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You are on page 1of 26

Sweeney

Williams

QUANTITATIVE

METHODS FOR

BUSINESS 8e

Chapter 3, Part I

Discrete Probability Distributions

Random Variables

Discrete Random Variables

Expected Value and Variance

Binomial Probability Distribution

Poisson Probability Distribution

Random Variables

of the outcome of an experiment.

A random variable can be classified as being

either discrete or continuous depending on the

numerical values it assumes.

A discrete random variable may assume either

a finite number of values or an infinite

sequence of values.

A continuous random variable may assume

any numerical value in an interval or collection

of intervals.

values:

Let x = number of TV sets sold at the store in one

day

where x can take on 5 values (0, 1, 2, 3, 4)

of values:

Let x = number of customers arriving in one day

where x can take on the values 0, 1, 2, . . .

We can count the customers arriving, but there is no

finite upper limit on the number that might arrive.

describes how probabilities are distributed over the

values of the random variable.

The probability distribution is defined by a probability

function, denoted by f(x), which provides the

probability for each value of the random variable.

The required conditions for a discrete probability

function are:

f(x) > 0

f(x) = 1

We can describe a discrete probability distribution

with a table, graph, or equation.

representation of the probability distribution for TV

sales (below right) was developed.

Number

Units Sold

of Days

x

f(x)

0

80

0

.40

1

50

1

.25

2

40

2

.20

3

10

3

.05

4

20

4

.10

200

1.00

A graphical representation of the probability

distribution for TV sales in one day

.50

Probability

.40

.30

.20

.10

0

1

2

3

4

Values of Random Variable x (TV sales)

7

variable is a measure of its central location.

Expected value of a discrete random

variable:

E(x) = = xf(x)

The variance summarizes the variability in the

values of a random variable.

Variance of a discrete random variable:

Var(x) = 2 = (x - )2f(x)

The standard deviation, , is defined as the

positive square root of the variance.

x

0

1

2

3

4

f(x)

.40

.25

.20

.05

.10

xf(x)

.00

.25

.40

.15

.40

1.20 = E(x)

is 1.2

9

of a Discrete Random Variable

x x - ( x - )2

f (x ) ( x - )2 f ( x )

_____

_________

___________

_______

_______________

0

1

2

3

4

-1.2

1.44

.40

.576

-0.2

0.04

.25

.010

0.8

0.64

.20

.128

1.8

3.24

.05

.162

2.8

7.84

.10

.784

1.660 =

The variance of daily sales is 1.66 TV sets squared.

The standard deviation of sales is 1.29 TV sets.

10

Value and Variance

1

2

3

4

5

6

7

8

A

x

0

1

2

3

4

B

f(x)

-1.2

-0.2

0.8

1.8

2.8

C

xf(x)

=A2*B2

=A3*B3

=A4*B4

=A5*B5

=A6*B6

=SUM(C2:C6)

Expected Value

D

(x- ) 2 f(x)

=(A2-C$7)^2*B2

=(A3-C$7)^2*B3

=(A4-C$7)^2*B4

=(A5-C$7)^2*B5

=(A6-C$7)^2*B6

=SUM(D2:D6)

Variance

11

The experiment consists of a sequence of n

identical trials.

Two outcomes, success and failure, are

possible on each trial.

The probability of a success, denoted by p,

does not change from trial to trial.

The trials are independent.

12

Evans is concerned about a low retention rate

for employees. On the basis of past experience,

management has seen a turnover of 10% of the

hourly employees annually. Thus, for any hourly

employees chosen at random, management

estimates a probability of 0.1 that the person will

not be with the company next year.

Choosing 3 hourly employees a random, what

is the probability that 1 of them will leave the

company this year?

Let:

p = .10, n = 3, x = 1

13

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

14

n!

f ( x)

p x (1 p ) ( n x )

x !( n x )!

f (1)

3!

( 0.1)1 ( 0. 9 ) 2

1!( 3 1)!

= (3)(0.1)(0.81)

= .243

15

n

3

x

0

1

2

3

.10

.7290

.2430

.0270

.0010

.15

.6141

.3251

.0574

.0034

.20

.5120

.3840

.0960

.0080

.25

.4219

.4219

.1406

.0156

p

.30

.3430

.4410

.1890

.0270

.35

.2746

.4436

.2389

.0429

.40

.2160

.4320

.2880

.0640

.45

.1664

.4084

.3341

.0911

.50

.1250

.3750

.3750

.1250

16

First

Worke

r

Secon

d

Worke

Leavesr(.1)

Third

Worke

L (.1) r

S (.9)

Leaves (.1)

L (.1)

S (.9)

2

1

L (.1)

S (.9)

Leaves (.1)

Stays (.9)

3

2

Stays (.9)

Stays (.9)

Value

of x

L (.1)

S (.9)

Probab

.

.

001

.

0

009

.0

009

.

0

081

.0

009

.0810

0

.0810

.7290

17

Step 1: Select a cell in the worksheet where you

want the binomial probabilities to appear.

Step 2: Select the Insert pull-down menu.

Step 3: Choose the Function option.

Step 4: When the Paste Function dialog box

appears:

Choose Statistical from the Function

Category box.

Choose BINOMDIST from the Function

Name box.

Select OK.

continued

18

Step 5: When the BINOMDIST dialog box appears:

Enter 1 in the Number_s box (value of x).

Enter 3 in the Trials box (value of n).

Enter .1 in the Probability_s box (value of

p).

Enter false in the Cumulative box.

[Note: At this point the desired binomial

probability of .243 is automatically computed

and appears in the right center of the dialog

box.]

Select OK (and .243 will appear in the

worksheet cell requested in Step 1).

19

Expected Value

E(x) = = np

Variance

Var(x) = 2 = np(1 - p)

Standard Deviation

SD( x ) np(1 p )

E(x) = = 3(.1) = .3 employees out of 3

Var(x) = 2 = 3(.1)(.9) = .27

SD( x )

20

The probability of an occurrence is the same

for any two intervals of equal length.

The occurrence or nonoccurrence in any

interval is independent of the occurrence or

nonoccurrence in any other interval.

21

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

22

Patients arrive at the emergency room of

Mercy

Hospital at the average rate of 6 per hour on

weekend

evenings. What is the probability of 4 arrivals in

30

minutes on a weekend evening?

34 ( 2. 71828) 3

Using the Poisson

f ( 4 ) Probability Function

.1680

4!

= 6/hour = 3/half-hour, x = 4

23

x

0

1

2

3

4

5

6

7

8

9

10

11

12

2.1

.1225

.2572

.2700

.1890

.0992

.0417

.0146

.0044

.0011

.0003

.0001

.0000

.0000

2.2

.1108

.2438

.2681

.1966

.1082

.0476

.0174

.0055

.0015

.0004

.0001

.0000

.0000

2.3

.1003

.2306

.2652

.2033

.1169

.0538

.0206

.0068

.0019

.0005

.0001

.0000

.0000

2.4

2.5

.0907 .0821

.2177 .2052

.2613 .2565

.2090 .2138

.1254 .1336

.0602 ..0668

.0241 .0278

.0083 .0099

.0025 .0031

.0007 .0009

.0002 .0002

.0000 .0000

.0000 .0000

2.6

.0743

.1931

.2510

.2176

.1414

.0735

.0319

.0118

.0038

.0011

.0003

.0001

.0000

2.7

.0672

.1815

.2450

.2205

.1488

.0804

.0362

.0139

.0047

.0014

.0004

.0001

.0000

2.8

.0608

.1703

.2384

.2225

.1557

.0872

.0407

.0163

.0057

.0018

.0005

.0001

.0000

2.9

.0550

.1596

.2314

.2237

.1622

.0940

.0455

.0188

.0068

.0022

.0006

.0002

.0000

3.0

.0498

.1494

.2240

.2240

.1680

.1008

.0504

.0216

.0081

.0027

.0008

.0002

.0001

24

The Poisson probability distribution can be

used as

an approximation of the binomial probability

distribution when p, the probability of success, is

small

and n, the number of trials, is large.

Approximation is good when p < .05 and n

> 20

Set = np and use the Poisson tables.

25

26

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