IS 310

Business
Statistics
CSU
Long Beach

IS 310 – Business Statistics Slide

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 Chapter 5
Discrete Probability Distributions
 Random Variables
 Discrete Probability Distributions
 Expected Value and Variance
 Binomial Probability Distribution .40

 Poisson Probability Distribution .30

.20

.10

0 1 2 3 4

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 Random Variables

A random variable is a variable that can take on values

at random. Consider the following experiments:
1. Asking 10 students if they watched a TV show last
night (the number of students who watched the show
is a random variable)
2. Inspecting 20 items of a product to check quality of
the items (the number of defective items is a random
variable)
3. Tossing a coin five times (the number of heads
occurring is a random variable)
4. Taking an exam with 100 questions (the number of
correct answers is a random variable)

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 Random Variables (Contd)

A random variable can be either

Discrete or Continuous

Discrete random variables take on certain specific values.

Examples are the following: number of defective items in an
inspection (0, 1, 2, 3,….); number of correct answers in an exam
(0, 1, 2, 3, …); number of heads obtained in tossing a coin five
times (0, 1, 2, 3, 4, 5)
o---------o---------o---------o---------o

The only values the discrete random variable can take on are
indicated by circles

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 Random Variables Contd

Continuous Random Variables

A continuous random variable can take on any values on a scale.

Examples are distance traveled, time taken to go from one place
to another, heights of individuals, weights of individuals,
temperature of cities, etc.

o------------------------------------------o

A continuous random variable can take on any value on the above

scale

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 Random Variables

Question Random Variable x Type

Family x = Number of dependents Discrete
size reported on tax return

Distance from x = Distance in miles from Continuous

home to store home to the store site
Own dog x = 1 if own no pet; Discrete
or cat = 2 if own dog(s) only;
= 3 if own cat(s) only;
= 4 if own dog(s) and cat(s)

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 Discrete Probability Distributions

The
The probability
probability distribution
distribution for
for aa random
random variable
variable
describes
describes how
how probabilities
probabilities are
are distributed
distributed over
over
the
the values
values of
of the
the random
random variable.
variable.

We can describe a discrete probability distribution

with a table, graph, or equation.

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 Discrete Probability Distribution

 Let’s consider the illustration in Section 5.2 (10-Page

190; 11-Page 197)
 DiCarlo Motors in Saratoga, New York sold the
following number of cars over the past 300 days:
 0 cars on 54 days; 1 car on 117 days; 2 cars on 72 days;
3 cars on 42 days; 4 cars on 12 days; and 5 cars on 3
days.

 The probability distribution is shown in Table 5.3 (10-

Page 191; 11_Page 198).

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 Discrete Probability Distribution

 Table 5.3

 Number of cars sold Probability

 0 54/300 = 0.18
 1 117/300 = 0.39
2 72/300 = 0.24
3 42/300 = 0.14
4 12/300 = 0.04
5 3/300 = 0.01

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 Sample Problem

 Problem # 8 (10-Page 193; 11-Page 200)

 Number of operating rooms used over a 20-day

period.

 Number of Rooms Frequency Probability

1 3 3/20 = 0.15
2 5 5/20 = 0.25
3 8 8/20 = 0.40
4 4 4/20 = 0.20

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 Expected Value and Variance

 The expected value of a random variable is obtained by multiplying

each value of the random variable by its probability and adding the
resulting products.
 Let’s refer to the problem of car sales of DiCarlo Motors. Look at Table
5.5 (10-Page 196) or Table 5.4 (11-Page 203).

 No. of Cars Sold (x) Probability [f(x)] x. f(x)

 0 0.18 0
 1 0.39 0.39
 2 0.24 0.48
 3 0.14 0.42
 4 0.04 0.16
5 0.01 0.05
Expected Value of x = E(x) = 1.50

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 Expected Value and Variance

 What does Expected Value mean?

 Expected Value is the average value of the random
variable over a long period of time.

 Referring to DiCarlo Motors, the Expected Value of

1.5 means that DiCarlo can expect to sell, on the
average, 1.5 cars per day over a long period of time.

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 Expected Value and Variance

 The variance of a random variable is obtained by

using formula 5.5 (10-Page 196; 11-Page 203).
Calculations are shown in Table 5.6 (10-Page 197) or
Table 5.5 (11-Page 204).

 The variance is calculated as 1.25 so the standard

deviation is √ 1.25 = 1.118.


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 Binomial Probability Distribution

 Two discrete probability distributions that we will

study are:

 Binomial Probability Distribution

 Poisson Probability Distribution

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 Binomial Distribution

 Four Properties of a Binomial Experiment

1. The experiment consists of a sequence of n
identical trials.

2. Two outcomes, success and failure, are possible

on each trial.

3. The probability of a success, denoted by p, does

not change from trial to trial.
stationarity
4. The trials are independent. assumption

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 Binomial Distribution

Our interest is in the number of successes

occurring in the n trials.

We let x denote the number of successes

occurring in the n trials.

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 Binomial Distribution

 Binomial Probability Function

n!
f (x)  p x (1  p )( n  x )
x !(n  x )!

where:
f(x) = the probability of x successes in n trials
n = the number of trials
p = the probability of success on any one trial

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 Binomial Distribution

 Binomial Probability Function

n!
f (x)  p x (1  p )( n  x )
x !(n  x )!

Probability of a particular
Number of experimental sequence of trial outcomes
outcomes providing exactly with x successes in n trials
x successes in n trials

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 Example of Binomial Distribution

 Martin Clothing Store (10-Page 202; 11-Page 209))

 Given: The probability of a customer making a purchase is 0.3. Three

customers walk into the store.

 What is the probability that two of the three customers will make a
purchase?

 This is an example of binomial distribution for the following reasons:

 1. There are only two outcomes: making a purchase (success) or not
making a purchase (failure).
 2. The probability of success is 0.3 . There are three trials (three
customers) and we are trying to determine the probability of two
successes.

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 Example of Binomial Distribution

 Martin Clothing Store Problem

 Let’s look at Figure 5.3 (10-Page 203; 11-Page 210).

 Formula 5.8 (10-Page 205; 11-Page 212) can be used to

calculate the probability of two customers making a
purchase.

 n x n-x
 P(x=2) = ( )p (1 – p) = 0.189
 x

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 Sample Problem on Binomial Distribution

 Martin Clothing Store Problem

 Rather than using formula 5.8, we could use Table 5

of Appendix B (10- Pages 930-937; 11-Pages 989-997)
to obtain directly the value of any probability
without any calculations.
We need to know the values of p, x, and n to use
Table 5.

For x=2, n=3, and p=0.3, the value of P(x=2) = 0.189

from (10-Page 932; 11-Page 992).

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 Sample Problems

Problem # 29 (10-Page 209; 11-Page 216)

Given: p = 0.30x = 3 (number of workers who

take public transportation)
n = 10 (total number of workers in the sample)

a. f(3) = 0.2668 (From Table 5 in Appendix B)

b. f(3 or more) = f(3) + f(4) + f(5) + f(6) + f(7) + f(8) + f(9)
+ f(10) = 0.2668 + 0.2001 + 0.1029 + 0.0368 + 0.0090 +
0.0014 + 0.0001 + 0.0000 = 0.62

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 Poisson Distribution

A
A Poisson
Poisson distributed
distributed random
random variable
variable is
is often
often
useful
useful in
in estimating
estimating the
the number
number of of occurrences
occurrences
over
over aa specified
specified interval
interval of
of time
time or
or space
space

It
It is
is aa discrete
discrete random
random variable
variable that
that may
may assume
assume
an
an infinite
infinite sequence
sequence of
of values
values (x
(x == 0,
0, 1,
1, 2,
2, .. .. .. ).).

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 Poisson Distribution

Examples of a Poisson distributed random variable:

the
the number
number of
of knotholes
knotholes in
in 14
14 linear
linear feet
feet of
of
pine
pine board
board

the
the number
number ofof vehicles
vehicles arriving
arriving at
at aa
toll
toll booth
booth in
in one
one hour
hour

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 Poisson Distribution

 Two Properties of a Poisson Experiment

1.
1. The
The probability
probability of
of an
an occurrence
occurrence is
is the
the same
same
for
for any
any two
two intervals
intervals of
of equal
equal length.
length.

2.
2. The
The occurrence
occurrence or
or nonoccurrence
nonoccurrence in
in any
any
interval
interval is
is independent
independent of
of the
the occurrence
occurrence or
or
nonoccurrence
nonoccurrence inin any
any other
other interval.
interval.

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 Poisson Distribution

 Poisson Probability Function

 x e 
f ( x) 
x!
where:
f(x) = probability of x occurrences in an interval
 = mean number of occurrences in an interval
e = 2.71828

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 Poisson Distribution

 Rather than using formula 5.11, one could use Table 7

of Appendix B (10-Pages 939-944; 11-Pages 999-1004)
to calculate any probability. We need to know the
values of µ and x to use Table 7.

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 Sample Problem

Problem # 40 (10-Page 213; 11-Page 220)

a. Given µ = 48 per hour = 4 per five-minute

f(3) = 0.1954 (From Table 7 in Appendix B)

b. Given µ = 12 per 15-minute

f(10) = 0.1048 (From Table 7 in Appendix B)

c. 4 calls f(0) = 0.0183

d. f(0) = 0.0907 with µ = 2.4

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 End of Chapter 5

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