BUS 232

Data and Decisions |

(Business Statistics)
Instructor: Negar Ganjouhaghighi
 Week 5 – Chapter 5
Discrete Distributions
 Discrete vs continuous distributions

Random Variable: a variable that contains the outcomes of a chance

experiment
Number of Number of The outcome
Completion Height of
arrivals to ED cars in a can be: 1, 2,
time of a task students
in a day parking lot 3.5, 4.25, or 5

Counted variables
Discrete Continuous Measured variables

Random random
variable variable
Distributions

Discrete Continuous
Binomial Uniform

Poisson Normal

Hypergeometric Exponential

T distribution

Chi square distribution

F distribution
 Describing a discrete distribution

Histogram: most common graphical way

Canada Household size (2016 Census) Probability

1 person 3,969,790 0.28
2 persons 4,834,605 0.34
3 persons 2,140,640 0.15
4 persons 1,946,275 0.14
5 or more persons 1,180,770 0.08
Total 14,072,080
 Describing a discrete distribution

Mean or expected value: repeating the experiment enough times so that

the average approaches a long-run average.
 Describing a discrete distribution

Variance and standard deviation.

 Lets solve Problem 5.3

The following data are the result of a historical study of the number of
flaws found in a porcelain cup produced by a manufacturing firm. Use
these data and the associated probabilities to compute the expected
number of flaws and the standard deviation of flaws.
 Binomial Distribution

The most widely known discrete distribution

In n trials, only x successes are possible, so discrete.

In a sample of 5 parts only 0,1,2,3,4, or 5 parts can be defective (success)
 Binomial Distribution, sample size

Each trial should be independent. If the sample size is less than 5% of the
population, the independent assumption is not of great concern:
The acceptable sample size:
 Binomial Distribution, sample size

Suppose 10% of the population of the world is left-handed

Sample of 20 people selected randomly without replacement.
The probability of 10% is unaffected: 20 is much smaller than the
population.
 Binomial Distribution, example

70% of all Canadians believe cleaning up the environment is an

important issue. What is the probability of a randomly sampling 4
Canadians and having exactly 2 of them say that they believe cleaning up
is an important issue?
Binomial Distribution formula
 Lets solve Problem 5.5

Solve the following problems by using the binomial formula.

a. If n = 4 and p = 0.10, find P(x = 3).

b. If n = 7 and p = 0.80, find P(x = 4).
c. If n = 10 and p = 0.60, find P(x ≥ 7).
d. If n = 12 and p = 0.45, find P(5 ≤ x ≤ 7).
Binomial Probability Distribution Table
 Mean and SD of binomial distribution

If we repeat a trial n times and the probability of success in each trial is

p: the expected number of successes for the n trial is n.p:
If n=10 and p=0.4: .
 Graphing Binomial distribution

Graphing all the possible values of x and their associated probabilities.

Graphing Binomial distribution
 Lets solve Problem 5.8

Use the binomial probability tables in Table A.2 and sketch the graph of the following
binomial distribution. Note on the graph where the mean of the distribution falls.

a. n = 6 and p = 0.70
 Lets solve Problem 5.14

22% of certified financial planners (CFPs) earn between $100,000 and $149,999 per
year. Thirty-two percent earn $150,000 or more. Suppose a complete list of all CFPs is
available and 18 are randomly selected
a. What is the expected number of CFPs who earn between $100,000 and $149,999 per
year? What is the expected number who earn $150,000 or more per year?
b. What is the probability that at least eight CFPs earn between $100,000 and $149,999
per year?
c. What is the probability that two, three, or four CFPs earn more than $150,000 per
year?
d. What is the probability that none of the CFPs earn between $100,000 and $149,999
per year? What is the probability that none earn $150,000 or more per year? Which
probability is higher and why?
 Poisson Distribution

Focuses on the number of discrete occurrences over some interval or continuum

Also referred as :Law of improbable events.
Widely used in Queueing theory.
• It is a discrete distribution.
• It describes rare events.
• Each occurrence is independent of the other occurrences.
• It describes discrete occurrences over a continuum or interval.
• The occurrences in each interval can range from zero to infinity.
• The expected number of occurrences must hold constant throughout the
experiment.
 Poisson Distribution

If we study a Poisson distributed phenomenon over a long period of time:

A long run average can be determined.
Lambda ()
 Poisson Distribution - example

A bank has an average random arrival rate of 3.2 customers every 4

minutes. What is the probability of getting exactly 10 customers during
an 8-minute interval?
Poisson Distribution – Poisson Table
 Poisson Distribution – Mean and SD

Expected value (mean) =

Variance =
Standard deviation =

We can use Chebyshev’s theorem to find out about the spread

of a Poisson distribution:
contains at lease 75% of the values.
Example: then and 75% of the data falls between 1.4 and
11.6.
 Lets solve Problem 5.21

Suppose the average number of annual trips per family to amusement parks in Canada
is Poisson distributed, with a mean of 0.6 trips per year. What is the probability of
randomly selecting a Canadian family and finding the following?

a. The family did not make a trip to an amusement park last year.
b. The family took exactly one trip to an amusement park last year.
c. The family took two or more trips to amusement parks last year.
d. The family took three or fewer trips to amusement parks over a three-year period.
Hypergeometric Distribution

Complements Binomial Distributions

Binomial Hypergeometric
• Trials are done with • Trials are done without
replacement replacement
 Hypergeometric Distribution

• Each outcome consists of either a success or a failure.

• Sampling is done without replacement.
• The population, N, is finite and known.
• The number of successes in the population, A, is known.
 Hypergeometric Distribution

• Generally Binomial Distributions is easier to deal with.

• But, if sample size is less than 5% of the population, we can use
binomial distribution even if the trial is without replacement.

• The hypergeometric distribution should be used instead of binomial

distribution if
• Sampling is being done without replacement
• Sample size >= 5% population
 Hypergeometric Distribution - example

• 24 people apply for a job, of whom 8 are women.

• If 5 of the applicant are sampled randomly, what is the probability
that exactly 3 of them are women?
• N=24
• n= 5
• n=21% N and sampling is done without replacement:
Hypergeometric distribution.
• A=8 (women), N-A=16 (men)
• The probability of getting x=3 women when n=5:
 Lets solve problem 5.32

A company produces and ships 16 personal computers knowing that 4 of

them have defective wiring. The company that purchased the computers
will thoroughly test three of the computers. The purchasing company can
detect the defective wiring. What is the probability that the purchasing
company will find the following?

a. No defective computers
b. Exactly three defective computers
c. Two or more defective computers
d. One or fewer defective computers
 Lets solve problem 5.57

In one western city, the government has 14 repossessed houses, which are
evaluated to be worth about the same. Ten of the houses are on the north side
of town and the rest are on the west side. A local contractor submitted a bid to
purchase four of the houses. Which houses the contractor will get is subject to
a random draw.
a. What is the probability that all four houses selected for the contractor will
be on the north side of town?
b. What is the probability that all four houses selected for the contractor will
be on the west side of town?
c. What is the probability that half of the houses selected for the contractor
will be on the west side and half on the north side of town?
 Uniform Distribution

Refereed to as Rectangular Distribution

Simple continuous distribution
Same height or f(x) is obtained over a range of values.
 Uniform Distribution

Refereed to as Rectangular Distribution

Simple continuous distribution
Same height or f(x) is obtained over a range of values.
 Uniform Distribution - example

suppose a production line is set up to manufacture machine braces in lots of

five per minute during a shift. When the lots are weighed, variation among
the masses is detected, with lot masses ranging from 41 g to 47 g in a uniform
distribution. .
 Uniform Distribution - Probability

For continuous distribution, probabilities are determined by the area over an

interval of the probability density function.
 Uniform Distribution - example

Suppose a production line is set up to manufacture machine braces in lots of

five per minute during a shift. When the lots are weighed, variation among
the masses is detected, with lot masses ranging from 41 g to 47 g in a uniform
distribution. Determine the probability that a lot has a mass of between 42 g
and 45 g
 Lets solve problem 6.5

Suppose the average Canadian household spends $2,100 a year on all types of
insurance. Suppose the figures are uniformly distributed between the values
of $400 and $3,800. What are the standard deviation and the height of this
distribution? What proportion of households spends more than $3,000 a year
on insurance? More than $4,000? Between $700 and $1,500?
 Normal Distribution

The most widely knows and used of all distributions

Fits many human characteristics such as weight, height, speed, IQ, …
 Normal Distribution

• It is a continuous distribution.
• It is a symmetrical distribution about its mean.
• It is asymptotic to the horizontal axis.
• It is unimodal.
• It is a family of curves.
• The area under the curve is 1.
Normal Distribution
Normal Distribution - Standardized
 Normal Distribution - Standardized

• Z score is the number of SDs that a value, x, is above or below the

mean.
• A standard z score table is used to find probabilities for any normal
curve.
• Z distribution: a normal distribution with a mean of 0 and a SD of 1.
• Empirical Rule
Normal Distribution - Standardized
Normal Distribution – Standardized,
example
• Assuming that the GMAT scores are normally distributed, probabilities of
achieving scores over various ranges of the GMAT can be determined. In
a recent year, the mean GMAT score was 494 and the standard deviation
was about 100. What is the probability that a randomly selected score
from this administration of the GMAT is between 600 and the mean?
Normal Distribution – Standardized,
example
Assuming that the GMAT scores are normally distributed, probabilities of achieving scores
over various ranges of the GMAT can be determined. In a recent year, the mean GMAT
score was 494 and the standard deviation was about 100. What is the probability that a
randomly selected score from this administration of the GMAT is between 600 and the
mean?
Lets solve problem 6.8

Tompkins International reports that the mean clear height for a Class A
warehouse in the U.S. is about 6.7 m. Suppose clear heights are normally
distributed and that the standard deviation is 1.2 m. A Class A warehouse in the
U.S. is randomly selected.

a. What is the probability that the clear height is greater than 5.2 m?
b. What is the probability that the clear height is less than 4 m?
c. What is the probability that the clear height is between 7.6 and 9.4 m?
Lets solve problem 6.12

Suppose you are working with a data set that is normally distributed, with a
mean of 200 and a standard deviation of 47. Determine the value of x from the
following information.

a. 60% of the values are greater than x.

b. x is less than 17% of the values.
c. 22% of the values are less than x.
d. x is greater than 55% of the values.
 Exponential Distribution

• Closely related to the Poisson

distribution
• It is a continuous distribution.
• It is a family of distributions.
• It is skewed to the right.
• The x values range from zero to
infinity.
• Its apex is always at x = 0.
• The curve steadily decreases as x
gets larger.
Exponential Distribution

• Mean of exponential distribution

• SD of exponential distribution σ
Exponential Distribution
Exponential Distribution - example

arrivals at a bank are Poisson distributed with a λ of 1.2 customers every

minute. What is the average time between arrivals?

what is the probability that at least 2 minutes will elapse between one
arrival and the next arrival?
Lets solve problem 6.29

A busy restaurant determined that between 6:30 P.M. and 9 P.M. on Friday
nights, the arrivals of customers are Poisson distributed with an average arrival
rate of 2.44 per minute.

a. What is the probability that at least 10 minutes will elapse between arrivals?
b. What is the probability that at least 5 minutes will elapse between arrivals?
c. What is the probability that at least 1 minute will elapse between arrivals?
d. What is the expected amount of time between arrivals?
Lets solve problem 6.44

History has shown that registrant arrivals follow a Poisson distribution at an

average rate of 1.8 every 15 seconds. Fortunately, several facilities are
available to register convention members.
a. What is the average number of seconds between arrivals to the registration
area for this convention based on past results?
b. What is the probability that 25 seconds or more would pass between
registration arrivals?
c. What is the probability that less than 5 seconds will elapse between arrivals?
d. Suppose the registration computers went down for a 1-minute period. Would
this condition pose a problem? What is the probability that at least 1 minute
will elapse between arrivals?