Statistics for Business and Economics

Ninth Edition, Global Edition

Chapter 4
Discrete Random
Variables and
Probability
Distributions

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 1

Chapter Goals
After completing this chapter, you should be
able to:
• Interpret the mean and standard deviation for a discrete
random variable
• Use the binomial probability distribution to find probabilities
• Describe when to apply the binomial distribution
• Use the Poisson discrete probability distributions to find
probabilities

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 2

Section 4.1 Random Variables
• Random Variable
– Represents a possible numerical value from a
random experiment

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 3

Discrete Random Variable
• Takes on no more than a countable number of
values
Examples:

– Roll a die twice

Let X be the number of times 4 comes up
(then X could be 0, 1, or 2 times)
– Toss a coin 5 times.
Let X be the number of heads (then
X = 0, 1, 2, 3, 4, or 5)
Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 4
Continuous Random Variable
• Can take on any value in an interval
– Possible values are measured on a continuum

Examples:
– Weight of packages filled by a mechanical filling
process
– Temperature of a cleaning solution
– Time between failures of an electrical component

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 5

Section 4.2 Probability Distributions
for Discrete Random Variables (1 of 2)
Let X be a discrete random variable and x be one of
its possible values
• The probability that random variable X takes
specific value x is denoted P ( X  x)
• The probability distribution function of a random
variable is a representation of the probabilities for
all the possible outcomes.
– Can be shown algebraically, graphically, or with
a table

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 6

Section 4.2 Probability Distributions
for Discrete Random Variables (2 of 2)
Experiment: Toss 2 Coins. Let X = # heads.
Show P  x  , i.e., P  X  x  , for all values of x 

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 7

Probability Distribution Required
Properties
• 0  P ( x)  1 for any value of x

• The individual probabilities sum to 1;

 Px  1
x

(The notation indicates summation over all possible x values)

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 8

Cumulative Probability Function (1 of 2)
• The cumulative probability function, denoted F ( x0 ),
shows the probability that X does not exceed the value x0

F  x0   P  X  x0 
Where the function is evaluated at all values x0
of

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 9

Cumulative Probability Function (2 of 2)
Example: Toss 2 Coins. Let X = # heads.

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 10

Derived Relationship
The derived relationship between the probability
distribution and the cumulative probability distribution
• Let X be a random variable with probability distribution P  x 
and cumulative probability distribution F  x0 . Then

F  x0    P x
x  x0

(the notation implies that summation is over all

possible values of x that are less than or equal to x0 )

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 11

Derived Properties
Derived properties of cumulative probability distributions
for discrete random variables
• Let X be a discrete random variable with cumulative
probability distribution F  x0 . Then
1. 0  F  x0   1 for every number x0
2. For x0  x1 , then F  x0   F  x1 

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 12

Section 4.3 Properties of Discrete
Random Variables
• Expected Value (or mean) of a discrete random
variable X:
E  X      xP  x 
x

• Example: Toss 2 coins,

x = # of heads,
compute expected value of x:

E  x    0  .25   1  .50    2  .25 

 1.0
Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 13
Variance and Standard Deviation
• Variance of a discrete random variable X

  E  X     x    Px
 
2 2 2

  x
Can also be expressed as

 2  E  X 2    2   x 2 P  x    2
x

• Standard Deviation of a discrete random variable X

x    Px
2
   2

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 14

Standard Deviation Example
• Example: Toss 2 coins, X = # heads, compute
standard deviation (recall E  X   1)

x    Px
2

x

0  1 .25   1  1 .50    2  1 .25  

2 2 2
 .50  .707

Possible number of heads

= 0, 1, or 2

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 15

Mean and Variance of Linear Functions
of a Random Variable
• Suppose a contractor was uncertain of the time required to
complete a contract.
• Uncertainty represented by the random variable whose values
= number of days elapsing from the beginning to the completion
of work on the contract.
• Contractor’s concern is not with the time but with the cost of
fulfilling the contract.
• The cost is a function of time.
• So to determine the expected value of “cost”, we need to find
the expected value of “time to completion”.

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 16

Expected Value of Functions of Random
Variables
• Let X be a discrete random variable with probability
distribution P(x), and let g(X) be some function of X.
Then the expected value, E[g(X)], of that function is
defined as follows:

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 17

Summary of Properties for Linear Functions
of a Random Variable

• Let be a random variable with mean and variance and let

and be any constant fixed numbers. Define the random
variable as . Then, the mean and variance of are

and

so that the standard deviation of is

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 18

Example of Linear Functions of a
Random Variable
• A contractor is interested in the total cost of a project on which she
intends to bid. She estimates that materials will cost and that her labor
will be per day. If the project takes X days to complete, the total labor
cost will be dollars, and the total cost of the project (in dollars) will be
as follows:
Using her experience the contractor forms probabilities (Table below) of
likely completion times for the project.
a. Find the mean and variance for completion time X.
b. Find the mean, variance, and standard deviation for total cost C.
Completion Time x (Days) 10 11 12 13 14
Probability 0.1 0.3 0.3 0.2 0.1

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 19

Example of Linear Functions of a
Random Variable
Solution
a. The mean and variance for completion time X can be found using
the following equation:

And

b. The mean, variance and standard deviation of total cost C are

obtained as follows:

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 20

Probability Distributions

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 21

Section 4.4 The Binomial Distribution

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 22

Bernoulli Distribution
• Consider only two outcomes: “success” or “failure”
• Let P denote the probability of success
• Let 1 − P be the probability of failure
• Define random variable X:
x = 1 if success, x = 0 if failure
• Then the Bernoulli probability distribution is

P  0   1  P  and P 1  P

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 23

Mean and Variance of a Bernoulli
Random Variable
• The mean is  x  P
 x  E  X    xP  x    0 1  P   1 P  P
x

• The variance is  x  P 1  P 
2

 x  E  X   x    x  x   x  P  x 
 
2 2 2

  0  P  1  P   1  P  P  P 1  P 
2 2

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 24

Developing Binomial Distribution

• An important generalization of the Bernoulli

distribution concerns the case where a random
experiment with two possible outcomes is
repeated several times.

• The repetitions are independent.

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 25

Developing Binomial Distribution
• Suppose that the probability of a success in a
single trial is P and that n independent trials are
carried out, so that the result of any one trial has
no influence on the outcome of any other.
• The number of successes, X, resulting from these
n trials could be a whole number from 0 to n, and
we are interested in the probability of obtaining
exactly X=x successes in n trials.

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 26

Developing the Binomial Distribution
• The number of sequences with x successes in n
independent trials is:
n n!
C x  x! n  x !
Where n!  n   n –1   n – 2 ··1 and 0!  1
• These sequences are mutually exclusive, since no two can
occur at the same time

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 27

Binomial Probability Distribution
• A fixed number of observations, n
– e.g., 15 tosses of a coin; ten light bulbs taken from a warehouse
• Two mutually exclusive and collectively exhaustive categories
– e.g., head or tail in each toss of a coin; defective or not defective light
bulb
– Generally called “success” and “failure”
– Probability of success is P, probability of failure is 1 − P
• Constant probability for each observation
– e.g., Probability of getting a tail is the same each time we toss the
coin
• Observations are independent
– The outcome of one observation does not affect the outcome of
the other
Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 28
Possible Binomial Distribution
Settings
• A manufacturing plant labels items as either
defective or acceptable
• A firm bidding for contracts will either get a
contract or not
• A marketing research firm receives survey
responses of “yes I will buy” or “no I will not”
• New job applicants either accept the offer or
reject it

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 29

The Binomial Distribution
• Suppose that a random experiment can result in
two possible mutually exclusive and collectively
exhaustive outcomes, “success” and “failure”, and
that P is the probability of success in a single trial.

• If n independent trails are carried out, the

distribution of the number of resulting successes,
x, is called the Binomial distribution.

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 30

The Probability Function of Binomial
Distribution
n!
Px  P 1  P 
x n x

x ! n  x !

P  x   probability of x successes in n
trials, with probability of success
P on each trial Example: Flip a coin four times,
x = number of ‘successes’ in sample, let x = # heads:
( x  0, 1, 2,  , n)
n4
n = sample size (number of
independent trials or observations)
P  0.5
P = probability of “success” 1  P  1  0.5   0.5
x  0, 1, 2, 3, 4
Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 31
Example 1: Calculating a Binomial
Probability
What is the probability of one success in five trials if the
probability of success is 0.1?
x = 1, n = 5, and P = 0.1
n!
P  x  1  P 1  P 
x n x

x ! n  x !
5!
0.1 1  0.1
1 51

1!5  1!
 5  0.1 0.9 
4

 .32805

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 32

Mean and Variance of a Binomial
Distribution
• Mean
  E  x   nP

• Variance and Standard Deviation

 2  nP 1  P 
  nP 1  P 
Where n = sample size
P = probability of success
(1 − P) = probability of failure

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 33

Binomial Characteristics
Examples

  nP  5  0.1  0.5
  nP 1  P   50.11  0.1
 0.6708

  nP  5  0.5   2.5

  nP 1  P   5 0.5 1  0.5 

 1.118

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 34

Using Binomial Tables
Individual probability Table

Examples:
n  10, x  3, P  0.35 : P  x  3 | n  10, p  0.35   .2522
n  10, x  8, P  0.45 : P  x  8 | n  10, p  0.45   .0229
Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 35
Using Binomial Tables
Cumulative probability Table

𝑛=6 , 𝑥 ≤ 3 , 𝑃=0.35 : 𝑃 ( 𝑥 ≤ 3|𝑛=6 , 𝑝=0.35 ¿=0.8826

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 36
Section 4.5 The Poisson
Distribution (1 of 3)

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 37

Section 4.5 The Poisson
Distribution (2 of 3)
• The Poisson distribution is used to determine the
probability of a random variable which characterizes the
number of occurrences or successes of a certain event in
a given continuous interval (such as time, surface area, or
length).

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 38

Section 4.5 The Poisson
Distribution (3 of 3)
• Assume an interval is divided into a very large number of
equal subintervals where the probability of the occurrence
of an event in any subinterval is very small.
Poisson distribution assumptions
1. The probability of the occurrence of an event is constant
for all subintervals.
2. There can be no more than one occurrence in each
subinterval.
3. Occurrences are independent; that is, an occurrence in
one interval does not influence the probability of an
occurrence in another interval.
Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 39
Poisson Distribution Function
The expected number of events per unit is the parameter 
(lambda), which is a constant that specifies the average
number of occurrences (successes) for a particular time
and/or space  x
e 
Px 
x
where:
P  x   the probability of x successes over a given time or space, given 
  the expected number of successes per time or space unit,   0
e = base of the natural logarithm system (2.71828)

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 40

Poisson Distribution Characteristics
Mean and variance of the Poisson distribution

• Mean
x  E  X   
• Variance and Standard Deviation

    
2 2
 E X  
x  x

 
where   expected number of successes per time or space unit

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 41

Using Poisson Tables

Example: Find P  X  2  if   .50

0.50 
 0.50 2
e  e X
P  X  2    .0758
X 2
Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 42
Poisson Distribution Shape
• The shape of the Poisson Distribution depends on
the parameter  :

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 43

Chapter Summary

• Defined discrete random variables and probability

distributions
• Discussed the Binomial distribution
• Discussed the Poisson distribution

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 44