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1-Probability Distributions
1-Probability Distributions
Probability
Concepts and Applications
3-2
Uncertainties
In business, most decision making involves uncertainty.
For example,
1. What are the chances that sales will increase if we increase
expenditure on advertisement?
2. What is the likelihood a valve in an industrial plant will
malfunction within the next week?
3. What are the odds that a new investment will be profitable?
3-3
Definition of Probability
Quantifiable likelihood (chance) of the occurrence of an
event expressed as odds, or a fraction of 1.
Probability is estimated usually through repeated
random sampling, and is represented numerically as
between 0 (impossibility) and 1 (certainty).
3-4
An Experiment and Its Sample Space
Random Experiment
Toss a coin
Inspection a part
Conduct a sales call
Roll a die
Play a football game
Experiment Outcomes
Head, tail
Defective, non-defective
Purchase, no purchase
1, 2, 3, 4, 5, 6
Win, lose, tie
Assigning Probabilities
Classical Method
Assigning probabilities based on the assumption of equally
likely outcomes
Relative Frequency Method
Assigning probabilities based on experimentation or historical
data
Subjective Method
Assigning probabilities based on judgment
Probability Distributions
and the topics to be covered
Random Variables
Discrete Random Variables
Expected Value and Variance
Binomial Probability Distribution
Poisson Probability Distribution
3-7
Probability Distributions
The probability distribution for a random variable
describes how probabilities are distributed over the
values of the random variable.
A random variable is a numerical description of the
outcome of an experiment.
3-8
Random Variables
A random variable can be classified as being either
discrete or continuous depending on the numerical
values it assumes.
A discrete random variable may assume either a finite
number of values or an infinite sequence of values.
A continuous random variable may assume any
numerical value in an interval or collection of intervals.
3-9
Construct Probability distribution of number of girls in four
sequential births.
Consider the different possible orderings of boy (B) and girl (G) in
four sequential births. There are 2*2*2*2=2
4
= 16 possibilities, so
the sample space is:
BBBB BGBB GBBB GGBB
BBBG BGBG GBBG GGBG
BBGB BGGB GBGB GGGB
BBGG BGGG GBGG GGGG
If girl and boy are each equally likely [P(G) = P(B) = 1/2], and the
gender of each child is independent of that of the previous child,
then the probability of each of these 16 possibilities is:
(1/2)(1/2)(1/2)(1/2) = 1/16.
3-10
Now count the number of girls in each set of four sequential births:
BBBB (0) BGBB (1) GBBB (1) GGBB (2)
BBBG (1) BGBG (2) GBBG (2) GGBG (3)
BBGB (1) BGGB (2) GBGB (2) GGGB (3)
BBGG (2) BGGG (3) GBGG (3) GGGG (4)
Notice that:
each possible outcome is assigned a single numeric value,
all outcomes are assigned a numeric value, and
the value assigned varies over the outcomes.
The count of the number of girls is a random variable:
A random variable, X, is a function that assigns a single, but variable, value to
each element of a sample space.
Random Variables
3-11
Since the random variable X = 3 when any of the four outcomes BGGG, GBGG,
GGBG, or GGGB occurs,
P(X = 3) = P(BGGG) + P(GBGG) + P(GGBG) + P(GGGB) = 4/16
The probability distribution of a random variable is a table that lists the
possible values of the random variables and their associated probabilities.
x P(x)
0 1/16
1 4/16
2 6/16
3 4/16
4 1/16
16/16=1
Random Variables (Continued)
The Graphical Display for this
Probability Distribution
is shown on the next Slide.
3-12
Random Variables (Continued)
Number of Girls, X
P
r
o
b
a
b
i
l
i
t
y
,
P
(
X
)
4 3 2 1 0
0.4
0.3
0.2
0.1
0.0
1/16
4/16
6/16
4/16
1/16
Probability Distribution of the Number of Girls in Four Births
3-13
Consider the experiment of tossing two six-sided dice. There are 36 possible
outcomes. Let the random variable X represent the sum of the numbers on
the two dice:
2 3 4 5 6 7
1,1 1,2 1,3 1,4 1,5 1,6 8
2,1 2,2 2,3 2,4 2,5 2,6 9
3,1 3,2 3,3 3,4 3,5 3,6 10
4,1 4,2 4,3 4,4 4,5 4,6 11
5,1 5,2 5,3 5,4 5,5 5,6 12
6,1 6,2 6,3 6,4 6,5 6,6
x P(x)
*
2 1/36
3 2/36
4 3/36
5 4/36
6 5/36
7 6/36
8 5/36
9 4/36
10 3/36
11 2/36
12 1/36
1
1 2 1 1 1 0 9 8 7 6 5 4 3 2
0 . 1 7
0 . 1 2
0 . 0 7
0 . 0 2
x
p
(
x
)
P r o b a b i l i t y D i s t r i b u t i o n o f S u m o f T w o D i c e
Example
3-14
EXAMPLES OF R.V
SRL
NO
EXP OUTCOME R.V RANGE OF R.V
1. Stock 50 Xmas
trees
No of trees sold X= No of Xmas
trees sold
0,1,..50
2. Inspect 500 items No of acceptable
items
Y= No of
acceptable
items
0,1.500
3. Send out 2000
sales letter
No of people
responding to
letters
Z= No of
people
responding to
letters
0,1,.2000
4. Build an office
complex
Percentage of
building
completed after
4 months
R=% of building
after 4 months
0R100
5. Test lifetime of a
bulb (min)
Length of a time
bulb lasts up to
80,000 min
S= Time the
bulb lasts
0S80,000
3-15
EXAMPLES OF R.V THAT ARE NOT NOs
SRL
NO
EXP OUTCOME
R.V RANGE OF
R.V
1 STUDENTS
RESPONDING TO
QUESTIONNAIRE-
WHETHER BOOK
IS WELL WRITTEN
SA
A
N
D
SD
X = 5
4
3
2
1
1,2,3,4,5
2. ONE NEW M/C IS
INSPECTED
DEFECTIVE
NOT
DEFECTIVE
Y = 0
1
0,1
3. CONSUMERS
RESPONSE TO A
NEW PRODUCT
GOOD
AVERAGE
POOR
Z = 3
2
1
1,2,3
3-16
A discrete random variable:
has a countable number of possible values
has discrete jumps (or gaps) between successive values
has measurable probability associated with individual values
A continuous random variable:
has an uncountably infinite number of possible values
moves continuously from value to value
has no measurable probability associated with each value
measures (e.g.: height, weight, speed, value, duration, length)
Discrete and Continuous Random
Variables
3-17
| |
1 0
1
0 1
. for all values of x.
2.
Corollary:
all x
P x
P x
P X
( )
( )
( )
>
=
s s
E X xP x
all x
( ) ( )
x P(x) xP(x)
0 0.1 0.0
1 0.2 0.2
2 0.3 0.6
3 0.2 0.6
4 0.1 0.4
5 0.1 0.5
1.0 2.3 = E(X) =
5 4 3 2 1 0
2.3
Expected Values of Discrete Random Variables
3-22
Suppose you are playing a coin toss game in which you are
paid $1 if the coin turns up heads and you lose $1 when the
coin turns up tails. The expected value of this game is E(X) =
0. A game of chance with an expected payoff of 0 is called a
fair game.
x P(x) xP(x)
-1 0.5 -0.50
1 0.5 0.50
1.0 0.00 = E(X)=
-1 1
0
A Fair Game
3-23
The variance of a random variable is the expected
squared deviation from the mean:
o
2 2 2
2 2 2
2
= = =
= =
V X E X x P x
E X E X x P x xP x
all x
all x all x
( ) [( ) ] ( ) ( )
( ) [ ( )] ( ) ( )
The standard deviation of a random variable is the
square root of its variance: o = = SD X V X ( ) ( )
Variance and Standard Deviation of a RV
3-24
Number of
Switches,
x P(x) xP(x) (x-) (x-)
2
P(x-)
2
x
2
P(x)
0 0.1 0.0 -2.3 5.29 0.529 0.0
1 0.2 0.2 -1.3 1.69 0.338 0.2
2 0.3 0.6 -0.3 0.09 0.027 1.2
3 0.2 0.6 0.7 0.49 0.098 1.8
4 0.1 0.4 1.7 2.89 0.289 1.6
5 0.1 0.5 2.7 7.29 0.729 2.5
2.3 2.010 7.3
o
2 2
2
2 01
2 2
2
2
7 3 2 3
2
2 01
= =
=
=
=
=
(
(
(
(
= =
V X E X
x
all x
P x
E X E X
x
all x
P x xP x
all x
( ) [( ) ]
( ) ( ) .
( ) [ ( )]
( ) ( )
. . .
Recall: = 2.3.
Variance and Standard Deviation of a RV
3-25
The mean or expected value of the sum of random variables is
the sum of their means or expected values:
( )
( ) ( ) ( )
X Y X Y
E X Y E X EY
+
= + = + = +
For example: E(X) = $350 and E(Y) = $200
E(X+Y) = $350 + $200 = $550
The variance of the sum of mutually independent random
variables is the sum of their variances:
o o o
2 2 2
( ) ( ) ( ) ( ) X Y X Y V X Y V X V Y + = + = + = +
if and only if X and Y are independent.
For example: V(X) = 84 and V(Y) = 60
V(X+Y) = 144
Properties of Means and Variances of RV
3-26
The variance of the sum of k mutually independent random
variables is the sum of their variances:
Properties of Means and Variances of RV
NOTE:
) ( ... )
2
( )
1
( ) ...
2 1
(
k
X E X E X E
k
X X X E + + + = + + +
) ( ... )
2
(
2
)
1
(
1
) ...
2 2 1 1
(
k
X E
k
a X E a X E a
k
X
k
a X a X a E + + + = + + +
) ( ... )
2
( )
1
( ) ...
2 1
(
k
X V X V X V
k
X X X V + + + = + + +
) (
2
... )
2
(
2
2
)
1
(
2
1
) ...
2 2 1 1
(
k
X V
k
a X V a X V a
k
X
k
a X a X a V + + + = + + +
and
3-27
Example: JSL Appliances
Using past data on TV sales (below left), a tabular representation of the
probability distribution for TV sales (below right) was developed.
Number
Units Sold of Days x f(x)
0 80 0 .40
1 50 1 .25
2 40 2 .20
3 10 3 .05
4 20 4 .10
200 1.00
3-28
Example: JSL Appliances
A graphical representation of the probability distribution for TV sales
in one day
.10
.20
.30
.40
.50
0 1 2 3 4
Values of Random Variable x (TV sales)
P
r
o
b
a
b
i
l
i
t
y
3-29
Expected Value and Variance
The expected value, or mean, of a random variable is a measure of its
central location.
Expected value of a discrete random variable:
E(x) = = Exf(x)
The variance summarizes the variability in the values of a random
variable.
Variance of a discrete random variable:
Var(x) = o
2
= E(x - )
2
f(x)
The standard deviation, o, is defined as the positive square root of
the variance.
3-30
Example: JSL Appliances
Expected Value of a Discrete Random Variable
x f(x) xf(x)
0 .40 .00
1 .25 .25
2 .20 .40
3 .05 .15
4 .10 .40
1.20 = E(x)
The expected number of TV sets sold in a day is
1.2
3-31
Variance and Standard Deviation of a Discrete Random Variable
x x - (x - )
2
f(x) (x - )
2
f(x)
_____ _________ ___________ _______ _______________
0 -1.2 1.44 .40 .576
1 -0.2 0.04 .25 .010
2 0.8 0.64 .20 .128
3 1.8 3.24 .05 .162
4 2.8 7.84 .10 .784
1.660 = o
2
The variance of daily sales is 1.66 TV sets squared.
The standard deviation of sales is 1.29 TV sets.
Example: JSL Appliances
3-32
If an experiment consists of a single trial and the
outcome of the trial can only be either a success
*
or a
failure, then the trial is called a Bernoulli trial.
The number of success X in one Bernoulli trial, which
can be 1 or 0, is a Bernoulli random variable.
Note: If p is the probability of success in a Bernoulli
experiment, the E(X) = p and V(X) = p(1 p).
* The terms success and failure are simply statistical terms, and
do not have positive or negative implications. In a production
setting, finding a defective product may be termed a success,
although it is not a positive result.
Bernoulli Random Variable
3-33
Consider a Bernoulli Process in which we have a sequence of n identical
trials satisfying the following conditions:
1. Each trial has two possible outcomes, called success *and failure.
The two outcomes are mutually exclusive and exhaustive.
2. The probability of success, denoted by p, remains constant from trial
to trial. The probability of failure is denoted by q, where q =1-p.
3. The n trials are independent. That is, the outcome of any trial does
not affect the outcomes of the other trials.
A random variable, X, that counts the number of successes in n Bernoulli
trials, where p is the probability of success* in any given trial, is said to
follow the binomial probability distribution with parameters n (number
of trials) and p (probability of success). We call X the binomial random
variable.
The Binomial Random Variable
3-34
Suppose we toss a single fair and balanced coin five times in succession,
and let X represent the number of heads.
There are 2
5
= 32 possible sequences of H and T (S and F) in the sample
space for this experiment. Of these, there are 10 in which there are exactly
2 heads (X=2):
HHTTT HTHTH HTTHT HTTTH THHTT THTHT THTTH TTHHT TTHTH TTTHH
The probability of each of these 10 outcomes is p
2
q
3
= (1/2)
2
(1/2)
3
=(1/32),
so the probability of 2 heads in 5 tosses of a fair and balanced coin is:
P(X = 2) = 10 * (1/32) = (10/32) = 0.3125
10 (1/32)
Number of
outcomes with 2
heads
Probability of
each outcome
with 2 heads
Binomial Probabilities
3-35
10 (1/32)
Number of outcomes
with 2 heads
Probability of each
outcome with 2 heads
P(X=2) = 10 * (1/32) = (10/32) = .3125
Notice that this probability has two parts:
In general:
1. The probability of a given sequence
of x successes out of n trials with
probability of success p and
probability of failure q is equal to:
p
x
q
(n-x)
nCx
n
x
n
x n x
=
|
\
|
.
|
=
!
!( )!
2. The number of different sequences of n trials that
result in exactly x successes is equal to the number
of choices of x elements out of a total of n elements.
This number is denoted:
Binomial Probabilities (continued)
3-36
1.00
q p
)! n n ( ! n
! n
n
q p
)! 3 n ( ! 3
! n
3
q p
)! 2 n ( ! 2
! n
2
q p
)! 1 n ( ! 1
! n
1
q p
)! 0 n ( ! 0
! n
0
P(x) y Probabilit x successes,
of Number
) n n ( n
) 3 n ( 3
) 2 n ( 2
) 1 n ( 1
) 0 n ( 0
The binomial probability
distribution:
where :
p is the probability of success in a
single trial,
q = 1-p,
n is the number of trials, and
x is the number of successes.
P x
n
x
p q
n
x n x
p q
x n x x n x
( )
!
!( )!
( ) ( )
=
|
\
|
.
|
=
The Binomial Probability Distribution
3-37
Mean of a binomial distribution:
Variance of a binomial distribution:
Standard deviation of a binomial distribution:
= SD(X) = npq
2
o
o
= =
= =
E X np
V X npq
( )
( )
118 . 1 25 . 1 ) (
25 . 1 ) 5 )(. 5 )(. 5 ( ) (
5 . 2 ) 5 )(. 5 ( ) (
2
: coin fair a of tosses five in heads
of number the counts H if example, For
= = =
= = =
= = =
H SD
H V
H E
H
H
H
o
o