CH 06

A PowerPoint Presentation Package to Accompany
Applied Statistics in Business

and Economics, 6th edition
David P. Doane and Lori E. Seward
Prepared by Lloyd R. Jaisingh
© 2019 McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction
or further distribution permitted without the prior written consent of McGraw-Hill Education. 6-1
Chapter 6
Discrete Probability Distributions
Chapter Contents
6.1 Discrete Probability Distributions
6.2 Expected Value and Variance
6.3 Uniform Distribution
6.4 Binomial Distribution
6.5 Poisson Distribution
6.6 Hypergeometric Distribution
6.7 Geometric Distribution (Optional)
6.8 Transformations of Random Variables (Optional)
© 2019 McGraw-Hill Education. 6-2

Chapter 6
Chapter Learning Objectives 1
LO 6-1: Define a discrete random variable and its probability

distribution.
LO 6-2: Solve problems using expected value and variance.
LO 6-3: Define and apply the uniform discrete model.
LO 6-4: Find binomial probabilities using tables, formulas, or Excel.
LO 6-5: Find Poisson probabilities using tables, formulas, or Excel.

Chapter 6
Chapter Learning Objectives 2
LO 6-6: Use the Poisson approximation to the binomial

(optional).
LO 4-8: Find hypergeometric probabilities using Excel.
LO 4-9: Use the binomial approximation to the
hypergeometric (optional).
LO 4-10: Calculate geometric probabilities (optional).
LO 4-11: Apply rules for transformations of random
variables (optional).

Chapter 6
6.1 Discrete Distributions
LO 6-1: Define a discrete random variable and its probability

distribution.
Random Variables
A random variable is a function or rule that assigns a numerical
begin underline end underline
value to each outcome in the sample space of a random

experiment.
Nomenclature:
• Upper case letters are used to represent random variables (e.g., X, Y). begin underline end underline
• Lower case letters are used to represent values of the random begin underline end underline
variable (e.g., x, y).

• A discrete random variable has a countable number of distinct values.

Chapter 6
LO 6-1: Define a Discrete Random Variable and Its
Probability Distribution 1
Probability Distributions
• A discrete probability distribution assigns a probability to each value of a
discrete random variable X.

• To be a valid probability distribution, the following must be satisfied.
• If X has n distinct values X1 , X 2 , , X n , then.
0  P(xi )  1 (the probability for any given value of X )

n
 P(x )  1 (the sum over all values of X )

i=1
i

Chapter 6
• Discrete probability distributions follow the rules of

functions.
• More than one sample space outcome can be assigned to the
same number, but you cannot assign one outcome to two
different numbers.
• Likewise, more than one random variable value can be
assigned to the same probability, but one random variable
value cannot have two different probabilities.
• The probabilities must sum to 1.

Chapter 6
• Figure 6.1 illustrates the relationship between the sample

space, the random variable, and the probability distribution
function for a simple experiment of rolling a die.
• Refer to the next slide.

Chapter 6
Figure 6.1 Random Experiment: Rolling a Die
Access the long description slide.

Chapter 6
Example: Coin Flips

When a coin is flipped three times, the sample space will be
S = {HHH, HHT, HTH, THH, HTT, THT, TTH, TTT}.
Table 6.1 Probability Distribution for Three Coin Flips
If X is the number of Possible Events x P(x)
heads, then X is a 1
TTT 0
random variable 8
3
whose probability HTT, THT, TTH 1
8
distribution is given in 3
HHT, HTH, THH 2
Table 6.1. 8
1
HHH 3 8
Total Blank 1

Chapter 6
Example: Coin Flips
Note that the values of X need Note also that a discrete probability
not be equally likely. However, distribution is defined only at specific
they must sum to unity. points on the X-axis.
Figure 6.2 Probability Distribution for Three Coin Flips

Chapter 6
What is a PDF or CDF?

• A probability distribution function (PDF) is a mathematical function
that shows the probability of each X-value.

• A cumulative distribution function (CDF) is a mathematical function that
shows the cumulative sum of probabilities, adding from the smallest to the
largest X-value, gradually approaching unity.

Chapter 6
What is a PDF or CDF?
Consider the following illustrative histograms:
Figure 6.3 Illustration of PDF and CDF
Random variables and their distributions are described by their parameters. The
equations for the PDF, the CDF, and the characteristics of the distribution (such as the
mean and standard deviation) will depend on the parameters of the process.
Chapter 6
6.2 Expected Value and Variance
LO 6-2: Solve problems using expected value and variance.

Expected Value
• The expected value E(X) of a discrete random variable is the
sum of all X-values weighted by their respective probabilities.

• E(X) is a measure of central tendency.
begin underline d
• If there are N distinct values of X, then:
N
E ( X )     xi P( xi )
i 1

Chapter 6
LO 6-2: Solve Problems Using Expected Value and Variance 1
Example: Service Calls

• The distribution of Sunday emergency service calls by Ace Appliance Repair is
shown in the table (Table 6.2 in the text). The probabilities sum to 1, as must be
true for any probability distribution.
x P(x) xP(x)
0 0.05 0.00
1 0.10 0.10
2 0.30 0.60
3 0.25 0.75
4 0.20 0.80
5 0.10 0.50
( )= =0(.05)+1(.10)+2(.30)+3(.25)+4(.20)+5(.10)=2.75

Chapter 6

Figure 6.4 Probability Distribution for Service Calls
This particular probability

distribution is not
symmetric around the
mean µ = 2.75.
However, the mean is still
the balancing point, or
fulcrum.
E(X) is an average and it does not have to be an observable value.

Chapter 6

• If there are N distinct values of X, then the variance of a begin underline end underline
discrete random variable is:

N
Var( X )     ( xi  )2P(xi )
2
i 1
• The variance is a weighted average of the dispersion begin underline end underline
about the mean, denoted either as 2 or V(X).

It is a measure of variability .
begin underline e
• The standard deviation is the square root of the variance

and is denoted s.
  2  Var( X )

Chapter 6
Example: Bed and Breakfast

• The Bay Street Inn is a seven-room bed-and-breakfast in the
sunny California coastal city of Santa Theresa. Demand for
rooms generally is strong during February, a prime month for
tourists. However, experience shows that demand is quite
variable. The probability distribution of room rentals during
February is shown on the next slide where X = the number of
rooms rented (X = 0, 1, 2, 3, 4, 5, 6, 7). The worksheet shows
the calculation of E(X) and Var(X).

Chapter 6
x P(x) xP(x) x−µ [x  μ]2 [x  μ]2 P(x)

0 .05 0.00 −4.71 22.1841 1.109205
1 .05 0.05 −3.71 13.7641 0.688205
2 .06 0.12 −2.71 7.3441 0.440646
3 .10 0.30 −1.71 2.9241 0.292410
4 .13 0.52 −0.71 0.5041 0.065533
5 .20 1.00 +0.29 0.0841 0.016820
6 .15 0.90 +1.29 1.6641 0.249615
7 .26 1.82 +2.29 5.2441 1.363466
Total 1.00 μ = 4.71 Blank Blank σ 2  4.225900

Chapter 6
The histogram shows that the distribution is skewed to the
left and bimodal.
Figure 6.5 Probability Distribution of Room Rentals
0.30
0.25
The mode is 7
Probability 0.20
rooms rented but
0.15
the average is only
0.10
4.71 room rentals.
0.05
0.00
0 1 2 3 4 5 6 7
Number of Rooms Rented
σ = 2.06 indicates considerable variation around µ.

Chapter 6
6.3 Uniform Distribution
LO 6-3: Define and apply the uniform discrete model.

Characteristics of the Uniform Discrete Distribution
• The discrete uniform distribution describes a random
variable with a finite number of integer values from a to b

(the only two parameters).
• Each value of the random variable is equally likely to occur.
• The next slide lists the characteristics of the uniform discrete
distribution (Table 6.5 in the text).

Chapter 6
LO 6-3: Define and Apply the Uniform Discrete Model 1
Characteristics of the Uniform Discrete Distribution
Table 6.5 Uniform Discrete Distribution
Parameters a = lower limit
b = upper limit
1
PDF PX  x 
b a 1
x a 1
CDF PX  x 
ba 1
Domain X  a , a  1, a  2, , b
ab
Mean
2
Standard deviation 2
 b  a   1  1
12
Random data generation in Excel =RANDBETWEEN(a,b)

Comments Useful as a benchmark, to generate
rendom integers for sampling, or in
simulation models.

Chapter 6
Example: Rolling a Die
• The number of dots on the roll of a die form a uniform random variable
with six equally likely integer values: 1, 2, 3, 4, 5, 6.
1
• The probability of getting any of these on the roll of a die will be .
6
• Figure 6.6 shows the PDF and CDF for rolling a die.
Figure 6.6 PDF and CDF for Rolling a Die

Chapter 6
Example: Rolling a Die

The mean and the standard deviation for the distribution is
given below.
a+ b 16
Mean =   3.5
2 2
[(b  a)  1]2  1 [(6  1)  1]2  1
Std. Dev.     1.708
12 12

Chapter 6
6.4 Binomial Distribution
LO 6-4: Find binomial probabilities using tables, formulas, or

Excel.
Bernoulli Experiments
• A random experiment with only two outcomes is a Bernoulli experiment .
• One outcome is arbitrarily labeled a “success” (denoted X = 1) and the

other a “failure” (denoted X = 0).
• π is the (success), 1− is the π(failure).
• The probability of success remains the same for each trial.
• Note that (0)+ (1)=(1− π)+ π =1 and 0≤ π ≤1.
• The expected value (mean) and variance of a Bernoulli experiment is
calculated as:
• ( )= π and ( )= π(1− π).
Chapter 6
LO 6-4: Find Binomial Probabilities Using Tables, Formulas, or
Excel 1
Characteristics of the Binomial Distribution
• The binomial distribution arises when a Bernoulli
experiment is repeated n times.

• Each trial is independent so the probability of success p
remains constant on each trial.
• In a binomial experiment, we are interested in X = number of
successes in n trials. So, X  X1  X2    X n
• The probability of a particular number of successes P(X)
is determined by parameters n and π.

Chapter 6
Excel 2
Characteristics of the Binomial Distribution
Table 6.7 Binomial Distribution
Parameters n=number of trials
  Probability of success
PDF n!
P( X  x)   x (1   )n x
x !(n  x)!
Excel* PDF =BINOM.DIST( x , n , ,0)

Excel* CDF =BINOM.DIST( x , n , ,1)
Domain x  0,1,2,..., n
Mean n
Standard deviation n (1   )
Random data generation in Excel =BINOM.INV(n, ,RAND())

Or use Excel’s Data Analysis Tools
Comments Skewed Right if  <.50, Skewed Left if   .50,

Symmetric if   .50.
Chapter 6
Excel 3
Example: Quick Oil Change Shop
It is important to quick oil change shops to ensure that a car’s
service time is not considered “late” by the customer.
Service times are defined as either late or not late.
X is the number of cars that are late out of the total number of
cars serviced.
Assumptions:
• Cars arrive independently of each other.
• The probability of a late car is consistent.

Chapter 6
Excel 4
Example: Quick Oil Change Shop

• What is the probability that exactly two of the next n = 12 cars
serviced are late (P(X = 2))?
• P(car is late) = π =.10.
• P(car is not late) = 1-π =.90.
• Now,
n!
P( X  x)   x (1  )n x
x !(n  x)!
12!
So P( X  2)  (.10)2 (1  10)122  .2301
2!(12  2)!
Chapter 6
Excel 5
Application: Uninsured Patients

• On average, 20% of the emergency room patients at
Greenwood General Hospital lack health insurance.
• In a random sample of four patients, what is the probability
that at least two will be uninsured?
• X = number of uninsured patients (“success”).
• P(uninsured) = π = 20% = 0.20.
• P(insured) = 1- π = 1-20 = .80.
• n = 4 patients.
• The range is X = 0, 1, 2, 3, 4 patients.

Chapter 6
Excel 6
Compound Events
• Individual probabilities can be added to obtain any desired
event probability.
• For example, the probability that the sample of four patients
will contain at least two uninsured patients is (Hint: What
inequality implies “at least?”):

• ( ≥2)= (2)+ (3)+ (4).
• =.1536+.0256+.0016=.1808.

Chapter 6
Excel 7
Compound Events
• What is the probability that fewer than two patients have
insurance? Hint: What inequality implies “fewer than?”

• ( <2)= (0) + (1) = .4096 + .4096 = .8192.
• What is the probability that no more than two patients have

insurance? Hint: What inequality implies “no more than?”

• ( ≤2) = (0) + (1) + (2) = .4096 + .4096 + .1536 = .9728.
Mean    n  (4)(.20)  0.8 patient

Standard deviation    n (1   )  (4)(.20)(1  .20)  0.8 patient

Chapter 6
Excel 8
Compound Events
When dealing with compound events, it might be helpful to
sketch a diagram. Figure 6.9 shows the supporting diagrams for
the previous examples.
Figure 6.9 Diagrams to Illustrate Events

Chapter 6
Excel 9
Binomial Shape
• A binomial distribution is skewed right if π < .50, skewed left
if π > .50, and symmetric only if π = .50.
• However, skewness decreases as n increases, regardless of
the value of π.
• Notice that π = .20 and π = .80 have the same shape, except
reversed from left to right.
• This is true for any values of π and 1 − π.
• Refer to Figure 6.7 on the next slide.

Chapter 6
Excel 10
Binomial Shape
Figure 6.7 Binomial Distributions

Chapter 6
Excel 11
Recognizing Binomial Applications

• Can you recognize a binomial situation? The binomial
distribution has five main characteristics.
• The number of trials (n) is fixed.
• There are only two outcomes for each trial: success or failure.
• The probability of success for each trial (π) remains constant.
• The trials are independent of each other.
• The random variable (X) is the number of successes out of
n trials.

Chapter 6
Excel 12
Finding Binomial Probabilities

• One can use the binomial formula.
• One can use the binomial tables in the appendix of the
text.
• One can use technology such as Excel. (Other technologies
include some scientific calculators, Mega Stat, Minitab, etc.)

Chapter 6
6.5 Poisson Distribution
LO 6-5: Find Poisson probabilities using tables, formulas, or
Excel.
• The Poisson distribution describes the number of occurrences within a
randomly chosen unit of time (e.g., minute, hour) or space (square foot,
linear mile).
• The events occur randomly and independently over a continuum of time
or space.
• We will call the continuum “time” since the most common Poisson
application is modeling arrivals per unit of time.
Each dot (•) is an occurrence of the event of interest.

Chapter 6
LO 6-5: Find Poisson Probabilities Using Tables, Formulas, or
Excel 1
• Let X = the number of events per unit of time.
• X is a random variable that depends on when the unit of time is observed.
• For example, we could get X = 3 or X = 1 or X = 5 events, depending on
where the randomly chosen unit of time happens to fall.
Figure 6.12 Poisson Events Distributed over Time
• The Poisson model’s only parameter is λ (Greek letter “lambda”) where λ

represents the mean number of events per unit of time or space.
Chapter 6
Excel 2
Characteristics of the Poisson Distribution

• All characteristics of the Poisson model are determined by its mean λ.
• The constant e (the base of the natural logarithm system) is approximately
2.71828 (to see a more precise value of e, use your calculator’s
e x function with x =1).
• The mean of the Poisson distribution is λ, and its standard deviation is
the square root of the mean.
• The simplicity of the Poisson formulas makes it an attractive model
(easier than the binomial, for example).
• Unlike the binomial, X has no obvious limit, that is, the number of
events that can occur in a given unit of time is not bounded. However,
Poisson probabilities taper off toward zero as X increases, so the
effective range is usually small.
Chapter 6
Excel 3
Characteristics of the Poisson Distribution
Table 6.9 summarizes these characteristics.
Table 6.9 Poisson Distribution
Parameters λ = mean arrivals per unit of time or space
PDF  x e
P( X  x) 
x!
Excel PDF =POISSON.DIST( , λ,0)
Excel CDF =POISSON.DIST( , λ,1)
Domain X  0, 1, 2,, no obvious upper limit 
Mean λ
Standard deviation 
Comments Always right-skewed, but less so for larger λ.

Chapter 6
Excel 4
Example: Credit Union Customers

• On Thursday morning between 9 a.m. and 10 a.m., customers arrive and
enter the queue at the Oxnard University Credit Union at a mean rate of
1.7 customers per minute. Using the Poisson formulas with λ = 1.7, find
the PDF, mean, and standard deviation.
• Note the unit for the mean and standard deviation is customers/minute.
 x e  (1.7)x e 1.7
PDF: P( X  x)  
x! x!
Mean:   1.7
Standard deviation:     1.7  1.304

Chapter 6
Excel 5
Compound Events
• Cumulative probabilities can be evaluated by summing
individual X probabilities.
• What is the probability that two or fewer customers will
arrive in a given minute?
• ( ≤2)= (0) + (1) + P(2)=.1827 + .3106 + .2640 = .7573.
• What is the probability of at least three customers (the
complimentary event)?
• ( ≥3) = 1− ( ≤2) = 1 − .7573 = .2427.

Chapter 6
Excel 6
Recognizing Poisson Applications

• Can you recognize a Poisson situation? The Poisson
distribution has four main characteristics.
• An event of interest occurs randomly over time or space.
• The average arrival rate (λ) remains constant.
• The arrivals are independent of each other.
• The random variable (X) is the number of events within an
observed time interval.

Chapter 6
Excel 7
Poisson distributions are always right-skewed (long right
tail) but become less skewed and more bell-shaped as λ
increases, as illustrated in Figure 6.13.
Figure 6.13 Poisson Becomes Less skewed for Larger λ

Chapter 6
Excel 8
Finding Poisson Probabilities

• One can use the Poisson distribution formula.
• One can use the Poisson tables in the appendix of the
text.
• Once can use technology such as Excel. (Other technologies
include some scientific calculators, Mega Stat, Minitab etc.)

Chapter 6
LO 6-6: Use the Poisson Approximation to the Binomial
(Optional)
• The Poisson distribution may be used to approximate a binomial by setting

λ = nπ approximation is helpful when the binomial calculation is difficult
(e.g., when n is large).
• The general rule for a good approximation is that n should be “large” and
π should be “small.”
• A common rule of thumb says the approximation is adequate if n ≥ 20 and
π ≤.05.

Chapter 6
6.6 Hypergeometric Distribution
LO 6-7: Find hypergeometric probabilities using Excel.

Characteristics of the Hypergeometric Distribution
• The hypergeometric distribution is similar to the binomial
distribution.
• However, unlike the binomial, sampling is without begin underline
replacement from a finite population of N items.

end underline
• The hypergeometric distribution may be skewed right or left

and is symmetric only if the proportion of successes in the
population is 50%.

Chapter 6
LO 6-7: Find Hypergeometric Probabilities Using Excel 1
Characteristics of the Hypergeometric Distribution

Table 6.12 Hypergeometric Distribution
Parameters N = mean arrivals per unit of time or space
n = sample size
S = number of successes in population
PDF s C xN  sC n  x
P( X  x) 
N Cn
Excel* PDF =HYPGEOM.DIST( , , , ,0)

Domain max(0, +s− ) ≤ ≤ min( , )
s
Mean n , where  
N
Standard deviation N n
n (1   )
N 1
Comments Similar to binomial, but sampling is without
replacement from a finite population. It can be
s n
approximated by a binomial with   if  0.05,
s N N
and is symmetric if  0.50.
N

Chapter 6
Example: Damaged iPods

• In a shipment of 10 iPods, two were damaged and eight are good.
• The receiving department at Best Buy tests a sample of three iPods at random to
see if they are defective.
• Let the random variable X be the number of damaged iPods in the sample.
N = 10 (number of iPods in the shipment)
n = 3 (sample size drawn from the shipment)
s = 2 (number of damaged iPods in the
shipment (“successes” in population))
N – s = 8 (number of non-damaged iPods in
the shipment)
x = number of damaged iPods in the sample
(“successes” in sample)
n – x = number of non-damaged iPods in the sample

Chapter 6
• This is not a binomial problem because p is not constant.

• What is the probability of getting a damaged iPod on the first draw from the
sample?
2
• 1  .
10
• Now, what is the probability of getting a damaged iPod on the second draw?
1
•  2  (if the first iPod was damaged)or
9
2
= (if the first iPod was undamaged).
9
• What about on the third draw?
•  3  0 or = 1 or = 2 .
8 8 8
depending on what happened in the first two draws.

Chapter 6
Using the Hypergeometric Formula

Since there are only two damaged iPods in the population, the only possible values
of x are 0, 1, and 2. Here are the probabilities:
PDF Formula Excel Function

 2!  8! 
  
2 C0 8 C3  0!2!  3!5!  56 7
P( X  0)      .4667  HYPGEOM.DIST(0,3,2,10,0)
10 C 3  10!  120 15
 
 3!7! 
 2!   8! 
  
2 C1 8 C 2  1!1!   2!6!  56 7
P( X  1)      .4667  HYPGEOM.DIST(0,3,2,10,0)
10 C 3  10!  120 15
 
 3!7! 
 2!   8! 
  
2 C 2 8 C1  2!0!   1!7!  8 1
P( X  2)      .0667  HYPGEOM.DIST(2,3,2,10,0)
10 C 3  10!  120 15
 
 3!7! 

Chapter 6
Using Software: Excel
Since the hypergeometric formula and tables are tedious and impractical, use
Excel’s hypergeometric function to find probabilities.
Figure 6.18 Excel Hypergeometric Probability Function

Chapter 6
Recognizing Hypergeometric Applications

• Can you recognize a hypergeometric situation?
• Look for a finite population (N) containing a known number
of successes (s) and sampling without replacement (n items
in the sample) where the probability of success is not
constant for each sample item drawn.

Chapter 6
Binomial Approximation to the Hypergeometric

• Both the binomial and hypergeometric involve samples
of size n and treat X as the number of successes.
• The binomial sample is with replacement while the
hypergeometric sample is without replacement.

n
• Rule of Thumb: If  .05, it is safe to use the binomial
N
approximation to the hypergeometric, using sample size
n and success probability   s .
N

Chapter 6
6.7 Geometric Distribution
LO 6-9: Calculate Geometric probabilities (optional).
Characteristics of the Geometric Distribution
• The geometric distribution describes the number of Bernoulli
trials until the first success.

• X is the number of trials until the first success.
• X ranges from {1, 2, …} since we must have at least one trial to
obtain the first success. However, the number of trials is not
fixed.
• π is the constant probability of a success on each trial.

Chapter 6
LO 6-9: Calculate Geometric Probabilities (Optional) 1
Characteristics of the Geometric Distribution

Table 6.13 Geometric Distribution
Parameters π = mean arrivals per unit of time or space
PDF P ( X  x )   (1   )x 1
CDF P ( X  x )  1  (1   )x
Domain x  1,2,....
1
Mean 
Standard deviation 1
2
Random data in Excel  LN(1-RAND()) 
 1  INT  
 LN(1- ) 
Comments Describes the number of trials before the first

success. Highly skewed.

Chapter 6
Example: Telefund Calling

• At Faber University, 15% of the alumni make a donation or pledge
during the annual telefund.
• What is the probability that the first donation will come within the
first five calls?
• To calculate this geometric pxrobability, we would set π = .15, apply
the PDF formula P( X  x)  (1  )x 1 , and then sum the
probabilities. View the next slide for the computations.

Chapter 6

P(1)  (.15)(1  .15)11  (.15)(.85)0  .1500
P(2)  (.15)(1  .15)21  (.15)(.85)1  .1275
P(3)  (.15)(1  .15)31  (.15)(.85)2  .1084
P(4)  (.15)(1  .15)4 1  (.15)(.85)3  .0921
P(5)  (.15)(1  .15)51  (.15)(.85)4  .0783
• Then ( ≤5)= (1)+ (2)+ (3)+ (4)+ (5)=.5563.

• Alternately, we can use the CDF to get
P( X  5)  1  (1  .15)5  1  .4437  .5563.
• The CDF is a much easier method when sums are required.

Chapter 6

• What are the mean and standard deviation of this distribution?
• The expected number of phone calls until the first donation is
1 1
   6.67 calls.
 (.15)
• Thus, on average, we expect to call between 6 and 7 alumni until the
first donation.
• The standard deviation is
1 1
 (1  )   (1  .15) 
2 2
 2   2   6.15 calls.
    .15 
• The large standard deviation is a signal that it would be unwise to regard
the mean as a good prediction of how many trials will be needed until the
first donation.

CH 06

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A PowerPoint Presentation Package to Accompany

Applied Statistics in Business

© 2019 McGraw-Hill Education. 6-2

LO 6-1: Define a discrete random variable and its probability

© 2019 McGraw-Hill Education. 6-3

LO 6-6: Use the Poisson approximation to the binomial

© 2019 McGraw-Hill Education. 6-4

LO 6-1: Define a discrete random variable and its probability

value to each outcome in the sample space of a random

variable (e.g., x, y).

© 2019 McGraw-Hill Education. 6-5

discrete random variable X.

0  P(xi )  1 (the probability for any given value of X )

 P(x )  1 (the sum over all values of X )

© 2019 McGraw-Hill Education. 6-6

• Discrete probability distributions follow the rules of

© 2019 McGraw-Hill Education. 6-7

• Figure 6.1 illustrates the relationship between the sample

© 2019 McGraw-Hill Education. 6-8

Access the long description slide.

Example: Coin Flips

© 2019 McGraw-Hill Education. 6-10

Access the long description slide.

What is a PDF or CDF?

that shows the probability of each X-value.

© 2019 McGraw-Hill Education. 6-12

LO 6-2: Solve problems using expected value and variance.

sum of all X-values weighted by their respective probabilities.

• If there are N distinct values of X, then:

© 2019 McGraw-Hill Education. 6-14

Example: Service Calls

© 2019 McGraw-Hill Education. 6-15

Example: Service Calls

This particular probability

E(X) is an average and it does not have to be an observable value.

Example: Service Calls

discrete random variable is:

about the mean, denoted either as 2 or V(X).

• The standard deviation is the square root of the variance

© 2019 McGraw-Hill Education. 6-17

Example: Bed and Breakfast

© 2019 McGraw-Hill Education. 6-18

Example: Bed and Breakfast

x P(x) xP(x) x−µ [x  μ]2 [x  μ]2 P(x)

© 2019 McGraw-Hill Education. 6-19

σ = 2.06 indicates considerable variation around µ.

LO 6-3: Define and apply the uniform discrete model.

variable with a finite number of integer values from a to b

© 2019 McGraw-Hill Education. 6-21

Random data generation in Excel =RANDBETWEEN(a,b)

© 2019 McGraw-Hill Education. 6-22

Access the long description slide.

Example: Rolling a Die

© 2019 McGraw-Hill Education. 4-24

LO 6-4: Find binomial probabilities using tables, formulas, or

• One outcome is arbitrarily labeled a “success” (denoted X = 1) and the

experiment is repeated n times.

© 2019 McGraw-Hill Education. 6-26

Excel* PDF =BINOM.DIST( x , n , ,0)

Random data generation in Excel =BINOM.INV(n, ,RAND())

Comments Skewed Right if  <.50, Skewed Left if   .50,

© 2019 McGraw-Hill Education. 6-28

Example: Quick Oil Change Shop