution of the random variable X, where X represents the number of
good components in this sample.
X 0 1 2 3
P(X) 1/35 12/35 18/35 4/35
1. Find the probability of getting 2 or 3 good components.

2. Calculate the mean and standard deviation.
3. Assume that 10, 20, 30, and 40 are the possible values of a random
variable X, with corresponding probabilities 0.15, 0.25, 0.35, and 0.25.
X 10 20 30 40
P(X) 0.15 0.25 0.35 0.25
a. Find the cumulative probability P(X≤30).

b. Calculate the mean and standard deviation.
4. Consider again the experiment of three electronic components tested,
If M is the random variable for a defective item and each point in the sample
space will be assigned a numerical value of 0, 1, 2, 3:
M 0 1 2 3
P(M = m) 1/8 3/8 3/8 1/8
a. What is the probability that at most 2 of the components tested are

defective?
b. What is the probability of testing 3 components with more than 2
defectives?
c. Calculate the mean and standard deviation.
5. A box contains 500 envelopes of which 75 contain $100 in cash, 150
contain $25, and 275 contain $10. An envelope may be purchased for $25.
What is the sample space for the different amounts of money?
Probability distribution: Let x = be the random variable of cash contained
in an envelope.
X $10 $25 $100
P(X) 275/500 150/500 75/500
a. Find the probability that the first enveloped purchased contains less
than $100.
6. Consider again the experiment of drawing two balls in succession from an
urn without replacement. Suppose the urn contains 4 red balls and 3 black
balls. We have listed the sample space of the experiment and identified
the random value of Y (red) = 0, 1 , 2.
Y 0 1 2
P(Y) 1/4 2/4 1/4
a. What is the probability of drawing 2 balls in succession with 1 or 2

red balls on it?
7. A committee of size 5 is to be selected at random from 3 chemists and 5
physicists. The table below shows the probability distribution for the
number of chemists on the committee.
Let C = be the random variable for the number of chemists in the committee.
C 0 1 2 3
P(C) 0.0179 0.2679 0.5357 0.1786

e) Calculate the mean and standard deviation.
8. Dice problem on getting a sum of 6:

a. Two dice are rolled where the sum of all possible outcomes is recorded.
Use excel construct the probability distribution and the cumulative
probability distribution.
Based on the probability distribution generated, determine the probability of
i. Rolling a 6 or less.
ii. Rolling a 7 or more.
iii. Rolling a number between 4 and 8 or 4  P(X)  8.
Source: Business Analytics by James Evans, p 169

Steps on constructing cumulative probability using excel for Rolling Two Dice:
1. Enter the outcomes on cell C4:M4 from the lowest value 2 to the highest 12,
where 2 corresponds to sum of 2 for (1, 1); 3 for the sum (1, 2), (2, 1); 4 for
the sum of (1, 3), (3, 1), (2, 2), …, 12 for the highest possible sum for (6, 6)
(see the diagram on slide 28 showing the sample points).
2. Enter the number of ways that the sum of each outcome could occur, say for
a sum of 2, 1 way; for sum of 3, 2 ways; for sum of 4, 3 ways,…, for sum of 6,
1 way. Get the sum of the number of ways.
3. Calculate the probability by dividing C5/total number of ways. The sum of all
the probability must be 1.
4. Calculate the cumulative probability for each outcome by the formula =C6
on cell C7, =C7+D6 on cell D7. Click D7 to drag the formula to the right to
compute for the rest of the cumulative probability.
Based on the probability distribution generated,
determine the probability of
a. Rolling a 6 or less
b. Rolling a 7 or more.
c. Rolling a number between 4 and 8 (4  P(X)  8)
6. A manufacturing facility needs to open a new product line. Based on
experience, the manager of this project believes that his proposal will
undergo at most four possible deliberations before it will be approved
by the board of directors. It is currently believed that the probabilities
of these four possibilities are 0.143, 0.263, 0.401, and 0.193. Let V be
the random variable that represents the number of deliberations that
will take place before the proposal is approved.
a. What is the sample space S for this experiment?
deliberations only?
a. What is the sample space S for this experiment?
S = {(A), (N,A), (N,N,A), (N,N,N,A)}
V 1 2 3 4 Above 4
P(V)

deliberations only?
P(A) + (NA) = ½ + ¼ = 3/4
Summary Measures For Market Returns Scenarios
for The National Economy (Albright and Winston, 2020)
Business Analytics by Albright and Winston, 5th edition, p.152

for The National Economy
Procedure for Calculating Summary Measures
You can see that the mean return is 15.3% and the standard
deviation is 5.3%. The mean or expected return does not imply
that the most likely return is 15.3%, nor it is the value that the
investor “expects” to occur. One can understand these measures
better in terms of long-run averages. Specifically, if you could
imagine the coming year being repeated many times, each time
this probability distribution is used to generate a market return,
then the average of these market returns would be close to
15.3%, and their standard deviation would be close to 5.3%.
Probability and Probability Distributions in in the
context of Business Problems (Albright and Winston)
It is noteworthy to see the significance of the probability and probability
distributions in business situations. The use probability and probability distributions in
making projections of the future possibilities over and over (or in the long run), indicates
that we, as decision makers, implies that we see uncertainty as a key factor in determining
the variability of the occurrences of the events (say, the market return scenarios) and we
really cannot ignore uncertainty. For instance, the mean return in this example is 15.3%. It
would be far from reality to think that the actual return will be sure as 15.3% because in
reality, it is not really 15.3%, but at least close to 15.3%, which will at least assist us to
assume the most possible market return scenario that would really take place in actual.
Otherwise, if you would think that the actual return in this problem is 15.3%, you
would be completely ignoring the uncertainty. A thought that a decision maker should not
believe. Therefore, to model such problem in a realistic manner, one must deal with the
probability and probability distributions.
Conditional Mean and Variance
Given the Conditional mean and Conditional standard deviation, find the unconditional mean and
variance.
State of Economy Conditional mean Conditional SD P(X=x)
Awful -20% 30% 0.2
Stable 5% 20% 0.5
Great 25% 15% 0.3
Unconditional mean and Unconditional standard deviation of X – are the
mean and standard deviation without the knowledge of (or before
determining) the state of economy.
For Stock Price and Economy
0.3
For Stock Price and Economy (in Excel)
ConditionProbabilities Mean SD
Awful 0.2 -0.2 0.3
Stable 0.5 0.05 0.2
Great 0.3 0.25 0.15
Conditional Mean 0.06 sumproduct(C3:C5,D3:D5)

Variance 0.06915 (C3*(D3^2+E3^2)+C4*(D4^2+E4^2)+C5*(D5^2+E5^2))-C7^2
SD 0.26296388 SQRT(C8)
It is fairly obvious that the unconditional mean of 6% is

the weighted average of the conditional means -20%, 5%,
and 25%, weighted by the probabilities 0.2, 0.5, and 0.3.
The variance of 6.92%, on the other hand, is the
unconditional of the conditional variance of 9%, 4%, and
2.25%
The point of this example is that it is often easier to assess the
uncertainty of some random variable X by conditioning on every possible
outcome of some external event like the economy. However, before that
outcome is known, the relevant mean and standard deviation of X are
those calculated from Equations in the previous slide. In this particular
example, before you know the state of the economy, the relevant mean
and standard deviation of the change in the price of stock A are 6% and
26.3%, respectively.
Introduction to Simulation (Anderson et. al, 2019)
Simulation is a technique used to model the operation of a
system. This Technique employs a computer program to
model the operation and perform simulation
computations.
Simulation is one of the most widely used
quantitative approaches to decision making. It is a method
for learning about a real system by experimenting with a
model that represents the system.
The simulation model contains the mathematical expressions and
logical relationships that describe how to compute the value of the outputs
given the values of the inputs. The inputs for a simulation model can be
classified as controllable inputs or uncontrollable inputs. Uncontrollable
inputs can be either uncertain or known with certainty. Figure 12.1 shows a
conceptual diagram of a simulation model.
Simulation has been successfully applied in a variety of applications.
The following examples are typical:
• New Product Development
• Airline Overbooking
• Inventory Policy
• Traffic Flow
• Waiting Lines
In this module, the Market Returns distribution will be used to

demonstrate simulation for the continuity of the discussion.
Simulation of Market Returns (Albright and Winston, 2020)
The goal is to simulate many
returns (we arbitrarily choose 400)
from this distribution and analyze the
resulting returns. We want each
simulated return to have probability
0.12 of being 23%, probability 0.40 of
being 18%, and so on. Then, using the
methods for summarizing data, we
calculate the average and standard
deviation of the 400 simulated
returns.
The RAND function
The key to this, is Excel’s RAND function, which generates a random
number between 0 and 1. The RAND function has no arguments, so every
time you use it, you must enter =RAND(). (Although there is nothing inside
the parentheses next to RAND, the parentheses cannot be omitted.) That
is, to generate a random number between 0 and 1 in any cell, you enter the
formula.
Random numbers generated with Excel’s RAND function are said to
be uniformly distributed between 0 and 1 because all decimal values
between 0 and 1 are equally likely. These uniformly distributed random
numbers can then be used to generate numbers from any discrete
distribution.
The RAND function
Procedure for Generating Random Market Returns in Excel
.
Now let’s step back and see what has been accomplished.
The following points are relevant.
❑ Simulations like this are very common, and we will
continue to use them to illustrate concepts in
probability and statistics.
❑ The numbers one may obtain will be different from the
ones in Figure 4.5 because of the nature of simulation.
The results depend on the particular random numbers
that happen to be generated.
❑ The way we entered cumulative probabilities and then used a lookup
table is generally the best way to generate random numbers from a
discrete probability distribution. However, there is an easier way if a
simulation add-in is available in the excel.
❑ Each generated market return in the Simulated_market_return range is
one of the five possible market returns. If you count the number of
times each return appears and then divide by 400, the number of
simulated values, you will see that the resulting fractions are
approximately equal to the original probabilities. For example, the
fraction of times the highest return 23% appears is about 0.12. This is
the essence of what it means to simulate from a given probability
distribution.
❑ The average and standard deviation calculated using the simple
formula for finding the mean and standard deviation from the
formulas in the Descriptive Statistics, are actually very close to the
mean and standard deviation of a probability distribution.
However, these measures are calculated in entirely different ways.
Specifically, the average in Descriptive statistics is an arithmetic
mean, whereas the mean computed in a probability distribution is
a weighted sum of the possible X - values, weighted by their
probabilities.
In this simulation, the mean is the long-run average of the
simulated values. Similarly, the standard deviation measures their
variability.
This long –run average interpretation will be more relevant
when a decision maker must choose among several actions that
have uncertain outcomes, the preferred decision is often the one
with the largest expected (monetary) value. This makes the
expected value of a probability distribution extremely important
in decision-making contexts.
Role of Simulation (Albright and Winston, 2020)
Spreadsheet simulation is one of the most important
tools in an analyst’s arsenal. Simulation doesn’t show you
what will occur; instead, it shows you many of the possible
scenarios that might occur. By seeing a variety of
scenarios, including those that are “typical” and those that
are “extreme,” you understand the situation much better
and can make more informed decisions relative to reward
and risk.
Assignment 3: Individual Activity
Exercise 1:
Submit excel
spreadsheet as an
output
Exercise 2:
..\excel files\cum prob_intro to

simulation\excel_intro to
simulation\5_P04_18_Data for
Number of Defectives in the
manufacturing process_Data
only.xlsx
Reference:
Introduction to Management Science: Quantitative Approaches to

Decision Making by Anderson, D., Sweeney, D., Williams, T., Camm, J.,
Cochran, J., Fry, M., and Ohlman, J. 14th Edition.
CONTINUOUS PROBABILITY
DISTRIBUTIONS and SPECIAL
DISCRETE PROBABILITY
DISTRIBUTIONS
1. Familiarize oneself with the continuous distributions and density
functions.
2. Familiarize oneself with special discrete probability distributions.
Types of Probability Distributions (Albright and Winston 2020)
Types of Probability Distributions
There are various probability distributions that can be used in
simulation models. The commonly used and familiar are the uniform
distributions and normal distributions. In order to understand the role of
these distributions, it is useful to take an overview of concepts like:
• Discrete versus Continuous
• Symmetric versus Skewed
• Bounded versus Unbounded
• Nonnegative versus unrestricted
On this module we rely on our knowledge about Discrete versus
Continuous and Symmetric versus Skewed
Gallery of
Common
Distributions
(Albright and
Winston, 2020)
Continuous Distributions and Density Functions
(Albright & Winston 2020)
We take a moment to discuss continuous probability distributions in
general. For continuous distributions, probabilities are areas under the
density function. These probabilities can often be calculated with Excel
functions.
Probabilities are found from a density function as areas under the
curve.
The area of the designated region represents

the probability of a score between 65 and 75.
Also, the area under the entire curve ia 1
because the total probability of all possible
values is always 1.
Common Probability Distributions
THE NORMAL DENSITY FUNCTION
The normal distribution is a continuous distribution with possible
values ranging over the entire number line – from negative infinity to
positive infinity. The normal density function is quite complex, in spite of
its “nice” bell-shaped appearance.
THE NORMAL DENSITY FUNCTION
THE UNIFORM DISTRIBUTION
The uniform distribution is the “flat” distribution. It can be
discrete or continuous probability distribution. It is bounded by a
minimum and maximum, and all the values between these two
extremes are equally likely. You can think of this as the “I have no
idea” distribution.
DISCRETE UNIFORM DISTRIBUTION (Jaggia, et al, 2021)
This distribution has a finite number of values where each
value is equally likely.
DISCRETE UNIFORM DISTRIBUTION (Jaggia, et al, 2021)
Example:
Suppose we know that the weekly production at a facility is between
31 and 40 units and the production follows a discrete uniform distribution.
Here, the random variable can only
assume one out of 10 equally likely values
between 31 and 40. for example, the
probability that weekly production is 34 is
1/10. Similarly, the probability that weekly
production is less than 34 is 3/10.
Common Probability Functions
CONTINUOUS UNIFORM DISTRIBUTION (Jaggia, et al, 2021)
For example, a manager might realize that a building cost is uncertain.
If she can state only that, “I know the cost will be between $20,000 and
$30,000, but other than this, I have no idea what the cost will be,” then a
uniform distribution from $20,000 to $30,000 is a natural choice. However,
even though some people do use the uniform distribution in such cases,
these situations are arguably not very common or realistic. If the manager
really thinks about it, she can probably provide more information about the
uncertain cost, such as, “The cost is more likely to be close to $25,000 than
to either of the extremes.” Then some distribution other than the uniform is
more appropriate.
The figure on the right
illustrate the
distribution of the
building cost. The graph
shows the minimum
and maximum value of
the distribution. The
mean is found to be 25,
000 with a standard
deviation of 2.887.
Special Discrete Probability Distribution
THE BINOMIAL DISTRIBUTION
The binomial distribution if a discrete distribution that can occur in
two situations:
1. When sampling from a population with only two types of members (e.g.
male and female, defective and not defective, etc..)
2. When performing a sequence of identical experiments, each of which
has only two possible outcomes.
The outcomes of successive trials are probabilistically independent of
one another and that each trial has only two possible outcomes.
The Bernoulli Process
For a Binomial Distribution, an experiment must first satisfy two important
conditions of a Bernoulli process:
.
Example:
Example:
Example:
THE POISSON DISTRIBUTION
TYPICAL EXAMPLES OF THE POISSON DISTRIBUTION
1. A bank manager is studying the arrival pattern to the bank. The events
are customer arrivals, the number of arrivals in an hour is Poisson-
distributed, and λ represents the expected number of arrivals per hour.
2. A retailer is interested in the number of customers who order a
particular product in a week. Then the events are customer orders for the
product, the number of customer orders in a week is Poisson-distributed,
and λ is the expected number of orders per week.
The parameter λ is often called a rate – arrivals per hour, failures per
month, customers who use the kiosk in ordering a meal per hour, and so
on.
TYPICAL EXAMPLES OF THE POISSON DISTRIBUTION
3. The number of logouts occurring per student attending the online class.
4. The number of customers that reports defective products per week.
5. The number of lags that a user experience within the 1st 30 minutes of
opening a device.
6. The number of defects in a 50-yard roll of fabric.
7. The number of bacteria in a specified culture.
The following formulas is used for calculating probabilities associated with a
Poisson random variable.
If X is a Poisson random Variable, then Var(X) = E(X) = .

,
,
Poisson Calculations using Excel
Suppose the number of arrivals to a bank in a single hour is Poisson-
distributed with rate λ = 30, then the number of arrivals in a half-hour period
is Poisson distri-
buted with rate
λ = 15.
EXPONENTIAL DISTRIBUTION
Consider the random process where a bank manager is studying the
pattern of customer arrivals at her branch location.
• There are two different variables that could be used to describe this
process.
• By counting the number of customers who arrive in a randomly
selected minute;
• By measuring the time between two customer arrivals.
Customer Arrival Process

at a Bank
• It should be noted that the number of customers who arrive in the bank is
a discrete random variable typically known as Poisson Distribution with
parameter λ, where λ represents the expected number of arrivals per hour.
• If the count of customer arrivals has a Poisson distribution, the distribution
of the time between two customer arrivals will have an Exponential
distribution. This is an alternative way to view the uncertainty in the arrival
process based on the times between customer arrivals.
• In the exponential model, the focus is on the waiting time until the next
event, which is a continuous variable.
• The Exponential distribution is the most common probability distribution
that models these time intervals, often called interarrival times.
Continuous Probability Distributions
Continuous Probability Distributions
The mean and standard deviation are both equal to the reciprocal of
the parameter λ. For example, an exponential distribution with parameter
λ=0.1 has mean and standard deviation both equal to 10.
To further illustrate:
Examples:
1. The time it takes a machine will finish a batch of items.
2. The mean life of a computer monitor in continual sue in 5 years.
3. The average speed that a certain operating system.
4. Passenger arrivals at the airport.
5. The times between arrivals at a bank during the peak period of the day.
Reference
Business Analytics: Communicating with Numbers by Jaggia, S., Kelly,
A., Lertwachara, K. and Chen, L.
Applied Statistics in Business and Economics by Doane, D. and Seward,
L. , 7th Edition.

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REVIEW OF BASICS OF

PROBABILITIES AND PROBABILITY

Probability – is a numerical value that measures the

Sample Space (S) – is the set of all possible outcomes

Event (E) – is the subset of the sample space.

Elementary Statistics by A. G. Bluman

Elementary Statistics by A. G. Bluman

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Elementary Statistics by A. G. Bluman https://www.slideshare.net/getyourcheaton/intro-to-probability-57576766

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Elementary Statistics by A. G. Bluman

This is an example of the

Elementary Statistics by A. G. Bluman

Rule 1 states that probabilities cannot be negative or greater than 1.

Elementary Statistics by A. G. Bluman

1. When a single die is rolled, find the probability of getting a 9.

Elementary Statistics by A. G. Bluman

Elementary Statistics by A. G. Bluman

Elementary Statistics by A. G. Bluman

Exhaustive events – are events that includes all outcomes

Elementary Statistics by Allan G. Bluman. McGraw Hill International Edition, 2010

In favor (I) Against (A) Total

1. Refer to the information on 50 students in the table below, determine

In favor (I) Against (A) Total

2. An accounting firm was able to finish a total caseload of 50 financial reports

Construct a contingency table to solve the problem.

Since the conditional and unconditional probabilities are

The Complement Rule is a simple, straightforward, powerful and widely

Multiplication Rule for Independent Events:

P(A  B)  P(A)  P(B)

To illustrate Multiplication Rule:

2. Suppose that 20% of personnel in a company has advanced studies. Of those

Probability and Statistics by Walpole, R., Myers R., and Myers S.

• P(X<30) = P(X=10) +P(X =20) = 0.40, P(X<30) = 1 – P(X>=30) = 1 – 0.60 = 0.40

a. What is the probability that at most 2 of the components tested are

b. What is the probability of testing 3 components with more than 2

P(X) 275/500 150/500 75/500

275 150 425 17

P(Y = 1) + P(Y = 2) = 2/4 + ¼ = ¾ or 75% chance that there will be 1 or 2

a) Find the probability that exactly 1 chemist is on the committee.

b) Find the probability that no chemist is on the committee.

3. Create the line chart to illustrate the trend.

Source: Business Analytics by James Evans, p 169

The mean, often denoted μ, is a weighted sum of the

It is also called the expected value of X and denoted

• Variance of a probability distribution, σ2, is:

• A more natural measure of variability is the standard deviation,

P(X) 1/4 2/4 1/4

Find the average number of heads per toss in an experiment.

= 0.0839 + 0.1749 + 0.0419 + 0.1889   1     12     18     4  

P(Y) 2/8 6/8

P(Y) 2/8 6/8

P(Y) 2/8 6/8

Statistics and Probability by Walpole, R., Myers, R., and Myers, S.

P(X) 1/4 2/4 1/4

a. Find the probability of getting at least 1 head.

1. Find the probability of getting 2 or 3 good components.

a. Find the cumulative probability P(X≤30).