Chap 2

2
Probability
Concepts and
Applications
To accompany
Quantitative Analysis for Management, Twelfth Edition,
by Render, Stair, Hanna and Hale
Power Point slides created by Jeff Heyl Copyright ©2015 Pearson Education, Inc.
LEARNING OBJECTIVES
After completing this chapter, students will be able to:
1. Understand the basic foundations of probability
analysis.
2. Describe statistically dependent and independent
events.
3. Use Bayes’ theorem to establish posterior probabilities.
4. Describe and provide examples of both discrete and
continuous random variables.
5. Explain the difference between discrete and continuous
probability distributions.
6. Calculate expected values and variances and use the
normal table.
Copyright ©2015 Pearson Education, Inc. 2–2
CHAPTER OUTLINE
2.1 Introduction
2.2 Fundamental Concepts
2.3 Revising Probabilities with Bayes’ Theorem
2.4 Further Probability Revisions
2.5 Random Variables
2.6 Probability Distributions
2.7 The Binomial Distribution
2.8 The Normal Distribution
2.9 The F Distribution
2.10 The Exponential Distribution
2.11 The Poisson Distribution
Introduction
• Life is uncertain; we are not sure what the
future will bring
• Probability is a numerical statement about
the likelihood that an event will occur

Chapters in This Book
That Use Probability
TABLE 2.1
CHAPTER TITLE
3 Decision Analysis
4 Regression Models
5 Forecasting
6 Inventory Control Models
11 Project Management
12 Waiting Lines and Queuing Theory Models
13 Simulation Modeling
14 Markov Analysis
15 Statistical Quality Control
Module 3 Decision Theory and the Normal Distribution
Module 4 Game Theory
Types of Probability
• Objective Approach
– Relative frequency approach
Number of occurrences of the event
P (event) = Total number of trials or outcomes
– Classical or logical method
1 Number of ways of getting a head

P (head) = Number of possible outcomes (head or tail)
2
13 Number of chances of drawing a spade

P (spade) = Number of possible outcomes
52
Diversey Paint Example
• Historical demand for white latex paint at = 0, 1, 2, 3,
or 4 gallons per day
• Observed frequencies over the past 200 days
TABLE 2.2
QUANTITY
DEMANDED NUMBER OF DAYS PROBABILITY
(GALLONS)
0 40 0.20 (=
40/200)
1 80 0.40 (=
80/200)
2 50 0.25 (=
50/200)
3 20 0.10 (=
20/200)
4 10 0.05 (=
Diversey Paint Example
• Historical demand for white latex paint at = 0, 1, 2, 3,
or 4 gallons
Individual per day are all
probabilities
•between 0 and
Observed 1
frequencies over the past 200 days
0 ≤ P (event) ≤ 1 TABLE 2.2
QUANTITY
Total of all event probabilities
DEMANDED NUMBER OF DAYS PROBABILITY
equals 1
(GALLONS)
0∑ P (event) = 1.0040 0.20 (=
40/200)
1 80 0.40 (=
80/200)
2 50 0.25 (=
50/200)
3 20 0.10 (=
20/200)
4 10 0.05 (=
Types of Probability
• Subjective Approach
– Based on the experience and judgment of the
person making the estimate
• Opinion polls
• Judgment of experts
• Delphi method

Mutually Exclusive and
Collectively Exhaustive Events
• Events are said to be mutually exclusive if
only one of the events can occur on any one
trial
• Tossing a coin will result

in either a head or a tail
• Rolling a die will result in

only one of six possible
outcomes
Copyright ©2015 Pearson Education, Inc. 2 – 10

Mutually Exclusive and
Collectively Exhaustive Events
• Events are said to be collectively exhaustive
if the list of outcomes includes every possible
outcome
• Both heads and tails OUTCOME
PROBABILITY
OF ROLL
as possible outcomes 1
1 /6
of coin flips 2 1
/6
• All six possible 3 1
/6
outcomes of the roll 4 1
/6
of a die 5 1
/6
1
6 /6
Total 1
Venn Diagrams
FIGURE 2.1 FIGURE 2.2
A B A B
Events that are mutually Events that are not

exclusive mutually exclusive

Drawing a Card
• Draw one card from a deck of 52 playing
cards
A = event that a 7 is drawn
B = event that a heart is drawn
P (a 7 is drawn) = P(A)= 4/52 = 1/13
P (a heart is drawn) = P(B) = 13/52 = 1/4
– These two events are not mutually exclusive since a

7 of hearts can be drawn
– These two events are not collectively exhaustive
since there are other cards in the deck besides 7s
and hearts
Differences
MUTUALLY COLLECTIVELY
DRAWS
EXCLUSIVE EXHAUSTIVE
1. Draws a spade and a club Yes No
2. Draw a face card and a Yes Yes
number card
3. Draw an ace and a 3 Yes No
4. Draw a club and a non-club Yes Yes
5. Draw a 5 and a diamond No No
6. Draw a red card and a No No
diamond

Unions and Intersections
of Events
• Intersection – the set of all outcomes that are
common to both events
Intersection of event A and event B = A and B
=A∩B
= AB
– Probability notation
P(Intersection of event A and event B) = P(A and B)

= P(A ∩ B)
= P(AB)
– Sometimes called joint probability
of Events
• Union – the set of all outcomes that are
contained in either of two events
Union of event A and event B = A or B
– Probability notation
P(Union of event A and event B) = P(A or B)

= P(A ∪ B)

of Events
• In the previous example
– Intersection of event A and event B
(A and B) = the 7 of hearts is drawn

P(A and B) = P(7 of hearts is drawn) = 1/52
– Union of event A and event B
(A or B) = either a 7 or a heart is drawn

P(A or B) = P(any 7 or any heart is drawn) = 16/52

Probability Rules
• General rule for union of two events,
additive rule
P(A or B) = P(A) + P(B) – P(A and B)
– Union of two events, a 7 or a heart
P(A or B) = P(A) + P(B) – P(A and B)

= 4/52 + 13/52 – 1/52
= 16/52

Probability Rules
• Conditional probability – probability that an
event occurs given another event has already
happened
P(AB)
P(A | B) =
P(B)
P(AB) = P(A | B) P(B)
– Probability of a 7 given a heart has been drawn

1
P(AB) /52 1
P(A | B) = = 13 = /13
P(B) /52

Probability Rules
Which sets are independent?
• Independent one event has no effect on the
other
1. event
(a) Your education Dependent
events Independent
(b) Your income level
events
2. (a) Draw a jack of hearts from a full 52-card deck
(b) Draw a jack of clubs from a full 52-card deck
3. (a) Chicago Cubs win the National League pennant
(b) Chicago Cubs win the World Series
Dependent
4. (a) Snow in Santiago, Chile events
(b) Rain in Tel Aviv, Israel
Independent
events

Probability Rules
• Independent one event has no effect on the
other event
P(A | B) = P(A)
P(A and B) = P(A)P(B)
– For a fair coin tossed twice
A = event that a head is the result of the first toss
B = event that a head is the result of the second toss
P(A) = 0.5 and P(B) = 0.5
P(AB) = P(A)P(B) = 0.5(0.5) = 0.25

Independent Events
• A bucket contains 3 black balls and 7 green
balls
– Draw a ball from the bucket, replace it, and draw a
second ball
1. The probability of a black ball drawn on first draw is:

P(B) = 0.30
2. The probability of two green balls drawn is:
P(GG) = P(G) x P(G) = 0.7 x 0.7 = 0.49

Independent Events
• A bucket contains 3 black balls and 7 green
balls
– Draw a ball from the bucket, replace it, and draw a
second ball
3. The probability of a black ball drawn on the second

draw if the first draw is green is:
P(B | G) = P(B) = 0.30
4. The probability of a green ball drawn on the
second draw if the first draw is green is:
P(G | G) = P(G) = 0.70

Dependent Events
• An urn contains the following 10 balls:
– 4 are white (W) and lettered (L)
– 2 are white (W) and numbered (N)
– 3 are yellow (Y) and lettered (L)
– 1 is yellow (Y) and numbered (N)
P(WL) = 4/10 = 0.4 P(YL) = 3/10 = 0.3

P(WN) = 2/10 = 0.2 P(YN) = 1/10 = 0.1
P(W) = 6/10 = 0.6 P(L) = 7/10 = 0.7
P(Y) = 4/10 = 0.4 P(N) = 3/10 = 0.3

Dependent Events
4 balls
White (W) 4
and Probability (WL) =
Lettered (L) 10
The urn 2 balls White

contains (W) and 2
10 balls Probability (WN) =
Numbered (N) 10
3 balls
Yellow (Y) 3
and Probability (YL) =
10
Lettered (L)
1 ball Yellow (Y) 1
and Numbered (N) Probability (YN) =
10
Dependent Events
• The conditional probability that the ball drawn
is lettered, given that it is yellow
P(YL) 0.3
P(L | Y) = P(Y) = 0.4 = 0.75
– We can verify P(YL) using the joint

probability formula
P(YL) = P(L | Y) x P(Y) = (0.75)(0.4) = 0.3

Revising Probabilities with
Bayes’ Theorem
• Bayes’ theorem is used to incorporate
additional information and help create
posterior probabilities from original or prior
probabilities FIGURE 2.3
Prior
Probabilities
Bayes’ Posterior
Process Probabilities
New
Information

Bayes’ Theorem
• A cup contains two dice identical
in appearance but one is fair
(unbiased) and the other is
loaded (biased)
– The probability of rolling a 3 on the
fair die is 1/6 or 0.166
– The probability of tossing the same number on the
loaded die is 0.60
– We select one by chance, toss it, and get a 3
– What is the probability that the die rolled was fair?
– What is the probability that the loaded die was
rolled?
Bayes’ Theorem
• The probability of the die being fair or loaded is
P(fair) = 0.50 P(loaded) = 0.50
And that
P(3 | fair) = 0.166 P(3 | loaded) = 0.60
• The probabilities of P(3 and fair) and P(3 and
loaded) are
P(3 and fair) = P(3 | fair) x P(fair)
= (0.166)(0.50) = 0.083
P(3 and loaded) = P(3 | loaded) x
P(loaded)
= (0.60)(0.50) = 0.300
Bayes’ Theorem
• The probability of the die being fair or loaded is:
P(fair) The sumP(loaded)
= 0.50 of these =probabilities
0.50
gives us the unconditional
And that probability of tossing a 3
P(3 | fair) = 0.166 P(3 | loaded) = 0.60
of=P(3
P(3)
• The probabilities 0.083
and+fair)
0.300and= P(3
0.383
and
loaded) are:
P(3 and fair) = P(3 | fair) x P(fair)
= (0.166)(0.50) = 0.083
P(3 and loaded) = P(3 | loaded) x
P(loaded)
= (0.60)(0.50) = 0.300
Bayes’ Theorem
• If a 3 does occur, the probability that the die
rolled was the fair one is
P(fair and 3) 0.083

P(fair | 3) = = = 0.22
P(3) 0.383
• The probability that the die was loaded is
P(loaded and 3) 0.300

P(loaded | 3) = = = 0.78
P(3) 0.383

• Bayes’
These are Theorem
the revised or
posterior probabilities for
• If the
a 3 next
doesrolloccur, thedie
of the probability that the die
• rolled wasthese
We use the fair
to one is our
revise
prior probability
P(fair and 3) 0.083
estimates
P(fair | 3) = = = 0.22
P(3) 0.383
• The probability that the die was loaded is
P(loaded and 3) 0.300

P(loaded | 3) = = = 0.78
P(3) 0.383

Bayes’ Theorem
TABLE 2.3 – Event B has occurred
STATE OF P (B | STATE PRIOR JOINT POSTERIOR

NATURE OF NATURE) PROBABILITY PROBABILITY PROBABILITY
A P(B | A) x P(A) = P(B and A) P(B and A)/P(B) = P(A | B)

A’ P(B | A’) x P(A’) = P(B and A’) P(B and A’)/P(B) = P(A’ | B)
P(B)
TABLE 2.4 – A 3 is rolled
STATE OF P (B | STATE PRIOR JOINT POSTERIOR

NATURE OF NATURE) PROBABILITY PROBABILITY PROBABILITY
Fair die 0.166 x 0.5 = 0.083 0.083 / 0.383 = 0.22

Loaded die 0.600 x 0.5 = 0.300 0.300 / 0.383 = 0.78
P(3) = 0.383

General Form of Bayes’ Theorem
• We can compute revised probabilities more
directly by using
where
A’ = the complement of the event A;
for example, if A is the event “fair die”,
then A’ is “loaded die”

General Form of Bayes’ Theorem
P(AB)
• Conditional probability – P(A | B) =
P(B)
– From the previous example
Replace A with “fair die”, A’ with “loaded die”,
B with “3 rolled”
P(fair die | 3 rolled)

Further Probability Revisions
• Additional information from a second
experiment
– If you can afford it, perform experiments several
times
– We roll the die again and again get a 3

experiment
times

experiment
times

• After the first roll of the die
probability the die is fair = 0.22
probability the die is loaded = 0.78
• After the second roll of the die

probability the die is fair = 0.067
probability the die is loaded = 0.933

Random Variables
• A random variable assigns a real number to
every possible outcome or event in an
experiment
X = number of refrigerators sold during the day
• Discrete random variables can assume only
a finite or limited set of values
• Continuous random variables can assume
any one of an infinite set of values

Random Variables
TABLE 2.5 – Random Variable that are Numbers
RANGE OF
RANDOM
EXPERIMENT OUTCOME RANDOM
VARIABLES
VARIABLES
Stock 50 Number of Christmas
X 0, 1, 2,…, 50
Christmas trees trees sold
Inspect 600 items Number of acceptable
items Y 0, 1, 2,…, 600
Send out 5,000 Number of people

sales letters responding to the letters Z 0, 1, 2,…, 5,000
Build an Percent of building

apartment completed after 4 R 0 ≤ R ≤ 100
building months
Test the lifetime Length of time the bulb
of a lightbulb lasts up to 80,000 S 0 ≤ S ≤ 80,000
(minutes) minutes

Random Variables
TABLE 2.6 – Random Variables not Numbers
RANGE OF RANDOM RANDOM

EXPERIMENT OUTCOME VARIABLES VARIABLES
Students Strongly agree (SA) 1, 2, 3, 4, 5
respond to a Agree (A)
questionnaire Neutral (N)
Disagree (D)
Strongly disagree (SD)
One machine is Defective 0, 1

inspected Not defective
Consumers Good 1, 2, 3
respond to how Average
they like a Poor
product

Probability Distributions
• For discrete random variables, probability
value assigned to each event
– Algebra class of 100 students
– Quiz with five problems with 1 point for each
correct answer
– Lowest score = 1, highest score = 5
• Examples follows the three rules
1. Events are mutually exclusive and collectively
exhaustive
2. Individual probability values between 0 and 1
3. Total probability sums to 1

TABLE 2.7 – Quiz Scores
RANDOM VARIABLE PROBABILITY

(X) – SCORE NUMBER P (X)
5 10 0.1 = 10/100
4 20 0.2 = 20/100
3 30 0.3 = 30/100
2 30 0.3 = 30/100
1 10 0.1 = 10/100
Total 100 1.0 = 100/100
• Developed using relative frequency approach

0.4 –
FIGURE 2.4 – Class Distribution
0.3 –
0.2 –
P (X)
0.1 –
0–
| | | | | |
1 2 3 4 5
X
0.4 –
FIGURE 2.4 – Class Distribution
0.3 –
• Central tendency of the
distribution is the mean
or expected value
0.2 – • Amount of variability is
the variance
P (X)
0.1 –
0–
| | | | | |
1 2 3 4 5
X
Expected Value of a Discrete
Probability Distribution
• Expected value is a measure of the central
tendency of the distribution
where
Xi = random variable’s possible values
P(Xi) = probability of each of the random variable’s
possible values
= summation sign indicating we are adding all n
possible values
E(X) = expected value or mean of the random variable
Expected Value of a Discrete
• For the quiz scores

Variance of a Discrete
where
Xi = random variable’s possible values

E(Xi) = expected value of the random variable
[Xi – E(X)] = difference between each value
of the random variable and the expected value
E(X) = probability of each possible value of the
random variable

• For quiz scores
Variance = (5 – 2.9)2(0.1) + (4 – 2.9)2(0.2) + (3

– 2.9)2(0.3)
+ (2 – 2.9)2(0.3) + (1 – 2.9)2(0.1)
= (2.1)2(0.1) + (1.1)2(0.2) + (0.1)2(0.3)
+ (–0.9)2(0.3) + (–1.9)2(0.1)
= 0.441 + 0.242 + 0.003 + 0.243 + 0.361
= 1.29
• Standard deviation is the square root of the
variance
where

• Standard deviation is the square root of the
variance
where For this example

Using Excel
PROGRAM 2.1A – Excel Output

Using Excel
PROGRAM 2.1B – Excel Formulas

Probability Distribution of a
Continuous Random Variable
• The fundamental rules for continuous random
variables must be modified
– The sum of the probability values must still equal 1
– The probability of each individual value of the
random variable occurring must equal 0 or the sum
would be infinitely large
• The probability distribution is defined by a
continuous mathematical function called the
probability density function or just the
probability function represented by f (X)

Probability Distribution of a
Continuous Random Variable
FIGURE 2.5 – Sample Density Function
Probability
| | | | | | |
5.06 5.10 5.14 5.18 5.22 5.26 5.30
Weight (grams)

The Binomial Distribution
• Many business experiments can be
characterized by the Bernoulli process
• The Bernoulli process is described by the
binomial probability distribution
1. Each trial has only two possible outcomes
2. The probability of each outcome stays the same
from one trial to the next
3. The trials are statistically independent
4. The number of trials is a positive integer

• The binomial distribution is used to find the
probability of a specific number of successes
in n trials
We need to know
n = number of trials
p = the probability of success on any single
trial
We let
r = number of successes
q = 1 – p = the probability of a failure

• The binomial formula is
Probability of r success in n trials
The symbol ! means factorial, and n! = n(n – 1)(n – 2)…(1)

4! = (4)(3)(2)(1) = 24
Also, 1! = 1 and 0! = 0 by definition

Solving Problems with the
Binomial Formula
• Find the probability of getting 4 heads in 5
tosses of a coin
n = 5, r = 4, p = 0.5, and q = 1 – 0.5 = 0.5
P(4 success
in 5 trials)

Binomial Formula
TABLE 2.8 – Binomial Distribution for n = 5, p = 0.50
NUMBER OF 5!
PROBABILITY = (0.5)r(0.5)5 – r
HEADS (r) r!(5 – r)!
0 0.03125 = (0.5)0(0.5)5!5 – 0
0!(5 –
1 5–1
0)!
1 0.15625 = (0.5) (0.5)5!
1!(5 – 1)!
2 0.31250 = (0.5)2(0.5)5!5 – 2
2!(5 – 2)!
3 0.31250 = (0.5)3(0.5)5!5 – 3
3!(5 – 3)!
4 0.15625 = (0.5)4(0.5)5!5 – 4
5
4!(5 –5–5
4)!
5 0.03125 = (0.5) (0.5)5!
5!(5 – 5)!

Binomial Formula
0.42.6
FIGURE – – Binomial Distribution for n = 5, p = 0.50
0.3 –
Probability P (r)
0.2 –
0.1 –
0–
| | | | | | |
1 2 3 4 5 6
Values of r (number of successes)
Solving Problems with
Binomial Tables
• MSA Electronics is experimenting with the
manufacture of a new transistor
– Every hour a random sample of 5 transistors is
taken
– The probability of one transistor being defective is
0.15
– What is the probability of finding 3, 4, or 5
defective?
n = 5, p = 0.15, and r = 3, 4, or 5

Binomial Tables
TABLE 2.9 (partial) – Table for Binomial Distribution
P
n r 0.05 0.10 0.15
5 0 0.7738 0.5905 0.4437
1 0.2036 0.3281 0.3915
2 0.0214 0.0729 0.1382
3 0.0011 0.0081 0.0244
4 0.0000 0.0005 0.0022
5 0.0000 0.0000 0.0001
We find the three probabilities in the table for

n = 5, p = 0.15, and r = 3, 4, and 5 and add
them together

Binomial Tables
TABLE 2.9 (partial) – Table for Binomial Distribution
P
0.05
n
P(3 orr more defects) = P(3)0.10
+ P(4) + P(5) 0.15
5 0 0.7738 0.5905 0.4437
1 0.2036 = 0.0244
0.3281+ 0.0022 + 0.0001
0.3915
2 0.0214 = 0.0729
0.0267 0.1382
3 0.0011 0.0081 0.0244
4 0.0000 0.0005 0.0022
5 0.0000 0.0000 0.0001
We find the three probabilities in the table for

n = 5, p = 0.15, and r = 3, 4, and 5 and add
them together

Binomial Tables
• Expected value is
Expected value (mean) = np
Variance = np(1 – p)
• For the MSA example
Expected value = np 5(0.15) = 0.75

Variance = np(1 – p) =
5(0.15)(0.85) = 0.6375

Using Excel

Using Excel
PROGRAM 2.2B – Excel Functions

The Normal Distribution
• One of the most popular and useful
continuous probability distributions
– The probability density function
– Completely specified by the mean, μ, and the

standard deviation, σ

FIGURE 2.7 – Normal Distribution with Different μs
| | |
40 μ = 50 60
Smaller μ, same σ
| | |
μ = 40 50 60
Larger μ, same σ
| | |
40 50 μ = 60

FIGURE 2.8 – Normal
Distribution with Different σ s
Same μ, smaller σ
Same μ, larger σ

• Symmetrical with the midpoint representing
the mean
• Shifting the mean does not change the shape
• Values on the X axis measured in the number
of standard deviations away from the mean
• As standard deviation becomes larger, curve
flattens
• As standard deviation becomes smaller, curve
becomes steeper

Using the
Standard Normal Table
Step 1
• Convert the normal distribution into a standard
normal distribution
– Mean of 0 and a standard deviation of 1
– The new standard random variable is Z
where
X = value of the random variable we want to measure
μ = mean of the distribution
σ = standard deviation of the distribution
Z = number of standard deviations from X to the mean, μ
Using the
• For μ = 100, σ = 15, find the probability that X
is less than 130
μ = 100
σ = 15
P(X < 130)
| | | | | | |
X = IQ
55 70 85 100 115 130 145
FIGURE 2.9 μ
– Normal Distribution | | | | | | |
–3 –2 –1 0 1 2 3

Using the
Step 2
• Look up the probability from a table of normal
curve areas
• Use Appendix A or Table 2.10
• Column on the left is Z value
• Row at the top has second decimal places for
Z values

Using the
TABLE 2.10 – Standardized Normal Distribution (partial)
AREA UNDER THE NORMAL CURVE

Z 0.00 0.01 0.02 0.03
1.8 0.96407 0.96485 0.96562 0.96638
1.9 0.97128 0.97193 0.97257 0.97320
2.0 0.97725 0.97784 0.97831 0.97882
2.1 0.98214 0.98257 0.98300 0.98341
2.2 0.98610 0.98645 0.98679 0.98713
For Z = 2.00
P(X < 130) = P(Z < 2.00) = 0.97725
P(X > 130) = 1 – P(X ≤ 130) = 1 – P(Z ≤ 2)
= 1 – 0.97725 = 0.02275
Haynes Construction Company
• Builds three- and four-unit apartment buildings
– Total construction time follows a normal
distribution
– For triplexes, μ = 100 days FIGURE 2.10
and μ = 20 days
– Contract calls for
completion in 125 days
– Late completion will
incur a severe
penalty fee
μ = 100 days
– Probability of σ = 20 days
completing X = 125 days
in 125 days?
• Compute Z
FIGURE 2.10
– From Appendix A,
for Z = 1.25
area = 0.89435 μ = 100 days
σ = 20 days
X = 125 days
Z = 1.25
• Compute Z
The probability is about 0.89
that Haynes will not violate the contract
FIGURE 2.10
– From Appendix A,
for Z = 1.25
area = 0.89435 μ = 100 days
σ = 20 days
X = 125 days
Z = 1.25
• If finished in 75 days or less, bonus = $5,000
– Probability of bonus?
FIGURE 2.11
0.89435
– Because the distribution
is symmetrical, μ = 100 days
equivalent to Z = 1.25 X = 75 days
so area = 0.89435
Z = –1.25
• If finished
P(X >in125)
75 days or–less,
= 1.0 P(X bonus
≤ 125) = $5,000
– Probability of bonus?
= 1.0 – 0.89435 = 0.10565
The probability of completing the FIGURE 2.11
contract in 75 days or less is about 11%
0.89435
– Because the distribution
is symmetrical, μ = 100 days
equivalent to Z = 1.25 X = 75 days
so area = 0.89435
Z = –1.25
• Probability of completing between 110 and
125 days?
P(110 < X < 125) = P(X ≤ 125) – P(X < 110)
– P(X ≤ 125) = 0.89435

σ = 20 days
100
μ=
For Z = 0.5 days
area = 0.69146 110 125
FIGURE 2.12 days days
• Probability
P(110 of completing
≤X between–110
< 125) = 0.89435 and
0.69146
125 days?
= 0.20289
P(110
The< probability
X < 125) = of
P(X ≤ 125) – P(X
completing < 110)
between
110 and 125 days is about 20%
– P(X ≤ 125) = 0.89435
σ = 20 days
100
μ=
For Z = 0.5 days
area = 0.69146 110 125
FIGURE 2.12 days days
Standard Normal Distribution
TABLE 2.10 - partial
AREA UNDER THE NORMAL CURVE

Z 0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09
0.5 .69146 .69497 .69847 .70194 .70540 .70884 .71226 .71566 .71904 .72240
0.6 .72575 .72907 .73237 .73536 .73891 .74215 .74537 .74857 .75175 .75490
0.7 .75804 .76115 .76424 .76730 .77035 .77337 .77637 .77935 .78230 .78524
0.8 .78814 .79103 .79389 .79673 .79955 .80234 .80511 .80785 .81057 .81327
0.9 .81594 .81859 .82121 .82381 .82639 .82894 .83147 .83398 .83646 .83891
1.0 .84134 .84375 .84614 .84849 .85083 .85314 .85543 .85769 .85993 .86214
1.1 .86433 .86650 .86864 .87076 .87286 .87493 .87698 .87900 .88100 .88298
1.2 .88493 .88686 .88877 .89065 .89251 .89435 .89617 .89796 .89973 .90147
1.3 .90320 .90490 .90658 .90824 .90988 .91149 .91309 .91466 .91621 .91774
1.4 .91924 .92073 .92220 .92364 .92507 .92647 .92785 .92922 .93056 .93189
1.5 .93319 .93448 .93574 .93699 .93822 .93943 .94062 .94179 .94295 .94408

Using Excel

The Empirical Rule
• For a normally distributed random variable
with mean μ and standard deviation σ
– Approximately 68% of values will be within ±1σ of
the mean
– Approximately 95% of values will be within ±2σ of
the mean
– Almost all (99.7%) of values will be within ±3σ of
the mean

The Empirical Rule
16% 68% 16%
–1σ +1σ
a µ b
2.5% 95% 2.5%
–2σ +2σ
a µ b
0.15% 99.7% 0.15%
FIGURE 2.13 – Approximate Probabilities

–3σ +3σ
a µ b

The F Distribution
• It is a continuous probability distribution
– The F statistic is the ratio of two sample variances
– F distributions have two sets of degrees of
freedom
– Degrees of freedom are based on sample size and
used to calculate the numerator and denominator
df1 = degrees of freedom for the numerator
df2 = degrees of freedom for the denominator
– The probabilities of large values of F are very small

The F Distribution
FIGURE 2.14
Fα

The F Distribution
• Consider the example
df1 = 5
df2 = 6
α = 0.05
From Appendix D, we get

Fα, df1, df2 = F0.05, 5, 6 = 4.39
This means
P(F > 4.39) = 0.05
The probability is only 0.05 F will exceed 4.39

The F Distribution
FIGURE 2.15 – F Value for 0.05 Probability with 5 and 6 Degrees of Freedom
0.05
F = 4.39

Using Excel

The Exponential Distribution
• Also called the negative exponential
distribution
– A continuous distribution often used in queuing
models
– Probability function given by
where
X = random variable (service times)
μ = average number of units the service facility can handle in
a specific period of time
e = 2.718 (the base of natural logarithms)

The Exponential Distribution
Figure 2.16
f(X)

Arnold’s Muffler Shop
• Installs new mufflers on automobiles and
small trucks
– Can install 3 new mufflers per hour
– Service time is exponentially distributed
• What is the probability that the time to install a
new muffler would be ½ hour or less?
X= Exponentially distributed service time
μ = average number of units the served per time period = 3 per
hour
t = ½ hour = 0.5 hour
P(X ≤ 0.5) = 1 – e–3(0.5) = 1 – e –1.5 = 1 = 0.2231 = 0.7769

FIGURE 2.17 – Probability of Installation in 0.5 Hour
2.5 –
2–
1.5 –
P(service time ≤ 0.5) = 0.7769
1–
0.5 – 0.7769
0–
| | | | | |
0 0.5 1 1.2 2 2.5

• Similarly
• And
P(X > 0.5) = 1 – P(X ≤ 0.5) = 1 – 0.7769 = 0.2231

Using Excel

The Poisson Distribution
• A discrete probability distribution
– Often used in queuing models to describe arrival
rates over time
– Probability function given by
wher
e
P(X) = probability of exactly X arrivals or occurrences
λ = average number of arrivals per unit of time
(the mean arrival rate)
e = 2.718, the base of natural logarithms
X= number of occurrences (0, 1, 2, 3, …)
• From Appendix C for λ = 2

Figure 2.18 – Sample Poisson Distributions with λ = 2 and λ = 4
0.30 – 0.25 –
0.25 – 0.20 –
0.20 – 0.15 –
Probability
Probability
0.15 –
0.10 –
0.10 –
0.05 –
0.05 –
0.00 – 0.00 –
| | | | | | | | | | | | | |
| | | | | |
0 1 2 X3 4 5 6 0 1 2 X3 4 5 6
7 8 9 7 8 9
λ = 2 Distribution λ = 4 Distribution

Using Excel

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2

Copyright ©2015 Pearson Education, Inc. 2–4

– Classical or logical method

1 Number of ways of getting a head

13 Number of chances of drawing a spade

Copyright ©2015 Pearson Education, Inc. 2–9

• Tossing a coin will result

• Rolling a die will result in

Copyright ©2015 Pearson Education, Inc. 2 – 10

Events that are mutually Events that are not

Copyright ©2015 Pearson Education, Inc. 2 – 12

– These two events are not mutually exclusive since a

Copyright ©2015 Pearson Education, Inc. 2 – 14

P(Intersection of event A and event B) = P(A and B)

Union of event A and event B = A or B

P(Union of event A and event B) = P(A or B)

Copyright ©2015 Pearson Education, Inc. 2 – 16

(A and B) = the 7 of hearts is drawn

– Union of event A and event B

(A or B) = either a 7 or a heart is drawn

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P(A or B) = P(A) + P(B) – P(A and B)

– Union of two events, a 7 or a heart

P(A or B) = P(A) + P(B) – P(A and B)

Copyright ©2015 Pearson Education, Inc. 2 – 18

– Probability of a 7 given a heart has been drawn

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P(A) = 0.5 and P(B) = 0.5

P(AB) = P(A)P(B) = 0.5(0.5) = 0.25

1. The probability of a black ball drawn on first draw is:

Copyright ©2015 Pearson Education, Inc. 2 – 22

3. The probability of a black ball drawn on the second

Copyright ©2015 Pearson Education, Inc. 2 – 23

P(WL) = 4/10 = 0.4 P(YL) = 3/10 = 0.3

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The urn 2 balls White

– We can verify P(YL) using the joint

P(YL) = P(L | Y) x P(Y) = (0.75)(0.4) = 0.3

Copyright ©2015 Pearson Education, Inc. 2 – 26

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P(fair and 3) 0.083

• The probability that the die was loaded is

P(loaded and 3) 0.300

Copyright ©2015 Pearson Education, Inc. 2 – 31

• The probability that the die was loaded is

P(loaded and 3) 0.300

Copyright ©2015 Pearson Education, Inc. 2 – 32

STATE OF P (B | STATE PRIOR JOINT POSTERIOR

A P(B | A) x P(A) = P(B and A) P(B and A)/P(B) = P(A | B)

TABLE 2.4 – A 3 is rolled

STATE OF P (B | STATE PRIOR JOINT POSTERIOR

Fair die 0.166 x 0.5 = 0.083 0.083 / 0.383 = 0.22

Copyright ©2015 Pearson Education, Inc. 2 – 33

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Copyright ©2015 Pearson Education, Inc. 2 – 37

Copyright ©2015 Pearson Education, Inc. 2 – 38

• After the second roll of the die

Copyright ©2015 Pearson Education, Inc. 2 – 39

Copyright ©2015 Pearson Education, Inc. 2 – 40

Send out 5,000 Number of people

Build an Percent of building