Course Business Statistics

Segment Probability Distribution

Faculty Dr. Tarushree Bari
Quick Recap of Segment 2

Random Experiment

Fundamentals of
probability

Addition and Multiplication

Theorem of Probability

Conditional probability
 Probability Distribution
Learning Objectives

At the end of this session, you will be able to:

 Distinguish between discrete and continuous random variables.

 Compute statistics about a function of a random variable.

 Explain the concept of Binomial distribution.

 Identify when a random variable will be normally distributed.

 Explain the significance of the Poisson and Exponential distribution.

 Probability Distribution
Random Variable

Consider a random experiment whose sample space is S. A random variable X is a

function from the sample space S into the set of real numbers R.
 Probability Distribution
Random Variable

Consider the sample space made up of the 16 equally likely points:

Let X be the random variable “the number of girls out of four births.”

A random variable is an uncertain quantity whose value depends on

chance.
 Probability Distribution
Random Variable

• A random variable has a probability law—a rule that assigns probabilities to

the different values of the random variable.
• The probability law, the probability assignment, is called the probability
distribution of the random variable.
• We usually denote the random variable by a capital letter, X.
• The probability distribution will then be denoted by P(X ).
 Probability Distribution
Random Variable
 Probability Distribution
Random Variable
 Probability Distribution
Random Variable

Probability Distribution of the Number of Girls in Four Births

 Probability Distribution
Discrete and Continuous Random Variables

A discrete random variable can assume at most a countable number of

values.

For example, the amount of money you make on an investment may be $500,
or it may be a loss: $200.
 Probability Distribution
Discrete and Continuous Random Variables: Examples

A continuous random variable may take on any value in an interval of

numbers (i.e., its possible values are uncountably infinite).

(i) For example, temperature is a continuous random variable, since it can be

measured as 72.00340981136 . . . °.
(ii) Weight, height, and time are other examples of continuous random
variables
 Probability Distribution
Expected Values of Discrete Random Variables

The expected value of a discrete random variable X is equal to the sum of

all values of the random variable, each value multiplied by its probability
 Probability Distribution
Expected Values of Discrete Random Variables
 Probability Distribution
Variance and Standard Deviation of a Random Variable

The variance of a discrete random variable X is given by

 Probability Distribution
Variance and Standard Deviation of a Random Variable

If X and Y are random variables and a and b are any constants, the
following identities hold:

• V(a) = 0
• V(aX) = a2V(X)
• V(X + b) = V(X)
• V(aX + b) = a2V(X)
• V(X + Y) = V(X) + V(Y), if X and Y are independent
• V(X - Y) = V(X) - V(Y), if X and Y are independent
• V(aX + bY) = a2V(X) + b2V(Y), if X and Y are independent
 Probability Distribution
Exercise

Suppose you are the manager of a coffee shop, and you want to analyze the number
of coffee cups sold each morning. Based on historical data, you've determined the
following probability distribution for the number of coffee cups sold:

0 cups with a probability of 0.10

1 cup with a probability of 0.30
2 cups with a probability of 0.40
3 cups with a probability of 0.15
4 cups with a probability of 0.05
Calculate the following:

The expected number of coffee cups sold each morning (the mean).
The variance of the number of coffee cups sold each morning.
 Probability Distribution
Exercise: Solution

To calculate the expected value (mean) of X, you can use the following formula:
 Probability Distribution
Exercise: Solution

To calculate the variance of X, you can use the following formula:

Var (X)
=(0−1.75)2⋅0.10+(1−1.75)2⋅0.30+(2−1.75)2⋅0.40+(3−1.75)2⋅0.15+(4−1.75)2⋅0.05
 Probability Distribution
Exercise: Solution

To calculate the variance of X, you can use the following formula:

Var (X)
=(0−1.75)2⋅0.10+(1−1.75)2⋅0.30+(2−1.75)2⋅0.40+(3−1.75)2⋅0.15+(4−1.75)2⋅0.05
 Probability Distribution
Binomial Distribution

Consider a fixed number n of mutually independent Bernoulli trails. Suppose

these trials have same probability of success, say p. A random variable
X is called a binomial random variable if it represents the total number of
successes in n independent Bernoulli trials.
 Probability Distribution
Binomial Distribution

Conditions

1. The experiment consists of a fixed number of trials, n.

2. The result of each trial has only two outcomes, namely, success or failure.
3. The probability of success, p, remains constant for each trial.
4. Each trial is independent of the others
 Probability Distribution
Binomial Distribution: Example

• Imagine you are the manager of a manufacturing plant that produces light
bulbs.
• Your quality control process involves testing each light bulb, and you are
interested in understanding the probability of defects in a batch of bulbs.
• You know from historical data that, on average, 5% of the bulbs produced in
your plant are defective.
 Probability Distribution
Binomial Distribution

In this scenario, you can model the number of defective bulbs in a batch as
a binomial distribution. The parameters for this scenario are as follows:

Probability of a defective bulb: p = 0.05

Number of bulbs tested in each batch: n = 20

You can calculate the probability of various outcomes. For example:

• Probability of exactly 3 defective bulbs in a batch (k = 3)

• Probability of no defective bulbs in a batch (k = 0)
• Probability of at least 5 defective bulbs in a batch (k ≥ 5)
 Probability Distribution
Normal Distribution

Normal distribution, also known as the Gaussian distribution, is a probability

distribution that is symmetric about the mean, showing that data near the mean
are more frequent in occurrence than data far from the mean.

• Height of Adults
• IQ Scores
• Errors in Measurement
• Exam Scores
• Blood Pressure in a Healthy Population
 Probability Distribution
Normal Distribution

• A random variable that is normally distributed has the following

properties:
1. It is a continuous probability distribution.
2. It can take on any value between -∞ to + ∞.
3. It is symmetrical about the mean.
4. The total area under the curve equals 1.
5. It is uniquely determined by its mean and variance
 Probability Distribution
Standard Normal Distribution

If X is a random variable following normal distribution with mean μ and standard

deviation σ, then the random variable Z defined as follows :

is called the standard normal variate (S.N.V.).

The standard normal variate (S.N.V.) Z has mean 0 and standard deviation 1.
 Probability Distribution
Standard Normal Distribution
 Probability Distribution
Normal Distribution: Exercise

The hourly wages of 1,000 workmen are normally distributed around a mean of
Rs. 70 and with a standard deviation of Rs. 5. Estimate the number of workers
whose houly wages will be :
(i) between Rs. 69 and Rs. 72 (ii) more than Rs. 75
 Probability Distribution
Poisson Distribution

If we count the number of times a rare event occurs during a fixed interval, then that
number would follow a Poisson distribution.

Poisson distribution may be obtained as a limiting case of Binomial probability

distribution under
the following conditions :

(i) n, the number of trials is indefinitely large i.e., n → ∞.

(ii) p, the constant probability of success for each trial is indefinitely small
i.e., p → 0.
(iii) np = µ, (say), is finite.
 Probability Distribution
Poisson Distribution

(i) The number of telephone calls arriving at a telephone switch board in unit time
(say, per minute).
(ii) The number of customers arriving at the super market ; say per hour.
(iii) The number of defects per unit of manufactured product
(iv) To count the number of bacteria per unit (Biology).
(v) The number of defective material say, pins, blades etc. in a packing manufactured
by a good concern.
(vi) The number of accidents taking place per day on a busy road.
 Probability Distribution
Poisson Distribution

A call center receives an average of 15 customer service calls per hour. What is the
probability that they will receive exactly 10 customer service calls in the next hour?

We want to find the probability of receiving exactly 10 customer service calls in the
next hour. So,
x=10
µ=15
The probability of receiving exactly 1o customer service calls in a given time period
is given by the Poisson probability formula:
 Probability Distribution
Exponential Distribution

The Exponential Distribution is another important distribution and is typically used to

model times between events or arrivals.

The distribution has one parameter, λ which is assumed to be the average rate of
arrivals or occurrences of an event in a given time interval.
 Probability Distribution
Exponential Distribution

i. Service Time in Customer Service: The exponential distribution is used to model

the time service representatives take to assist customers in a call center or
service center.

ii. Inventory Management: It is used to model the time between customer

purchases or requests, which is essential for inventory management and supply
chain optimization.

iii. Queuing Theory: In queuing models, the exponential distribution is used to

describe the time between customer arrivals at a service point.
 Probability Distribution
Exercise

The probability that X passed in maths is 2/3. The probability that he passed in
statistics is 4/9. The probability that he passed in atleast one subject is 4/5. What
is the probability that he passed in both subjects ?

Let A be the event that Mr. X passed in maths, i.e.. P(A) = 2/3 and B be the event
that Mr. X passed in statistics, i.e. P(B) = 4/9. Then P(A ∪ B) = 4/5. The probability
that he passed in at least one subject is given by
 Probability Distribution
SUMMARY

1) A random variable is one that can assume any one of many possible values with
known probabilities.
2) Random variables can be combined into a new random variable in which the expected
value and variance can be found.
3) A binomial random variable indicates the total number of successes in the n trials of a
binomial experiment.
4) The normal distribution is symmetric about its mean and is uniquely determined by
its mean and standard deviation,
5) A Poisson random variable indicates the number of successes that occur during a
given time interval or in a specified region in a Poisson experiment.
6)An exponential random variable can be used to measure the time that elapses
between occurrences of an event.