Data Analysis for Managers

BMT5113

INSTITUTE-
VIT Business School

Module:5 Probability Faculty Name: Dr. Bijay Kushwaha

Dr. Bijay Kushwaha, VIT BS, Vellore Institute of
Technology, Vellore, India
STUDENT LEARNING OUTCOMES (SLO)
1. Use both the small-sample and large-sample runs tests to determine
whether the order of observations in a sample is random.
2. Use both the small-sample and large-sample cases of the Mann-Whitney U
test to determine if there is a difference in two independent populations.
3. Use both the small-sample and large-sample cases of the Wilcoxon
matched-pairs signed rank test to compare the difference in two related
samples.
4. Use the Kruskal-Wallis test to determine whether samples come from the
same or different populations.

Dr. Bijay Kushwaha, VIT BS, Vellore Institute of Technology, Vellore, India
 Probability
A numerical measure of uncertainty is provided by a very important branch of
Statistics called the “Theory of Probability”.

In the words of Prof. Ya-Lin-Chou : “Statistics is the science of decision making with
calculated risks in the face of uncertainty”.
Example,
(i) The sex of a baby to be born cannot be predicted with certainty.
(ii) A sales (or production) manager cannot say with certainty if he will achieve the
sales (or production) target in the season.
(iii) If an electric bulb or tube has lasted for 3 months, nothing can be said about its
future life.
(iv) In toss of a uniform coin, we are not sure if we shall get head or tail.
(v) A producer can not ascertain the future demand of his product with certainty.

If a random experiment results in N exhaustive, mutually exclusive and equally likely

outcomes (cases) out of which m are favourable to the happening of an event A, then
the probability of occurrence of A, usually denoted by P(A) is given by :

Dr. Bijay Kushwaha, VIT BS, Vellore Institute of Technology, Vellore, India
 Probability
Random Experiment. An experiment is called a random experiment if when
conducted repeatedly under essentially homogeneous conditions, the result is not
unique but may be any one of the various possible outcomes.

Trial and Event. Performing of a random experiment is called a trial and outcome or
combination of outcomes are termed as events.
Exhaustive Cases. The total number of possible outcomes of a random
experiment is called the exhaustive cases for the experiment. Thus, in toss of a
single coin, we can get head (H) or tail (T). Hence exhaustive number of cases is 2
Favourable Cases or Events. The number of outcomes of a random experiment
which entail (or result in) the happening of an event are termed as the cases
favourable to the event. For example : In a toss of two coins, the number of cases
favourable to the event ‘exactly one head’ is 2, viz., HT, TH and for getting ‘two
heads’ is one viz., HH.

Dr. Bijay Kushwaha, VIT BS, Vellore Institute of Technology, Vellore, India
 Probability
Mutually Exclusive Events or Cases. Two or more events are said to be mutually
exclusive if the happening of any one of them excludes the happening of all others in
the same experiment. For example, in toss of a coin, the events ‘head’ and ‘tail’ are
mutually exclusive because if head comes, we can’t get tail and if tail comes we can’t
get head. Similarly, in the throw of a die, the six faces numbered 1, 2, 3, 4, 5 and 6 are
mutually exclusive. Thus, events are said to be mutually exclusive if no two or more of
them can happen simultaneously.

Equally Likely Cases. The outcomes are said to be equally likely or equally probable
if none of them is expected to occur in preference to other. Thus, in tossing of a coin
(dice), all the outcomes, viz., H, T (the faces 1, 2, 3, 4, 5, 6) are equally likely if the
coin (die) is unbiased.

Independent Events. Events are said to be independent of each other if happening of

any one of them is not affected by and does not affect the happening of any one of
others. For example : In tossing of a die repeatedly, the event of getting ‘5’ in 1st
throw is independent of getting ‘5’ in second, third or subsequent throws.

Dr. Bijay Kushwaha, VIT BS, Vellore Institute of Technology, Vellore, India
 Probability

A uniform die is thrown at random. Find the probability that the number
on it is :
(i) 5, (ii) greater than 4, (iii) even.

Solution. Since the dice can fall with any one of the faces 1, 2, 3, 4, 5, and 6, the
exhaustive number of cases is 6.

Dr. Bijay Kushwaha, VIT BS, Vellore Institute of Technology, Vellore, India
 Probability
In a single throw with two uniform dice find the probability of throwing
(i) Five, (ii) Eight.

Dr. Bijay Kushwaha, VIT BS, Vellore Institute of Technology, Vellore, India
Probability

Dr. Bijay Kushwaha, VIT BS, Vellore Institute of Technology, Vellore, India
Probability

Dr. Bijay Kushwaha, VIT BS, Vellore Institute of Technology, Vellore, India
 Probability
An urn contains 8 white and 3 red balls. If two balls are drawn at random, find
the probability that
(i) both are white, (ii) both are red, (iii) one is of each colour.

Dr. Bijay Kushwaha, VIT BS, Vellore Institute of Technology, Vellore, India
Probability

Dr. Bijay Kushwaha, VIT BS, Vellore Institute of Technology, Vellore, India
 Probability Distribution
Let us consider a discrete random variable X which can take the possible values x1, x2,
x3,…, xn. With each value of the variable X, we associate a number

The concept of probability distribution is analogous to that of frequency distribution. Just

as frequency distribution tells us how the total frequency is distributed among different
values (or classes) of the variable, similarly a probability distribution tells us how total
probability of 1 is distributed among the various values which the random variable can
take. Dr. Bijay Kushwaha, VIT BS, Vellore Institute of Technology, Vellore, India
Probability Distribution

Dr. Bijay Kushwaha, VIT BS, Vellore Institute of Technology, Vellore, India
 Probability Distribution
Two cards are drawn from a well shuffled deck of 52 cards. Find the probability
distribution of the number of aces.
(a) successively with replacement
(b) simultaneously (successively without replacement)
Probability Distribution

Dr. Bijay Kushwaha, VIT BS, Vellore Institute of Technology, Vellore, India
 Probability of Expectation
An urn contains 7 white and 3 red balls. Two balls are drawn together, at random, from
this urn. Compute the probability that neither of them is white. Find also the probability
of getting one white and one red ball. Hence compute the expected number of white
balls drawn.

Dr. Bijay Kushwaha, VIT BS, Vellore Institute of Technology, Vellore, India
 Probability of Expectation
From a bag containing 6 white and 4 red balls, three balls are drawn at random .
(i) Find the expected number of white balls down.
(ii) If each white ball drawn carries a reward of Rs. 5 and each red ball Rs. 7, find the
expected reward of the draw.

Dr. Bijay Kushwaha, VIT BS, Vellore Institute of Technology, Vellore, India
 Probability of Expectation
A contractor spends Rs. 3,000 to prepare for a bid on a construction project which,
after deducting manufacturing expenses and the cost of bidding, will yield a profit
of Rs. 25,000 if the bid is won. If the chance of winning the bid is ten per cent,
compute his expected profit and state the likely decision on whether to bid or not to
bid.
Solution:
Expenses incurred on preparing the bid = Rs. 3,000.
This will be his loss if the bid is not won by the contractor.

Profit if bid is won = Rs. 25,000.

P(Winning the bid) = 10% = 0·10 (Given) ; P(Losing the bid) = 1 – 0·10 = 0·90

 Contractor’s expected profit

[
= Rs. 25,000 × 0·10 + (–3,000) × 0·90 ] = Rs. (2,500 – 2,700) = (–) Rs. 200
Since the contractor’s expected profit is negative, he should not bid.

Dr. Bijay Kushwaha, VIT BS, Vellore Institute of Technology, Vellore, India
THANK YOU

Dr. Bijay Kushwaha, VIT BS, Vellore Institute of Technology, Vellore, India