Statistics with Economics and

Business Applications

Probability and Discrete Probability

Distributions

Experiment, Event, Sample space, Probability, Counting rules,

Conditional probability, Bayes’s rule, random variables, mean,
variance
5E Note 4
 Recommended Text Books
❑ Introduction to Statistics By: RONALD
WALPOLE, 3rd Edition.

❑ Statistics for Management by: Richard I.

Levin.

❑ Introduction to Statistics Theory by: Prof.

Sher Muhammad Choudary

❑ Statistics – Concepts & Methods by: S.

khurshed Alam. 5E Note 4
 Review

II. What's in this and the next two lectures?

Experiment, Event, Sample space, Probability,
Counting rules, Conditional probability,
Bayes’s rule, random variables, mean, variance.

5E Note 4
 Learning Objectives
Statistics can be broken into two basic types:
• Sampling Methods
STATISTICS

DESCRIPTIVE INFERENTIAL
STATISTICS STATISTICS

describes data allows you to make

(for example, a chart or predictions (“inferences”)
from that data
graph)
5E Note 4
© 2002 Thomson / South-Western
 What is Statistics?
• Science of gathering, analyzing, interpreting, and
presenting data
• Branch of mathematics
• Course of study
• Facts and figures
• A death
• Measurement taken on a sample
• Type of distribution being used to analyze data
• Statistics can also refer to the art and science of collecting,
analyzing, presenting, and interpreting data.
5E Note 4
 Descriptive and Inferential Statistics
Descriptive statistics uses the Inferential statistics makes
data to provide descriptions of inferences and predictions
the population, either through about a population based on a
numerical calculations or sample of data taken from the
graphs or tables. population in question.

Gives information and Describes the Inferential statistics is used to make

data in some manner. Or. the generalization about the
Data only provide information is population based on the samples. Or.
called Descriptive, not much the Data which provide you information
future planning. that can make the future prediction.
Eg: Cricket Graph.
Prediction of future from
previous records and also the
much more in Business.
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Descriptive Statistics

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5E Note 4
 Inferential Statistics
• Inferential Statistics.
Methods that making decisions or predictions
about a population based on sampled data.
To generalize the information which is obtained
from sample survey.
Hypothesis: A claim about population. (To test claim
by sample info:)
Parameter: to calculate average from population
called parameter.
Estimator: To calculate the average from Sample
5E Note 4
called Estimator.
 Descriptive Statistics and Graphical
Presentation of Data
1. Terminology
2. Central Tendency (Mean, Median, mode
etc)
3. Frequency Distributions/Histograms
4. Measures of data location
5. Measures of data spread
6. Box-plots
7. Scatter-plots
8. Clustering (Multivariate Data)
5E Note 4
10
 Statistical Inference
1. Probability Theory
2. Distributions & Densities
3. Normal Distribution
4. Sampling Distribution & Central Limit
Theorem
5. Estimation (Point Estimation, Interval
Estimation)
6. Hypothesis Tests
7. P-values
8. Confidence Intervals
9. Two-Sample Inferences
5E Note 4
10. Paired Data 11
 INFERENTIAL STATISTICS
1. Two-Sample Inferences
– Paired t-test
– Two-sample t-test
2. Inferences for more than two samples
– One-way ANOVA
– Two-way ANOVA
– Interactions in Two-way ANOVA
1. Data Desk demo.
5E Note 4
12
 INFERENTIAL STATISTICS
1. Chi Square
2. Regression
3. Correlation
4. Multiple Regression
5. ANNOVA
6. Normality Checks
7. Non-parametric
8. Sample Size Calculations
9. Useful tools and websites
5E Note 4
13
 Why Learn Probability?
• Nothing in life is certain. In everything we do, we gauge
the chances of successful outcomes, from business to
medicine to the weather
• A probability provides a quantitative description of the
chances or likelihoods associated with various outcomes
• It provides a bridge between descriptive and inferential
statistics

Probability
Population Sample
Statistics
5E Note 4
 Probabilistic vs Statistical Reasoning
• Suppose I know exactly the proportions of
car makes in California. Then I can find the
probability that the first car I see in the
street is a Ford. This is probabilistic
reasoning as I know the population and
predict the sample

• Now suppose that I do not know the

proportions of car makes in California, but
would like to estimate them. I observe a
random sample of cars in the street and then
I have an estimate of the proportions of the
population. This is statistical reasoning ~
5E Note 4
 What is Probability?
Proportion of time an outcome will occur.

We call any happening whose result is uncertain in

experiment.

Happening of any action whose result is uncertain.

Possibility of equally likely chances of occurrence.

Each and every unit of population has an equal and

identical chance to be included in sample. Note 5 of 5E
 Basic Concepts
An EXPERIMENT is the process by which an
observation (or measurement) is obtained.
An Experiment is some thing which result in an outcome.

Each repetition of an experiment is called TRAIL .

The Possible Result of an experiment is called OUTCOME.

Note 5 of 5E
 Basic Concepts
SAMPLE SPACE.:
Connected with Universal Set. (The set of total possible
outcomes of an experiment is called SAMPLE SPACE,
denoted by “S”)
Eg: Throughing or Rolling a Six sided Cubic dice.
S= {1, 2, 3, 4, 5, 6 }

An EVENT: A sub set of a sample space is Called an EVENT.

An event is an outcome of an experiment, usually denoted by a capital

letter.
The basic element to which probability is applied, When an experiment
is performed, a particular event either happens, or it doesn’t!
eg: Let A be the EVENT in above Example, such that the upper
number of dice contains even number. A= {2, 4, 6}Note 5 of 5E
Experiments and Events
• Experiment: Roll a die
– A: observe an odd number
– B: observe a number greater than 2

Note 5 of 5E
 Example
• The die toss:
• Simple events: Sample space:
1 E1
S ={E1, E2, E3, E4, E5, E6}
2 E2
S
3 E3 •E1 •E3
4 E4 •E5
5 E5 •E2 •E4 •E6
6 E6
Note 5 of 5E
 Finding the SAMPLE SPACE
• An experiment consists of tossing a
Six sided cubic dice:

• A. What is the SAMPLE SPACE?

• B. Describe the EVENT corresponding
to a number greater than TWO
turning up?

Note 5 of 5E
 Finding the SAMPLE SPACE

• A. What is the SAMPLE SPACE?

S = {1, 2, 3, 4, 5, 6 }

B. Describe the EVENT corresponding to a

number greater than TWO turning up?

A = { 3, 4, 5, 6 }

Note 5 of 5E
Find the SAMPLE SPACE of Following

a. One Coin is Tossed

b. Two Coins are Tossed

c. Three Coins are Tossed

Note 5 of 5E
Find the SAMPLE SPACE of Following
a. One Coin is Tossed
Since the Coin will land wither HEAD or TAIL,
so the sample space is
S = { H, T }

b. Two Coins are Tossed

Since Either Coin land Head or Tail, so possible
outcomes are as follows:
Note 5 of 5E
Find the SAMPLE SPACE of Following
b. Two Coins are Tossed
Since Either Coin land Head or Tail, so possible
outcomes are as follows:

Note 5 of 5E
Find the SAMPLE SPACE of Following
b. THREE Coins are Tossed
The THREE COINS are tossed then the SAMPLE
SPACE is:

Note 5 of 5E
 The Probability
of an Event
• The probability of an event A measures “how
often” A will occur. We write P(A).
• Suppose that an experiment is performed n
times. The relative frequency for an event A is
Number of times A occurs f
=
n n

Note 5 of 5E
 The Probability of an Event
• To count the probability of an event, we must count the
number of elements in event “A” either n(A) and the number of
elements in Sample Space n(S).
• Where the probability of an EVENT A is denoted by P(A), and is

• defined as P(A) =

• Where.
• P(A) is favorable cases.
• P(S) is Possible cases.

• “how often” A will occur.

Note 5 of 5E
 PROPERTIES of Probability of an Event

• Let “A” be the event which is sub set of finite sample space (S) then.
•

• 2. P( ) = 0 (Where Let, A be the event which is unsure or impossible

• then) P(A) = 0 (Moreover, the Statement P (A) =0
means that event A can not occur, & we call A an impossible event.)

• 3. P (S) = 1. (Where Let, A be the event which is sure or certain

• then) P(A) = 1

Note 5 of 5E
Finding the ROBABILITY OF an EVENT:
EX: 01
a. TWO coins are tossed, what is the
probability that both land HEADS?

b. A card is Drawn from the standard Deck

of playing cards, what is the probability
that it is an ACE?

Note 5 of 5E
Finding the ROBABILITY OF an EVENT:
a. TWO coins are tossed, what is the
probability that both land HEADS?

Note 5 of 5E
Finding the ROBABILITY OF an EVENT:
b. A card is Drawn from the standard Deck
of playing cards, what is the probability
that it is an ACE?

Note 5 of 5E
Finding the ROBABILITY OF an EVENT:
EX: 02
Two Six sided cubic dice are tossed, what is the
probability that the total of two dice is 7?

Solution:
Since there are Six possible outcomes in each
dice, we use the Multiplication principle to
conclude that there are:

Note 5 of 5E
Finding the ROBABILITY OF an EVENT:
Ex: 2: Two Six sided cubic dice are tossed, what is
the probability that the total of two dice is 7?

Note 5 of 5E
Finding the ROBABILITY OF an EVENT:

Note 5 of 5E