© 2003 Pearson Prentice Hall

Statistics for Business and

Economics
Discrete Random Variables
Chapter 4

4-1
 Learning Objectives
© 2003 Pearson Prentice Hall

1. Distinguish Between the Two Types of

Random Variables
2. Compute the Expected Value &
Variance of Discrete Random Variables
3. Describe the Binomial, Poisson, and
Hypergeometric distributions
4. Calculate Probabilities for Discrete
Random Variables

4-2
 Thinking Challenge
© 2003 Pearson Prentice Hall

You’re taking a 33 question

multiple choice test. Each
question has 4 choices.
Clueless on 1 question, you
decide to guess. What’s
the chance you’ll get it
right?
If you guessed on all 33
questions, what would be
your grade? pass?

4-3
 Data Types
© 2003 Pearson Prentice Hall

Data

Numerical Qualitative

Discrete Continuous

4-4
© 2003 Pearson Prentice Hall

Discrete Random Variables

4-5
 Discrete
© 2003 Pearson Prentice Hall
Random Variable

1. Random Variable
 A Numerical Outcome of an Experiment
 Example: Number of Tails in 2 Coin Tosses
2. Discrete Random Variable
 Whole Number (0, 1, 2, 3 etc.)
 Obtained by Counting
 Usually Finite Number of Values
 Poisson Random Variable Is Exception ( )

4-6
 Discrete Random
© 2003 Pearson Prentice Hall
Variable Examples

Experiment Random Possible

Variable Values
Make 100 Sales Calls # Sales 0, 1, 2, ..., 100

Inspect 70 Radios # Defective 0, 1, 2, ..., 70

Answer 33 Questions # Correct 0, 1, 2, ..., 33

Count Cars at Toll # Cars 0, 1, 2, ..., 

Between 11:00 & 1:00 Arriving
4-7
 Discrete
© 2003 Pearson Prentice Hall
Probability Distribution

1. List of All possible [x, p(x)] pairs

 x = Value of Random Variable (Outcome)
 p(x) = Probability Associated with Value
2. Mutually Exclusive (No Overlap)
3. Collectively Exhaustive (Nothing Left Out)
4. 0  p(x)  1
5.  p(x) = 1
4-8
 Discrete Probability
© 2003 Pearson Prentice Hall
Distribution Example
Experiment: Toss 2 Coins. Count # Tails.
Probability Distribution
Values, x Probabilities, p(x)
0 1/4 = .25
1 2/4 = .50
2 1/4 = .25

© 1984-1994 T/Maker Co.

4-9
 Visualizing Discrete
© 2003 Pearson Prentice Hall
Probability Distributions
Listing Table
# Tails f(x) p(x)
Count
{ (0, .25), (1, .50), (2, .25) } 0 1 .25
1 2 .50
2 1 .25

p(x) Graph Equation

.50
n!
.25 p ( x)  p x (1  p) n  x
x ! ( n  x) !
.00 x
0 1 2
4 - 10
 Summary Measures
© 2003 Pearson Prentice Hall

1. Expected Value
 Mean of Probability Distribution
 Weighted Average of All Possible Values
  = E(X) = x p(x)

2. Variance
 Weighted Average Squared Deviation about
Mean
 2 = E[ (x (x p(x)

4 - 11
 Summary Measures
© 2003 Pearson Prentice Hall
Calculation Table

2 2
x p(x) x p(x ) x- (x -) (x -) 2 p( x )

2
Total x p(x )  (x -) p( x )

4 - 12
 Thinking Challenge
© 2003 Pearson Prentice Hall

You toss 2 coins. You’re

interested in the number
of tails. What are the
expected value &
standard deviation of
this random variable,
number of tails?
© 1984-1994 T/Maker Co.

4 - 13
 Expected Value &
© 2003 Pearson Prentice Hall
Variance Solution*

2 2
x p(x) x p(x ) x- (x -) (x -) 2 p( x )

0 .25 0 -1.00 1.00 .25

1 .50 .50 0 0 0
2 .25 .50 1.00 1.00 .25
2
 = 1.0  2 = .50

4 - 14
© 2003 Pearson Prentice Hall

Discrete Probability
Distribution Function

4 - 15
 Discrete Probability
© 2003 Pearson Prentice Hall
Distribution Function

1. Type of Model
 Representation of Some P (X  x ) 
Underlying phenomenon x -
 e
2. Mathematical Formula
x!
3. Represents Discrete
Random Variable
4. Used to Get Exact
Probabilities

4 - 16
 Discrete Probability
© 2003 Pearson Prentice Hall
Distribution Models

Discrete
Probability
Distribution
Binomial

Poisson

Hypergeometric

4 - 17
© 2003 Pearson Prentice Hall

Binomial Distribution

4 - 18
 Discrete Probability
© 2003 Pearson Prentice Hall
Distribution Models

Discrete
Probability
Distribution
Binomial

Poisson

Hypergeometric

4 - 19
 Binomial Distribution
© 2003 Pearson Prentice Hall

1. Number of ‘Successes’ in a Sample of

n Observations (Trials)
 # Reds in 15 Spins of Roulette Wheel
 # Defective Items in a Batch of 5 Items
 # Correct on a 33 Question Exam
 # Customers Who Purchase Out of 100
Customers Who Enter Store

4 - 20
 Binomial Distribution
© 2003 Pearson Prentice Hall
Properties
1. Two Different Sampling Methods
 Infinite Population Without Replacement
 Finite Population With Replacement

2. Sequence of n Identical Trials

3. Each Trial Has 2 Outcomes
 ‘Success’ (Desired Outcome) or ‘Failure’

4. Constant Trial Probability

5. Trials Are Independent
4 - 21
 Binomial Probability
© 2003 Pearson Prentice Hall
Distribution Function

 n  x n x n! x n x
p ( x)    p q  p (1  p)
 x x!(n  x)!

p(x) = Probability of x ‘Successes’

n = Sample Size
p = Probability of ‘Success’
x = Number of ‘Successes’ in Sample
(x = 0, 1, 2, ..., n)

4 - 22
 Binomial Probability
© 2003 Pearson Prentice Hall
Distribution Example

Experiment: Toss 1 Coin 5 Times in a Row.

Note # Tails. What’s the Probability of 3 Tails?
n! x n x
p( x )  p (1  p )
x !(n  x )!
5! 3 5 3
p(3)  .5 (1 .5)
3 !(5  3)!

 0.3125
4 - 23
 Binomial Probability
© 2003 Pearson Prentice Hall
Table (Portion)
n=5 p
k .01 … 0.50 … .99
0 .951 … .031 … .000
1 .999 … .188 … .000
2 1.000 … .500 … .000
3 1.000 … .812 … .001
4 1.000 … .969 … .049
Cumulative Probabilities
4 - 24
 Binomial Distribution
© 2003 Pearson Prentice Hall
Characteristics

Mean P(X) n = 5 p = 0.1

.6
  E ( x )  np .4
.2
.0 X
0 1 2 3 4 5
Standard Deviation
  np (1  p ) .6
P(X) n = 5 p = 0.5
.4
.2
.0 X
0 1 2 3 4 5

4 - 25
 Binomial Distribution
© 2003 Pearson Prentice Hall
Thinking Challenge
You’re a telemarketer selling
service contracts for Macy’s.
You’ve sold 20 in your last
100 calls (p = .20). If you
call 12 people tonight,
what’s the probability of
A. No sales?
B. Exactly 2 sales?
C. At most 2 sales?
D. At least 2 sales?
4 - 26
 Binomial Distribution
© 2003 Pearson Prentice Hall
Solution*
Using the Binomial Tables:
A. p(0) = .0687 B. p(2) = .2835
C. p(at most 2) = p(0) + p(1) + p(2)
= .0687 + .2062 + .2835
= .5584
D. p(at least 2) = p(2) + p(3)...+ p(12)
= 1 - [p(0) + p(1)]
= 1 - .0687 - .2062
= .7251

4 - 27
© 2003 Pearson Prentice Hall

Poisson Distribution

4 - 28
 Discrete Probability
© 2003 Pearson Prentice Hall
Distribution Models

Discrete
Probability
Distribution
Binomial

Poisson

Hypergeometric

4 - 29
 Poisson Distribution
© 2003 Pearson Prentice Hall

1. Number of Events that Occur in an

Interval
 Events Per Unit
 Time, Length, Area, Space

2. Examples
 # Customers Arriving in 20 minutes
 # Strikes Per Year in the U.S.
 # Defects Per Lot (Group) of VCR’s

4 - 30
 Poisson Process
© 2003 Pearson Prentice Hall

1. Constant Event
Probability
 Average of 60/Hr Is 1/Min
for 60 1-Minute Intervals
2. One Event Per Interval
 Don’t Arrive Together
3. Independent Events
 Arrival of 1 Person Does
Not Affect Another’s Arrival

© 1984-1994 T/Maker Co.

4 - 31
 Poisson Probability
© 2003 Pearson Prentice Hall
Distribution Function

x -
e
p (x) 
x!

p(x) = Probability of x Given 

 = Expected (Mean) Number of ‘Successes’
e = 2.71828 (Base of Natural Logs)
x = Number of ‘Successes’ Per Unit

4 - 32
 Poisson Distribution
© 2003 Pearson Prentice Hall
Characteristics

Mean P(X) = 0.5

.6
  E( x)   .4
.2
N .0 X
  x p( x ) 0 1 2 3 4 5

i 1

.6
P(X) = 6
Standard Deviation .4

   .2
.0 X
0 2 4 6 8 10

4 - 33
 Poisson Distribution
© 2003 Pearson Prentice Hall
Example

Customers arrive at a
rate of 72 per hour.
What is the
probability of 4
customers arriving in
3 minutes?
© 1995 Corel Corp.

4 - 34
 Poisson Distribution
© 2003 Pearson Prentice Hall
Solution

72 Per Hr. = 1.2 Per Min. = 3.6 Per 3 Min. Interval

x -
e
p ( x) 
x!

p (4) 
3.6 e
4 -3.6
 0.1912
4!

4 - 35
 Poisson Probability
© 2003 Pearson Prentice Hall
Table (Portion)
x
 0 … 3 4 … 9
.02 .980 …
: : : : : : :
3.4 .033 … .558 .744 … .997
3.6 .027 … .515 .706 … .996
3.8 .022 … .473 .668 … .994
: : : : : : :
Cumulative Probabilities
4 - 36
 Thinking Challenge
© 2003 Pearson Prentice Hall

You work in Quality

Assurance for an
investment firm. A
clerk enters 75 words
per minute with 6
errors per hour. What
is the probability of 0
errors in a 255-word
bond transaction?
© 1984-1994 T/Maker Co.

4 - 37
 Poisson Distribution
© 2003 Pearson Prentice Hall
Solution: Finding *

75 words/min = (75 words/min)(60 min/hr)

= 4500 words/hr
6 errors/hr = 6 errors/4500 words
= .00133 errors/word
In a 255-word transaction (interval):
 = (.00133 errors/word )(255 words)
= .34 errors/255-word transaction
4 - 38
 Poisson Distribution
© 2003 Pearson Prentice Hall
Solution: Finding p(0)*

x -
e
p ( x) 
x!

p ( 4) 
.34 e
0 -.34
 0.7118
0!

4 - 39
© 2003 Pearson Prentice Hall

Hypergeometric Distribution

4 - 40
 Discrete Probability
© 2003 Pearson Prentice Hall
Distribution Models

Discrete
Probability
Distribution
Binomial

Poisson

Hypergeometric

4 - 41
 Hypergeometric Distribution
© 2003 Pearson Prentice Hall

1. Randomly drawing n elements from a

set of N elements.
2. Population consists of r successes and
(N-r) failures.
3. Random variable x is the number of
S’s in the draw of n elements.

4 - 42
 Hypergeometric Probability
© 2003 Pearson Prentice Hall
Distribution Function
 r  N  r 
  
 x  n  x 
p( x) 
N
 
n
N = Total number of elements
R = Number of S’s in the N elements
n = Number of elements drawn
X = Number of S’s drawn in the n elements

4 - 43
 Hypergeometric
© 2003 Pearson Prentice Hall
Distribution Characteristics

Mean
nr

N
Standard Deviation

2 r ( N  r ) n( N  n)
  2
N (N 1
4 - 44
 Hypergeometric
© 2003 Pearson Prentice Hall
Distribution Example
Suppose 3 people are to
be randomly selected from
a group of 10 entries, six
male and 4 female, to
participate in a new drug
study. Let x be the number
of females selected.
Find the probability that no © 1995 Corel Corp.

females are included in the

study.

4 - 45
 Hypergeometric
© 2003 Pearson Prentice Hall
Distribution Solution

Solution:  4 10  4 
  
 0  3  0 
N = 10 p ( x  0)  p ( 0) 
10 
 
n=3 3
r=4 4! 6!
0!(4  0)! 3!(6  3)! (1)(20) 1
p ( 0)   
10! 120 6
3!(10  3)!

4 - 46
 Conclusion
© 2003 Pearson Prentice Hall

1. Distinguished Between the Two Types of

Random Variables
2. Computed the Expected Value & Variance of
Discrete Random Variables
3. Described the Binomial, Poisson, and
Hypergeometric Distributions
4. Calculated Probabilities for Discrete Random
Variables

4 - 47
 End of Chapter

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