27/05/2021 Discrete Probability Distributions: Equations & Examples - Video & Lesson Transcript | Study.

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Discrete Probability Distributions: Equations & Examples

Discrete probability distributions give the probability of getting a certain value for a discrete random variable.
In this lesson, you will learn how to calculate the expected value of a discrete variable and find the variance
and standard deviation.

Selling Ice Cream Example

Let's say that your good friend James has just started a new business selling ice cream from an
ice cream cart. His cart has a limited amount of space in it, so in the beginning, he decided to
start each day with 100 servings of vanilla ice cream, 100 servings of chocolate ice cream, and
100 servings of strawberry ice cream. However, after a few weeks, he notices that on lots of
days, he runs out of vanilla ice cream early and still has some strawberry and chocolate left. He
has to go home and refill his ice cream cart with vanilla a long time before he runs out of the
other flavors. He thinks he could make more money and eliminate his extra trips to resupply the
ice cream cart if he could just figure out exactly how much of each type of ice cream to stock
each day.

To solve his problem, James records the total amount of vanilla, chocolate, and strawberry ice
cream he sold each day for two weeks. Each box of ice cream contains 10 servings, so James
recorded the number of servings he sold in groups of 10 since he can't load just one serving at a
time onto his cart. The data he collected is shown in the table below:

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Discrete Probability Distributions

James first wants to estimate how much vanilla ice cream he should put in his cart each
morning, so he looks a little more closely at the data for vanilla ice cream. He records how many
times each amount occurred during the last two weeks. Then, he calculates the probability that
he will use a certain amount on any given day. For example, the probability that he will need 120
servings is 1/14, or 0.071.

The number of ice cream servings that James should put in his cart is an example of a discrete
random variable because there are only certain values that are possible (120, 130, 140, etc.), so
this represents a discrete probability distribution, since this gives the probability of getting
any particular value of the discrete variable. If you add up all the probabilities, you should get
exactly one. This is true for all discrete probability distributions.

0.071 + 0.071 + 0.143 + 0.143+ 0.214 + 0.071 + 0.143 + 0.143= 1.000

Expected Value Function

How can this information help James determine how many cases of vanilla ice cream to load in
his cart each day? He can use the expected value function, which you can see below, in order
to calculate how many ice cream cases he can expect to need on an average day. To use the
expected value function, multiply each amount (xi) by the probability that he will use that
amount of ice cream in a given day (pi). Then, add all of these value together.

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Using James's data, the expected value function gives the following:

E(x) = (120)(0.071) + (130)(0.071) + (140)(0.143) + (150)(0.214) + (160)(0.071) + (170)(0.143) + (180)

(0.143) + (190)(0.143)

This simplifies down to the following:

E(x) = 8.57 + 9.29 + 20.00 + 34.29 + 21.43 + 12.14 + 25.71 + 27.14 = 158.57

The value given by the expected value function also represents the mean of the data set. This
means that, on average, James can expect to need about 159 servings of vanilla ice cream in his
cart each day. Since each box contains 10 servings, he can expect to use 16 boxes on an average
day.

Variance & Standard Deviation

Now James knows exactly how much ice cream he will need on an average day, but that means
that on half of the days, he's still going to run out of ice cream. He's not okay with that! One
thing that might help James is to calculate the standard deviation of his data. If data is
approximately normally distributed, then about 70% will fall within one standard deviation.

To find the standard deviation, first find the variance. Variance is one way to measure the
spread in a data set, and it's defined as the sum of the squared deviations from the mean. For a
discrete probability distribution like this, variance can be calculated using the equation below:

This is where pi is the probability of getting each value and E(x) is the expected value (which is
158.57 in this case).

Calculating the variance of James's data gives the following information:

Var(X) = (0.071)(120)2 + (0.071)(130)2 + (0.143)(140)2 + (0.143)(150)2 + (0.214)(160)2 + (0.071)

(170)2 + (0.143)(180)2 + (0.143)(190)2 - 158.572

So therefore, Var(X) = 440.8.

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The standard deviation is equal to the square root of the variance, so for this data the
standard deviation is:

For James, this means that nearly 70% of the time, he will require between 138 and 180 servings
of vanilla ice cream each day. He uses this information to decide that he will load his cart each
morning with 18 boxes of vanilla ice cream, which will provide him with 180 servings. He knows
that he will now be able to provide all the vanilla ice cream that his customers want on a
majority of days.

Just like James, many people and businesses use discrete probability distributions to make
important decisions every day!

Lesson Summary
Let's take a couple of moments to review what we've learned about discrete probability
distributions. A discrete variable is a variable, like the number of ice cream servings sold by
James, for which only certain values are possible. A discrete probability distribution gives the
probability of getting any particular value of the discrete variable. The expected value function
for a discrete variable is a way to calculate the mean of the data set. You can see the formula
below:

The variance measures how much spread there is in the data. It's equal to the sum of the
squared deviations from the mean. For a discrete variable, the variance can be calculated using
this next formula that we looked at earlier in the lesson. As you can see:

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Finally, the standard deviation is the square root of the variance. For normally distributed data,
about 70% will fall within one standard deviation of the mean.

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