MIS171 Business Analytics

Week 5b: Probability

Unit Schedule
Unit Information
Week 1 Introduction and Data Visualisation
Week 2 Univariate Analyses Assessment task 1 (10%) –
(Participation in Pre lectorial and Lectorial workbook
Week 3 Descriptive activities and continuous class attendance from week 2 to
Bivariate Analyses
week 12)
Week 4 Data visualisation Assessment task 2 (10%) - (Project related Online quiz)
Week 5 Inference Probability
Week 6 Confidence Intervals
Week 7 Hypothesis Testing Assessment task 3 (20%) - (Assignment on analysis and
reporting)
Simple Linear Regression and
Week 8 Predictive Prediction
Week 9 Multiple Linear Regression

Week 10 Multiple Linear Regression in action Assessment task 4 (10%) - (Project related Online quiz)

Week 11 Exam Revision 1

Revision
Week 12 Exam Revision 2
Week 13 Exam Exam (50%)
 Random variables
A random variable is a numerical description of the outcome of
an experiment.

A discrete random variable is one for which the number of

possible outcomes can be counted.

A continuous random variable has outcomes over one or more

continuous intervals of real numbers. They can assume an infinite
number of values on a continuum.

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 Discrete probability distribution

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 Discrete probability distribution

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 Continuous distributions

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 Continuous and normal distributions

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 Core 8 Example

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 Core 8 Example

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 Core 8 Example

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 Core 8 Example

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 Standard normal distribution

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 Using standard normal distributions table

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 Core 8 Example

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 Normal distribution

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 Normal distribution

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Workbook Exercise 4.6

The distribution for customer demand (units per month) is normal with mean = 750
and standard deviation = 100

Find the probability that demand will be:

a. at most 900 units/month

b. exceed 700 units/month
c. be between 700 and 900 units/month
 Normal distribution empirical rules
There are some general rules as to what we can say about the distribution of values around
the mean
μ ± σ covers approximately 68% of observations
μ ± 2σ covers approximately 95% of observations
μ ± 3σ covers approximately 99.7% of observations

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 Normal distribution empirical rules - Example
Weekly demand for a particular brand of a perishable product is assumed to be
approximately normal, with a mean of 150 and a standard deviation of 8.

Management orders the product at the beginning of the week and throws out
leftover stock at the end of the week.

What would you recommend as the minimum and maximum order quantities for
this product? Explain.

Minimum = µ – 3  = 150 – 3×8 = 126

Maximum = µ + 3  = 150 + 3×8 = 174

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 Workbook Exercise 4.7
Weekly demand for a particular brand of a perishable product is assumed to be
approximately normal, with a mean of 150 and a standard deviation of 8.
Management orders the product at the beginning of the week and throws out
leftover stock at the end of the week.

a. What would you recommend as the minimum and maximum order quantities for
this product? Explain.

b. The ordering policy has been to order 160 units of the brand. What is the
probability that some of the product will need to be thrown out at the end of the
week?

c. What should the ordering policy be if they want to ensure that they run out of
stock (‘stockout’) in only about 5% of weeks?
 Week 4 Excel task

Open week 4 Excel task and continue

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 Summary
• In this topic, we studied basic probability concepts and saw how simple, marginal,
joint, and conditional probabilities are calculated from cross tabulations.

• We considered the standard normal distribution (of z) to solve business problem.

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END