Probability

Distributions
• Probability distributions are related to frequency distributions.
• A political candidate for local office is considering the votes she can
get in a coming election. Assume that votes can take on only four
possible values. If the candidate’s assessment is like this:
• frequency distribution is a listing of the observed frequencies of all
the outcomes of an experiment that actually occurred when the
experiment was done, whereas a probability distribution is a listing of
the probabilities of all the possible outcomes that could result if the
experiment were done
Types of Probability Distributions
• Discrete probability distributions
• Continuous probability distributions
• A discrete probability can take on only a limited number of values,
which can be listed
• The probability that you were born in a given month is also discrete
because there are only 12 possible values (the 12 months of the year)
• In a continuous probability distribution, on the other hand, the
variable under consideration is allowed to take on any value within a
given range, so we cannot list all the possible values.
RANDOM VARIABLES
• A variable is random if it takes on different values as a result of the
outcomes of a random experiment.
• A random variable can be either discrete or continuous.
• If a random variable is allowed to take on only a limited number of
values, which can be listed, it is a discrete random variable.
• On the other hand, if it is allowed to assume any value within a given
range, it is a continuous random variable.
• A breast-cancer screening clinic, for example, has no way of knowing
exactly how many women will be screened on any one day, so
tomorrow’s number of patients is a random variable.
• The values of a random variable are the numerical values
corresponding to each possible outcome of the random experiment.
• If past daily records of the clinic indicate that the values of the
random variable range from 100 to 115 patients daily, the random
variable is a discrete random variable.
The Expected Value of a Random Variable
USE OF EXPECTED VALUE IN
DECISION MAKING
• A fruit and vegetable wholesaler who sells strawberries. This
product has a very limited useful life. If not sold on the day of
delivery, it is worthless. One case of strawberries costs $20, and the
wholesaler receives $50 for it. The wholesaler cannot specify the
number of cases customers will call for on any one day, but her
analysis of past records has produced the information
Types of Losses Defined
• Obsolescence losses.
• Opportunity losses.
THE BINOMIAL DISTRIBUTION
• One widely used probability distribution of a discrete random variable
is the binomial distribution.
• It describes a variety of processes of interest to managers. The
binomial distribution describes discrete, not continuous, data,
resulting from an experiment known as a Bernoulli process, after the
seventeenth-century Swiss mathematician Jacob Bernoulli.
Use of the Bernoulli Process
• Each trial (each toss, in this case) has only two possible outcomes:
heads or tails, yes or no, success or failure.
• The probability of the outcome of any trial (toss) remains fixed over
time. With a fair coin, the probability of heads remains 0.5 each toss
regardless of the number of times the coin is tossed.
• The trials are statistically independent; that is, the outcome of one
toss does not affect the outcome of any other toss
Calculate Probability of 2 head in 3 trials of a fair coin
Some Graphic Illustrations of the
Binomial Distribution
• Five workers are in the pharmacy. The owner has studied the situation
over a period of time and has determined that there is a 0.4 chance of
any one employee being late and that they arrive independently of
one another. How would we draw a binomial probability distribution
illustrating the probabilities of 0, 1, 2, 3, 4, or 5 workers being late
simultaneously?
• p = 0.4 q = 0.6 n = 5*
Measures of Central T endency and
Dispersion for the Binomial
Distribution
THE POISSON DISTRIBUTION
• The Poisson distribution is named for Siméon Denis Poisson (1781–
1840), a French mathematician who developed the distribution from
studies during the latter part of his lifetime
• The Poisson distribution is used to describe a number of processes,
including the distribution of telephone calls going through a
switchboard system, the demand (needs) of patients for service at a
health institution, the arrivals of trucks and cars at a tollbooth, and
the number of accidents at an intersection.
• These examples all have a common element: They can be described
by a discrete random variable that takes on integer (whole) values (0,
1, 2, 3, 4, 5, and so on). The number of patients who arrive at a
physician’s offi ce in a given interval of time will be 0, 1, 2, 3, 4, 5, or
some other whole number. Similarly, if you count the number of cars
arriving at a tollbooth on the New Jersey Turnpike during some 10-
minute period, the number will be 0, 1, 2, 3, 4, 5, and so on.
• The number of vehicles passing through a single turnpike tollbooth at
rush hour serves as an illustration of Poisson probability distribution
characteristics.
• Suppose that we are investigating the safety of a dangerous
intersection. Past police records indicate a mean of fi ve accidents per
month at this intersection. The number of accidents is distributed
according to a Poisson distribution, and the Highway Safety Division
wants us to calculate the probability in any month of exactly 0, 1, 2, 3,
or 4 accidents.