Chapter 03 - Random Variables PDF

International University IU
STATISTICS FOR BUSINESS [IUBA]

CHAPTER 03
RANDOM VARIABLES
PART 1
1. Random Variable X Probability P(X) Cumulative Distribution Function F(X)
Random Variable Probability Cumulative Distribution Function

X P(X) F(X)
0 0.1 0.1
1 0.2 0.3
2 0.3 0.6
3 0.2 0.8
4 0.1 0.9
5 0.1 1.0
1.0
P(x) 0 for all values x
Statistics for Business | Chapter 03: Random Variables

F(x) = P(X x) = P(x)
P(x) = 1

2. Expected Value, Variance, and Standard Deviation of Random Variable X
Expected Value (Mean) = E(X) = xP(x)
Variance = V(x) = E[(x ) ] = (x ) P(x)
Standard Deviation = SD(X) = V(X)
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CALCULATOR INSTRUCTIONS FOR STATISTICS

Note: This page is only relevant for CASIO scientific calculator FX-570ES and FX-
570ES PLUS
Calculate Mean and Standard Deviation of Random Variable X.
(Chapter 03 | Random Variables)
For CASIO scientific calculator FX-570ES
Step 01: Press MODE 3: STAT 1: 1 - VAR
SHIFT + MODE | [SET UP]
REPLAY
4: STAT
1: ON (Frequency ?)
Step 02: Input the data into two columns
Step 03: Calculate the expected value of the random variable X

No.01: Put the cursor in the (n+1)th line and FREQ column
No.02: Press SHIFT + 1 | [STAT]
5: VAR
2:
[=]
Step 04: Calculate the standard deviation of the random variable X
No.01: Return the table of data and put the cursor in the (n+1)th line
and FREQ column.
No.02: Press [ DEL ] to delete the value of the expected value in step 03.
(This step is very important for you to remember. If you do not delete
the expected value you had already computed, you will get the wrong
result in this computation)
5: VAR
3:
[=]
Step 04: Calculate the variance of the random variable X
We can get the value of the variance of the random variable X by using
the following formula:
( )=[ ( )]
For CASIO scientific calculator FX-570ES PLUS
REPLAY
4: STAT

1: ON (Frequency ?)
Step 03: Press AC
No.01: Put the cursor in the (n+1)th line and FREQ column
4: VAR
2:
[=]
No.01: Return the table of data and put the cursor in the (n+1)th line
and FREQ column.
No.02: Press [ DEL ] to delete the value of the expected value in step 03.
(This step is very important for you to remember. If you do not delete
the expected value you had already computed, you will get the wrong
result in this computation)
4: VAR
3:
[=]
We can get the value of the variance of the random variable X by using
the following formula:
( )=[ ( )]

Example | Part 1
PROBLEM: The number of defects in a machine-made product is a random variable X with the
following probability distribution:
x P(x)
0 0.1
1 0.2
2 0.3
3 0.3
4 0.1
a. Show that P(x) is a probability distribution.
b. Find the probability (1 < 3).
c. Find the probability (1 < 4)
d. Find the cumulative distribution function F(x).
e. Find the expected value, variance, and standard deviation of the random
variable X.
SOLUTION: a.
P(x) = P(0) + P(1) + P(2) + P(3) + P(4)

= 0.1 + 0.2 + 0.3 + 0.3 + 0.1 = 1.0
Hence, P(X) is a probability distribution
b.
P(1 < 3) = P(2) + P(3) = 0.3 + 0.3 = 0.6
c.
P(1 < 4) = P(2) + P(3) + P(4) = 0.3 + 0.3 + 0.1 = 0.7
d.
x P(x) F(X)
0 0.1 0.1
1 0.2 0.3
2 0.3 0.6
3 0.3 0.9
4 0.1 1.0
e.
General Method
( ) ( ) ( ) ( )
0 0.1 0.0 0.441

1 0.2 0.2 0.242
2 0.3 0.6 0.003
3 0.3 0.9 0.243
4 0.1 0.4 0.361
2.1 1.29
Expected Value (Mean):

E(X) = xP(x) = 2.1

Variance:
V(X) = (x ) P(x) = 1.29

Standard Deviation:
SD(X) = V(X) = 1.29 1.1358
Calculator Method
To calculate the expected value, standard deviation, and variance by
using the calculator, we follow these steps:
For CASIO scientific calculator FX-570ES

REPLAY
4: STAT
1: ON (Frequency ?)
Step 03: Compute the expected value of the random variable X

No.01: Put the cursor in the 6th line and FREQ column
5: VAR
2:
[=]
(The available result you can get is 2.1)
Step 04: Compute the standard deviation of the random variable X

No.01: Return the table of data and put the cursor
in the 6th line and FREQ column.
No.02: Press [ DEL ] to delete the value of the

expected value in step 03.
(This step is very important for you to
remember. If you do not delete the expected
value you had already computed, you will get
the wrong result in this computation)
5: VAR
3:
[=]
Step 04: Compute the variance of the random variable X

Since ( )= ( ) or ( ) = [ ( )] , we can get the
result as following
( ) = [ ( )] = (1.135781669) = .
For CASIO scientific calculator FX-570ES PLUS

REPLAY
4: STAT
1: ON (Frequency ?)
Step 03: Press AC

No.01: Put the cursor in the 6th line and FREQ column
4: VAR
2:
[=]

No.01: Return the table of data and put the cursor
in the 6th line and FREQ column.
No.02: Press [ DEL ] to delete the value of the
expected value in step 03.
(This step is very important for you to

remember. If you do not delete the expected
value you had already computed, you will get
the wrong result in this computation)
4: VAR
3:
[=]

Since ( )= ( ) or ( ) = [ ( )] , we can get the
result as following
( ) = [ ( )] = (1.135781669) = .
PART 2
1. Binomial Distribution: ~ ( , )
Let be the number of trials

be the probability of success
Conditions for a Binominal Random Variable

The trials must be Bernoulli trials in that the outcomes can only be either success or failure.
The outcomes of the trials must be independent.
The probability of success in each trial must be constant.
( = )= ( )( )
= , ,,
( )=
( )= ( )
Example | Part 2.1: (Case of Binomial Distribution)

PROBLEM:
A salesperson goes door-to-door in a residential area to demonstrate the use of a new

household appliance to potential customers. At the end of a demonstration, the probability that
the potential customer would place an order for the product is a constant 0.2107. To perform
satisfactorily on the job, the salesperson needs at least four orders. Assume that each
demonstration is a Bernoulli trial.
a. If the salesperson makes 15 demonstrations, what is the probability that there would be
exactly 4 orders?
SOLUTION
With = 0.2107 and = 15, the probability that there would be EXACTLY 4 orders:
( = 4) = 15 (0.2107) (1 0.2107)
4
With the calculator, you type as following
( )( . ) ( . )
After pressing [ = ], we can get the result .
b. If the salesperson makes 16 demonstrations, what is the probability that there would be at
most 4 orders?
SOLUTION
With = 0.2107 and = 16, the probability that there would be AT MOST 4 orders:
( 4) = (0) + (1) + (2) + (3) + (4)
16
= (0.2107) (1 0.2107)
With the calculator, you use the following method
Step 01: Press SHIFT + [ log ] | [ ]
Step 02: Type

( )( . ) ( . )
Note: Press ALPHA + [ ) ] | [ X ] to get sign X in the formula
Step 03: Press [ = ], we can get the result .
c. If the salesperson makes 17 demonstrations, what is the probability that there would be at
least 4 orders?
SOLUTION:
With = 0.2107 and = 17, the probability that there would be AT LEAST 4 orders:
( 4) = (4) + (5) + (6) + + (17)
17
= (0.2107) (1 0.2107)
Step 02: Type
( )( . ) ( . )
d. If the salesperson makes 18 demonstrations, what is the probability that there would be
anywhere from 4 to 8 (both inclusive) orders?
SOLUTION
With = 0.2107 and = 18, the probability that there would be FROM 4 TO 8 orders:

(4 8) = (4) + (5) + (6) + (7) + (8)
18
= (0.2107) (1 0.2107)
Step 02: Type
( )( . ) ( . )
e. If the salesperson wants to be at least 90% condent of getting at least 4 orders, at least how
many demonstrations should she make?
SOLUTION:
With = 0.2107, ( 4) 0.9, and unknown , the probability that there would be AT
LEAST 4 orders:
( 4) = (4) + (5) + + ( ) 0.9
= (0.2107) (1 0.2107) 0.9
Note: The calculator cannot provide you the final value , so you have to try the different values
you can guess in the formula until you can find out the value which can satisfy the condition
( ) . .
With = 17 Step 01: Press SHIFT + [ log ] | [ ]

Step 02: Type
( )( . ) ( . )

Step 02: Type
( )( . ) ( . )

Step 02: Type
( )( . ) ( . )

Step 02: Type
( )( . ) ( . )

By using the calculator, we can find out that =
f. The salesperson has time to make only 22 demonstrations, and she still wants to be at least
90% condent of getting at least 4 orders. She intends to gain this condence by improving the
quality of her demonstration and thereby improving the chances of getting an order at the end
of a demonstration. At least to what value should this probability be increased in order to gain
the desired condence? Your answer should be accurate to four decimal places.
SOLUTION:
With = 22, ( 4) 0.9, and unknown , the probability that there would be AT LEAST 4
orders:
( 4) = (4) + (5) + + ( ) 0.9
22
= ( ) (1 ) 0.9
Note: The calculator cannot provide you the final value , so you have to try the different values you
can guess in the formula until you can find out the value which can satisfy the condition ( )
. .
With = 0.2107 Step 01: Press SHIFT + [ log ] | [ ]

Step 02: Type

( )( . ) ( . )

Step 02: Type
( )( . ) ( . )

Step 02: Type
( )( . ) ( . )
By using the calculator, we can find out that 0.28
2. Hypergeometric Distribution: ~ ( , , )
Let us derive the formula for ( = ) when is hypergeometrically distributed. The

number of successes have to come from the successes in the pool, which can happen in
ways. Th( ) failures have to come from the ( ) failures in the pool, which

can happen in ways. Together the successes and ( ) failures can happen

in ways. Finally, there are ways of selecting a sample of size .

( = )= ( , + ) ( , )
( )= = ( / )
( )= ( )
Example | Part 2.2: (Case of Hypergeometric Distribution)

PROBLEM
A committee of 7 members is to be formed by selecting members at random from a pool of 14

candidates consisting of 5 women and 9 men.
a. What is the probability that there will be at least three women in the committee?
SOLUTION:
With = 14, = 5 (women), and = 7, the probability that there will be at least three
women in the committee:
(3 5) = (3) + (4) + (5)
5 14 5
= 7
14
7
Step 02: Type
( ) ( ) ( )
b. It is desired to increase the chance that there are at least three women in the committee to
80% by doing one of the following:
i. Adding more women to the pool.
SOLUTION
=7
= + 9 (the pool of candidates consisting of women and 9 men)

The probability that there are AT LEAST 3 women in the committee:
(3 7) = (3) + (4) + (5) + (6) + (7) 0.8
( + 9) 9
= 7 = 7 0.8
+9 +9
7 7
Note: The calculator cannot provide you the final value , so you have to try the different values you
can guess in the formula until you can find out the value which can satisfy the condition (
) . .
With =7 Step 01: Press SHIFT + [ log ] | [ ]
Step 02: Type
( ) ( )
( + )
Step 02: Type
( ) ( )
( + )
Step 02: Type
( ) ( )
( + )
By using the calculator, we can find out = 9. It means that it is desired to increase the chance
that there are at least three women in the committee to 80% by adding 4 more women to the
pool with a pool of 18 candidates consisting of 9 women and 9 men.

ii. Removing some men from the pool.
SOLUTION:
=7
=5+ (the pool of candidates consisting of 5 women and men)
The probability that there are AT LEAST 3 women in the committee:
(3 5) = (3) + (4) + (5) 0.8
5 (5 + ) 5 5
= 7 = 7 0.8
5+ 5+
7 7
Note: The calculator cannot provide you the final value , so you have to try the different values
you can guess in the formula until you can find out the value which can satisfy the condition
( ) . .

Step 02: Type
( ) ( )
( + )
Step 02: Type
( ) ( )
( + )
Step 02: Type
( ) ( )
( + )

By using the calculator, we can find out = 6. It means that it is desired to increase the
chance that there are at least three women in the committee to 80% by removing 3 men from
the pool with a pool of 11 candidates consisting of 5 women and 6 men.

Chapter 03 - Random Variables PDF

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International University IU

STATISTICS FOR BUSINESS [IUBA]

Random Variable Probability Cumulative Distribution Function

Statistics for Business | Chapter 03: Random Variables

2. Expected Value, Variance, and Standard Deviation of Random Variable X

Expected Value (Mean) = E(X) = xP(x)

Variance = V(x) = E[(x ) ] = (x ) P(x)

Standard Deviation = SD(X) = V(X)

CALCULATOR INSTRUCTIONS FOR STATISTICS

Calculate Mean and Standard Deviation of Random Variable X.