5.0 Discrete Probability Distribution

Business Statistics WMB305-15BF
Discrete Probability
Distribution
Arun Dev Bhattarai – The British
College
Arun Dev Bhattarai – The British College 1

Chapter 5: Discrete Probability Distributions

5.1 - Random Variables
5.2 - Developing Discrete Probability
Distributions
5.3 - Expected Value and Variance
5.4 - Bivariate Distributions, Covariance,
and Financial Portfolios
5.5 - Binomial Probability Distribution
5.6 - Poisson Probability Distribution
5.7 - Hypergeometric Probability
Distribution

Random Variables (1 of 5)
• A random variable is a numerical description of the
outcome of an experiment.
• A random variable is a variable whose numerical value is determined
by the outcome of random trial.
• A random variable can also be defined as a rule that assigns a
numerical value to each outcome of random experiment.
• 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.

Random Variables Rolling a Pair of Dice

• P(X = 2) = 1/36
• P(X = 3) = 2/36
• P(X = 4) = 3/36
• P(X = 5) = 4/36
• P(X = 6) = 5/36
• P(X = 7) = 6/36
• P(X = 8) = 5/36
• P(X = 9) = 4/36
• P(X = 10) = 3/36
• P(X = 11) = 2/36 Rolling of Two Dice
•
Probability of Occurrence
P(X = 12) = 1/36 0.2
0.15
0.1
0.05
0
1 2 3 4 5 6 7 8 9 10 11
Outcome



Types Of
Variables
Discrete Continuous
Ch. 5 Ch. 6
Variable Variable

Illustration Random Variable x Type
Family size x = Number of dependents reported Discrete

on tax return
Distance from home to x = Distance in miles from home to Continuous

stores on a highway the store site
Own dog or cat x = 1 if own no pet; Discrete

= 2 if own dog(s) only;
= 3 if own cat(s) only;
= 4 if own dog(s) and cat(s)

Discrete Random Variable with a Finite Number of

Values
Example: JSL Appliances
Let x = number of TVs sold at the store in one day, where x can
take on 5 values (0, 1, 2, 3, 4)
We can count the TVs sold, and there is a finite upper limit on
the number that might be sold (which is the number of TVs in
stock).

Discrete Random Variable with an Infinite Number 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.

Discrete Probability Distributions (1 of 8)

• The probability distribution for a random variable describes how
probabilities are distributed over the values of the random variable.
• We can describe a discrete probability distribution with a table, graph, or
formula.
Types of discrete probability distributions:
• First type: uses the rules of assigning probabilities to experimental
outcomes to determine probabilities for each value of the random
variable.
• Second type: uses a special mathematical formula to compute the
probabilities for each value of the random variable.


• The probability distribution is defined by a probability
function, denoted by f(x), that provides the probability for
each value of the random variable.
• The required conditions for a discrete probability function are:


• There are three methods for assigning probabilities to random
variables: classical method, subjective method, and relative
frequency method.
• The use of the relative frequency method to develop discrete
probability distributions leads to what is called an empirical
discrete distribution.


Using past data on TV sales, a tabular representation of the probability
distribution for sales was developed.
Number
Units Sold of Days
0 80 0 .40 = 80/200
1 50 1 0.25
2
2 40
40 2
2 0.20
0.20
3
3 10
10 3
3 0.05
0.05
4
4 20
20 4
4 0.10
0.10
200 1.00
. .
200 1.00
. .




• In addition to tables and graphs, a formula that gives the
probability function, f(x), for every value of x is often used to
describe the probability distributions.
• Several discrete probability distributions specified by formulas
are the discrete-uniform, binomial, Poisson, and
hypergeometric distributions.


• The discrete uniform probability distribution is the simplest
example of a discrete probability distribution given by a
formula.
• The discrete uniform probability function is
where: n = the number of values the

random variable may assume
• The values of the random variable are equally likely.


• For example, consider again the experiment of rolling a die.
• We define the random variable x to be the number of dots on the
upward face.
• For this experiment, n = 6 values are possible for the random variable;
x = 1, 2, 3, 4, 5, 6.
• Since the probabilities are equally likely, the probability function for
this discrete uniform random variable is
𝟏 , 𝟐 ,𝟑 , 𝟒 ,𝟓
𝒇 ( 𝒙 )= 𝒙=𝟏
𝟔

Few Examples (1 of 13)

• Example 1 - The probability distribution for the random
variable x follows.
a. Is this probability distribution valid? Explain.
b. What is the probability that x = 30?
c. What is the probability that x is less than or
equal to 25?
d. What is the probability that x is greater than
30?
a. f(x) ≥ 0 for all values of x. Σf(x) = 1. Therefore, it is a proper probability distribution.
b. Probability x = 30 is f(30) = .25
c. Probability x ≤ 25 is f(20) + f(25) = .20 + .15 = .35
d. Probability x > 30 is f(35) = .40


• Example 2 - Employee Retention. Employee retention is a
major concern for many companies. A survey of Americans
asked how long they have worked for their current employer
(Bureau of Labor Statistics website). Consider the following
example of sample data of 2000 college graduates who
graduated five years ago.


• Example 2 - Let x be the random variable indicating the
number of years the respondent has worked for her/his current
employer.
a. Use the data to develop an empirical discrete probability
distribution for x.
b. Show that your probability distribution satisfies the
conditions for a valid discrete probability distribution.
c. What is the probability that a respondent has been at her/his
current place of employment for more than 3 years?


a. Use the data to develop an empirical discrete probability
distribution for x.
0.35
Time (Year) Number Probability
0.3
1 506 506/2000 0.253 0.25
2 390 390/2000 0.195 0.2
Probability
0.15
3 310 310/2000 0.155
0.1
4 218 218/2000 0.109 0.05
5 576 576/2000 0.288 0

1 2 3 4 5
Total 2000 1 Year


b. Each probability is ≥ 0 and .253 + .195 + .155 + .109 + .288 = 1.
Time (Year) Number Probability 0.35
0.3
1 506 506/2000 0.253
0.25
2 390 390/2000 0.195
Probability
0.2
3 310 310/2000 0.155 0.15
0.1
4 218 218/2000 0.109
0.05
5 576 576/2000 0.288 0

1 2 3 4 5
Total 2000 1 Year


c. What is the probability that a respondent has been at her/his
current place of employment for more than 3 years?
Time (Year) Number Probability 0.35
0.3
1 506 506/2000 0.253
0.25
2 390 390/2000 0.195
Probability
0.2
0.15
3 310 310/2000 0.155
0.1
4 218 218/2000 0.109
0.05
5 576 576/2000 0.288 0

1 2 3 4 5
Total 2000 1 Year
f(4) + f(5) = .109 + .288 = .397


• Example 3 - Job Satisfaction of IS Managers. The percent
frequency distributions of job satisfaction scores for a sample
of information systems (IS) senior executives and middle
managers are as follows. The scores range from a low of 1 (very
dissatisfied) to a high of 5 (very satisfied).


a. Develop a probability distribution for the job satisfaction score
of a senior executive.
b. Develop a probability distribution for the job satisfaction score
of a middle manager.
c. What is the probability a senior executive will report a job
satisfaction score of 4 or 5?
d. What is the probability a middle manager is very satisfied?
e. Compare the overall job satisfaction of senior executives and
middle managers.


a. Develop a probability distribution for the job satisfaction score
of a senior executive.
SE
JSS SE P(x) 0.45
1 5 0.05
0.4
0.35
2 9 0.09 0.3
0.25
3 3 0.03 0.2
0.15
4 42 0.42 0.1
0.05
5 41 0.41 0
1 2 3 4 5


b. Develop a probability distribution for the job satisfaction score
of a middle manager.
JSS MM P(x) 0.5

MM
1 4 0.04 0.45
0.4
2 10 0.1 0.35
0.3
3 12 0.12
0.25
0.2
0.15
4 46 0.46 0.1
0.05
5 28 0.28 0
1 2 3 4 5


c. What is the probability a senior executive will report a job
satisfaction score of 4 or 5?
JSS SE P(x)
4 42 0.42
5 41 0.41
0.83
P(4) + P(5) = 0.42+0.41 = 0.83


d. What is the probability a middle manager is very satisfied?
Probability of very satisfied: 0.28
JSS MM P(x)
1 4 0.04
2 10 0.1
3 12 0.12
4 46 0.46
5 28 0.28


e. Compare the overall job satisfaction of senior executives and
middle managers.
JSS SE P(x) JSS MM P(x)
1 5 0.05 1 4 0.04
2 9 0.09 2 10 0.1
3 3 0.03 3 12 0.12
4 42 0.42 4 46 0.46
5 41 0.41 5 28 0.28
Senior executives appear to be more satisfied than middle managers; 83% of senior
executives have a score of 4 or 5, with 41% reporting a 5. Only 28% of middle.

Examples YOUR TOURN

As determined from long experience, the number of automobiles
rented per hour, X, at the Rent-A-Car counter at Honolulu
International Airport has the frequency distribution given in the
table below
1. What is the probability of each automobile rented?
Automobile 2. What is the sum of the probabilities?
Rented Frequency 3. Determine the probability that there will be at most 2 cars
0 10 rented.
1 25 4. What is the probability that there will be at least 3 cars
2 40 rented?
3 20 5. Do you think keeping 3 cars hourly for rent will be a wise
4 5 decision?

Expected Value (1 of 2)
• The expected value, or mean, of a random variable is a
measure of its central location.
• The expected value is a weighted average of the values the

random variable may assume. The weights are the
probabilities.
• The expected value does not have to be a value the random
variable can assume.

Expected Value Practical Scenario

• Our charity is going to raise money by running a lottery. We
plan to sell 500 tickets for $3 each, and to offer a grand prize
of $250 and four second prizes of $50 each. We need to raise
$1000. Can we expect to do so?
• To figure out whether the lottery will make money, we need to
compute the expected value of a ticket.


• Each ticket has a 1/500 chance of winning the grand prize of
$250, a 4/500 chance of winning $50, and a 495/500 chance
of winning nothing.
• We represent the outcome of the lottery as a random variable,
X, and we compute the expected value of a ticket by
multiplying each outcome by its probability.
• So, E(X) = (1/500) * $250 + (4/500) * $50 + (495/500) * $0 =
$0.50 + $0.40 + $0.00 = $0.90.
• Actual cost of ticket = $3 - $0.90 = $2.10 (Expected Value)


• Although no single person will lose $2.10 (they lose $3, win
$50, or win $250), $2.10 is the amount, on average, that the
lottery gains per ticket.
• Therefore, we can expect to make 500 * $2.10 = $1050.
• Regulators and savvy consumers also analyze games of chance
from the perspective of the ticket buyer.
• This lottery has a payout of only 30% of the money collected,
which is quite low.
• However, given that we are a charity, people are likely to view
the ticket more like a donation than a casino game and not
worry about the payout ratio.

• Stage-it faces a choice between two policy options. One is to
make a certain annual profit of £100,000 from interest on a
sum of money left on deposit in a bank. The second is to
invest that same sum of money in co-producing a major rock
concert in the capital city.
• If Stage-it goes ahead with the rock concert, there is a 70%
probability that a major competitor, Perform Inc, will react by
introducing a similar concert and a 30% probability that it will
not.


• Should Stage-it decide to go ahead with the rock concert it can
choose a high price (HP), a medium price (MP) or a low price
(LP) scenario for tickets.
• How much profit Stage-it estimates that it will make depends on
several factors:
• whether or not Perform Inc reacts with a similar product;
• what strategy Stage-it selects regarding price;
• what counter-strategy Perform Inc selects regarding price.


• Stage-it calculates the following table to represent the estimated profits
(in present value terms) from the different possible outcomes. Stage-it
has assigned various probabilities to each possible outcome.
Construct a decision tree and use it

to suggest whether Stage-it should
invest in the rock concert or leave its
funds to earn interest in the bank.


• Using the technique of backward
induction, we begin our solutions at
the right-hand
side and work leftwards, back to the
initial decision node (box 4).
• We can see that there are two ‘earlier’
decision nodes (boxes 1 and 2) and
four chance nodes (circles HP, MP, LP
and 3).
• The pay-offs are listed at the end of
the branches furthest to the right.


• At decision box 1, Stage-it must
choose between a high price (HP),
medium price (MP) and low price (LP)
strategy.
• Its choice will depend on the EV
(shown underneath each chance node)
of each pricing strategy,
• which in turn depends on the
probabilities of the price responses of
Perform Inc and the pay-offs estimated
for each response.


• With all values in £000s we can say:
• EV (Stage-it, HP strategy) = 0.6 (150) +
0.3 (100) + 0.1 (90) = 90 + 30 + 9 i.e., EV
(HP) = £129 (000)
• EV (Stage-it, MP strategy) = 0.3 (120) +
0.5 (100) + 0.2 (60) = 36 + 50 + 12 i.e.,
EV (MP) = £98 (000)
• EV (Stage-it, LP strategy) = 0.0 (250) +
0.4 (150) + 0.6 (100) i.e., EV (LP) =
£120 (000)


• At decision node 1, Stage-it will select the
strategy with the highest expected profit
pay-off, that is, a higher price (HP)
strategy (in the event of competition from
Perform Inc), yielding £129,000 in
expected profit.
• At decision node 2, Stage-it has no
probabilities to contend with since the
pay-offs listed are not associated with the
possible reactions of Perform Inc. Here it
can select the higher price (HP) strategy
(in the event of no competition from
Perform Inc) yielding £600,000 in
expected profit.


• There are probabilities associated with
whether Perform Inc will react with a new
product of its own.
• We must take these into account in
working out the EV at chance node 3.
• EV (rock concert) = 0.7 (129) + 0.3 (600)
= 90.3 + 180 i.e., EV (rock concert) =
£270.3 (000) = £270,300
• At the initial decision box (4) we can
see that, based on our expectations,
there will be greater profit from
investing the available money in the
rock concert than from leaving the
money earning interest in the bank.

Expected Value (2 of 2)
Interruptions Per Probability

Day In Computer P(X = xi) xiP(X = xi)
Network (xi)
0 0.35 (0)(0.35) = 0.00
1 0.25 (1)(0.25) = 0.25
2 0.20 (2)(0.20) = 0.40
3 0.10 (3)(0.10) = 0.30
4 0.05 (4)(0.05) = 0.20
5 0.05 (5)(0.05) = 0.25
1.00 μ = E(X) = 1.40

Expected Value Example
• Over the past 300 days, DiCarlo has experienced 54 days with
no automobiles sold, 117 days with 1 automobile sold, 72 days
with 2 automobiles sold, 42 days with 3 automobiles sold, 12
days with 4 automobiles sold, and 3 days with 5 automobiles
sold.
• With probability distribution shown in the table, what is
expectation sales daily?

Expected Value Example
• We therefore know that although sales of 0, 1, 2, 3, 4, or 5 automobiles are

possible on any one day, over time DiCarlo can anticipate selling an average of
1.50 automobiles per day.
• Assuming 30 days of operation during a month, we can use the expected value of
1.50 to forecast average monthly sales of 30(1.50) = 45 automobiles.

Expected Value
x f(x) xf(x)
0 .40 .00
1 .25 .25
2 .20 .40
3 .05 .15
4 .10 .40

Variance and Standard Deviation

• The variance summarizes the variability in the values of a
random variable.
• The variance is a weighted average of the squared deviations of

a random variable from its mean. The weights are the
probabilities.
• The standard deviation, σ , is defined as the positive square
root of the variance.

Variance
Example: DiCarlo Motors
Calculation of the Variance for the Number of Automobiles Sold During a
Day at DiCarlo Motors
SD = 1.11
Expected sales daily = 1.5±1.11

Variance
X x–μ (x – μ )2 f(x) (x–μ )2 f(x)
0 –1.2 1.44 .40 .576
1 –0.2 0.04 .25 .010
2 0.8 0.64 .20 .128
3 1.8 3.24 .05 .162
4 2.8 7.84 .10 .784
Variance of daily sales =
Empty cell
Empty cell Empty cell Empty cell
σ 2 = 1.660
Standard deviation of daily sales = 1.2884 TVs

Variance Practical Scenario

• Analyze the lottery (earlier example) from the perspective of a
potential ticket buyer. How should the buyer look at the risk?
• We already computed the expected value of the lottery to be
$2.10 for the buyer. We now need to compute the standard
deviation of buying a ticket.

Variance Practical Scenario

• $12.07 is lot of variation for a mean of $2.10, which reflects the
fact that there is a small chance that you’ll win a lottery but a
large chance you’ll win nothing.
• Note that almost all the variation in this case is an improvement
over losing $3, which is what happens in 495/500 cases.
• Some financial analysts treat this “upside” variation differently
and do not call it “risk.”

Binomial Probability Distribution (1 of 11)

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.
(This is referred to as the stationarity assumption.)
4. The trials are independent.


• Our interest is in the number of successes occurring in the n trials.
• Let x denote the number of successes occurring in the n trials.
• Binomial Probability Function:
where:
x = the number of successes
p = the probability of a success on one trial
n = the number of trials
f(x) = the probability of x successes in n trials
n! = n(n – 1)(n – 2) ….. (2)(1)


Binomial Probability Function


Example: Evans Electronics
Evans Electronics is concerned about a low retention rate for its employees. In
recent years, management has seen a turnover of 10% of the hourly employees
annually.
Thus, for any hourly employee 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 at random, what is the probability that 1 of them
will leave the company this year?


• The probability of the first employee leaving and the second and third
employees staying, denoted (S, F, F), is given by
p(1 – p)(1 – p)
• With a 0.10 probability of an employee leaving on any one trial, the probability
of an employee leaving on the first trial and not on the second and third trials is
given by
(0.10)(0.90)(0.90) = (0.10)(0.90)2 = 0.081


Two other experimental outcomes result in one success and two failures. The
probabilities for all three experimental outcomes involving one success follow.
Experimental Probability of
Outcome Experimental Outcome
(S, F, F) p(1 – p)(1 – p) = (.1)(.9)(.9) = .081

(F, S, F) (1 – p)p(1 – p) = (.9)(.1)(.9) = .081
(F, F, S) (1 – p)(1 – p)p = (.9)(.9)(.1) = .081
Empty cell
Total = .243


Using the probability function with p = 0.10, n = 3, and x = 1



Binomial Probabilities and Cumulative Probabilities

• Statisticians have developed tables that give probabilities and cumulative
probabilities for a binomial experiment random variable.
• These tables can be found in some statistics textbooks.
• With modern calculators and the capability of statistical software
packages, such tables are almost unnecessary.


Using Tables of Binomial Probabilities
n x p = .05 p = .10 p = .15 p = .20 p = .25 p =.30 p = .35 p =.40 p =.45 p =.50
3 0 .8574 .7290 .6141 .5120 .4219 .3430 .2746 .2160 .1664 .1250
3 1 .1354 .2430 .3251 .3840 .4219 .4410 .4436 .4320 .4084 .3750
3 2 .0071 .0270 .0574 .0960 .1406 .1890 .2389 .2880 .3341 .3750
3 3 .0001 .0010 .0034 .0080 .0156 .0270 .0429 .0640 .0911 .1250

Computing Binomial Probabilities Using the Binomial

Table
• According to the Gallup Organization, 65% of adult Americans
are in favor of the death penalty for individuals convicted of
murder. In a random sample of 15 adult Americans, what is the
probability that
• exactly 10 favor the death penalty?
• no more than 6 favor the death penalty?


Table
• We use Following Tables to obtain the probabilities.


Table
• We have n = 15, p = 0.65, and x = 10. In Table go to the section
that contains n = 15 and the column that contains p = 0.65. The
value at which the x = 10 row intersects the p = 0.65 column is
the probability we seek. See Figure. So, P(10) = 0.2123.
In 100 trials of this study (randomly

selecting 15 adult Americans), we
expect about 21 trials to result in
exactly 10 adult Americans who favor
the death penalty for individuals
convicted of murder.


Table
• The phrase no more than means “less than or equal to.” To compute P(X ≤
62), use the cumulative binomial table, which lists binomial probabilities
less than or equal to a specified value. We have n = 15, p = 0.65, so go to
the section that contains n = 15 and the column that contains p = 0.65.
The value at which the x = 6 row intersects the p = 0.65 column represents
P(X ≤ 62). See Figure. So, P(X ≤ 62) = 0.0422.

Statistics for Business and Economics (14e)

• The expected value is:
• The variance is:
• The standard deviation is:
TBC
73

• The expected value is:
• The variance is:
• The standard deviation is:

Binomial Probability Distribution Few more examples – your turn

Travelers Corporation, an insurer, has millions of policy holders.
In the past Travelers has made payment to the beneficiaries of
15% of its policyholders on claims relative to accidental death
coverage. A random sample of 10 insurance policy is drawn from
all of Traveler’s policies. Find the probability that the
beneficiaries of 2 of the 10 will be paid on accidental death
claims.
10 ! ( 0.15 )2 ( 1 − 0.15 )(10 −2)
Here, n = 10, p = 0.15 and x = 2 𝑝 ( 𝑥=2 ) =
2 !(𝑛 − 𝑥 ) !
10 ! )2 ( 0.85 )8 ¿ 0.2759
¿ ( 0.15
2!8!

Poisson Probability Distribution (1 of 6)

• A Poisson distributed random variable is often useful in estimating the number
of occurrences over a specified interval of time or space.
• It is a discrete random variable that may assume an infinite sequence of values
(x = 0, 1, 2, . . . ).
• Examples of Poisson distributed random variables:
• number of knotholes in 14 linear feet of pine board
• number of vehicles arriving at a toll booth in one hour
• Bell Labs used the Poisson distribution to model the arrival of phone calls.


Two Properties of a Poisson Experiment
1. The probability of an occurrence is the same for any two intervals of equal
length.
2. The occurrence or nonoccurrence in any interval is independent of the
occurrence or nonoccurrence in any other interval.
Poisson Probability Function:
where:
x = the number of occurrences in an interval
f(x) = the probability of x occurrences in an interval
μ = mean number of occurrences in an interval
e = 2.71828
x! = x(x – 1)(x – 2) . . . (2)(1)

Poisson Probability Function
• Because there is no stated upper limit for the number of occurrences, the
probability function f(x) is applicable for values x = 0, 1, 2, … without limit.
• In practical applications, x will eventually become large enough so that f(x) is
approximately zero and the probability of any larger values of x becomes
negligible.


•
Example: Mercy Hospital
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?
Using the probability function with = 6/hour = 3/half-hour and x = 4




A property of the Poisson distribution is that the mean and variance are equal.

Variance for number of arrivals during 30-minute periods

Computing Probabilities of a Poisson Process
• A McDonald’s manager knows from prior experience that cars arrive at

the drive through at an average rate of two cars per minute between
the hours of 12:00 noon and 1:00 p.m. The random variable X, the
number of cars that arrive between 12:20 and 12:40, follows a Poisson
process.
• Determine and interpret the probability of the following events:
(a) Exactly six cars arrive between 12 noon and 12:05 p.m.
(b) Fewer than six cars arrive between 12 noon and 12:05 p.m.
(c) At least six cars arrive between 12 noon and 12:05 p.m.

• The cars arrive at a rate of two per minute over the time interval
between 12 noon and 1:00 p.m. We know that the random variable X
follows a Poisson process, where x = 0, 1, 2, … . The Poisson probability
distribution function requires a value for l and t. Since the cars arrive
at a rate of two per minute, l = 2. The interval of time we are
interested in is five minutes, so t = 5, and x = 6. We use the Poisson
probability distribution function.

• a) The probability that exactly six cars arrive between 12 noon and
12:05 p.m. is
• On about 6 of every 100 days, exactly six cars will arrive between 12:00
noon and 12:05 p.m.

• b) The probability that fewer than six cars arrive between 12:00 noon
and 12:05 p.m. is
• On about 7 of every 100 days, fewer than six cars will arrive between
12:00 noon and 12:05 p.m.
• c) The probability that at least six cars arrive between 12 noon and
12:05 p.m. is the complement of the probability that fewer than six
cars arrive during that time. That is,
• On about 93 of every 100 days, at least six cars will arrive between
12:00 noon and 12:05 p.m.

End of Chapter 5

5.0 Discrete Probability Distribution

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

5.0 Discrete Probability Distribution

Uploaded by

Copyright:

Available Formats

Business Statistics WMB305-15BF

Arun Dev Bhattarai – The British College 1

Chapter 5: Discrete Probability Distributions

Arun Dev Bhattarai – The British College 2

Arun Dev Bhattarai – The British College 3

Random Variables Rolling a Pair of Dice

Arun Dev Bhattarai – The British College 4

Arun Dev Bhattarai – The British College 5

Arun Dev Bhattarai – The British College 6

Arun Dev Bhattarai – The British College 7

Family size x = Number of dependents reported Discrete

Distance from home to x = Distance in miles from home to Continuous

Own dog or cat x = 1 if own no pet; Discrete

Arun Dev Bhattarai – The British College 8

Discrete Random Variable with a Finite Number of

Arun Dev Bhattarai – The British College 9

Discrete Random Variable with an Infinite Number of

Let x = number of customers arriving in one day, where x can

We can count the customers arriving, but there is no finite

Arun Dev Bhattarai – The British College 10

Discrete Probability Distributions (1 of 8)

Arun Dev Bhattarai – The British College 11

Discrete Probability Distributions (2 of 8)

Arun Dev Bhattarai – The British College 12

Discrete Probability Distributions (3 of 8)

Arun Dev Bhattarai – The British College 13

Discrete Probability Distributions (4 of 8)

Arun Dev Bhattarai – The British College 14

Discrete Probability Distributions (5 of 8)

Arun Dev Bhattarai – The British College 15

Discrete Probability Distributions (6 of 8)

Arun Dev Bhattarai – The British College 16

Discrete Probability Distributions (7 of 8)

where: n = the number of values the

Arun Dev Bhattarai – The British College 17

Discrete Probability Distributions (8 of 8)

Arun Dev Bhattarai – The British College 18

Few Examples (1 of 13)

Arun Dev Bhattarai – The British College 19

Few Examples (2 of 13)

Arun Dev Bhattarai – The British College 20

Few Examples (3 of 13)

Arun Dev Bhattarai – The British College 21

Few Examples (4 of 13)

1 506 506/2000 0.253 0.25

2 390 390/2000 0.195 0.2

4 218 218/2000 0.109 0.05

5 576 576/2000 0.288 0

Total 2000 1 Year

Arun Dev Bhattarai – The British College 22

Few Examples (5 of 13)

2 390 390/2000 0.195

3 310 310/2000 0.155 0.15

5 576 576/2000 0.288 0

Arun Dev Bhattarai – The British College 23

Few Examples (6 of 13)

2 390 390/2000 0.195

5 576 576/2000 0.288 0

f(4) + f(5) = .109 + .288 = .397

Arun Dev Bhattarai – The British College 24

Few Examples (7 of 13)

Arun Dev Bhattarai – The British College 25

Few Examples (8 of 13)

Arun Dev Bhattarai – The British College 26