Statistics with Economics and

Business Applications

Chapter 4 Useful Discrete Probability

Distributions
Binomial, Poisson and Hypergeometric
Probability Distributions
Note 6 of 5E

Review
I. Whats in last two lectures?
Experiment, Event, Sample space, Probability,
Counting rules, Conditional probability,
Bayess rule, random variables, mean,
variance. Chapter 3.
II. What's in this lecture?
Binomial, Poisson and Hypergeometric
Probability Distributions.
Read Chapter 4.
Note 6 of 5E

Introduction
Discrete random variables take on
only a finite or countable number of
values.
There are several useful discrete
probability distributions. We will
learn Binomial and Poisson
distributions.
Note 6 of 5E

The Binomial Random Variable

The coin-tossing experiment is a
simple example of a binomial random
variable. Toss a fair coin n = 3 times
and record x = number of heads.

p(x)

1/8

3/8

3/8

1/8
Note 6 of 5E

The Binomial Random Variable

Many situations in real life resemble the coin
toss, but the coin is not necessarily fair, so that
P(H) 1/2.

Example: A geneticist samples 10

people and counts the number who
have a gene linked to Alzheimers
disease.
Person
Coin:
Number of tosses: n = 10
Head: Has gene
P(has gene) = proportion
in the population who

P(H):
Tail: Doesnt have gene
have the gene.
Note 6 of 5E

The Binomial Experiment

1. The experiment consists of n identical trials.
2. Each trial results in one of two outcomes,
outcomes success
(S) or failure (F).
3. The probability of success on a single trial is p and
remains constant from trial to trial. The probability
of failure is q = 1 p.
4. The trials are independent.
independent
5. We are interested in x, the number of successes in
n trials.

Note 6 of 5E

Binomial or Not?
The independence is a key assumption
that often violated in real life applications

Select two people from the U.S.

population, and suppose that 15% of the
population has the Alzheimers gene.
For the first person, p = P(gene) = .15
For the second person, p P(gene) = .15,
even though one person has been removed
from the population.
Note 6 of 5E

Binomial or Not?
1.
2.
3.
4.

2 out of 20 PCs are defective. We randomly select 3

for testing. Is this a binomial experiment?
The experiment consists of n=3 identical trials
Each trial result in one of two outcomes
The probability of success (finding the defective) is
2/20 and remains the same
The trials are not independent. For example,
P( success on the 2nd trial | success on the 1st trial) =
1/19, not 2/20

Rule of thumb: if the sample size n is relatively large to

the population size N, say n/N >= .05, the resulting
experiment would not be binomial.
Note 6 of 5E

The Binomial Probability

Distribution

SticiGui

For a binomial experiment with n trials and

probability p of success on a given trial, the
probability of k successes in n trials is
PP((xx kk))CC pp qq

nn kk nnkk
kk

nn!!
kk nnkk

pp qq for
forkk 00,1,1,,22,...
,...nn..
kk!!((nnkk)!)!

nn!!
Recall
Recall CC
kk!!((nnkk)!)!
with
withnn!! nn((nn11)()(nn22)...(
)...(22))11and
and00!!11..
nn
kk

Note 6 of 5E

The Mean and Standard

Deviation
For a binomial experiment with n trials and
probability p of success on a given trial, the
measures of center and spread are:

Mean
:: np
Mean
np
22
Variance
:: npq
Variance
npq
Standard
deviation
:: npq
Standard
deviation
npq
Note 6 of 5E

Example
A marksman hits a target 80% of the
time. He fires five shots at the target. What is
the probability that exactly 3 shots hit the
target?
n= 5

success = hit

P ( x 3) C p q
n
3

n 3

p = .8

x = # of hits

5!

(.8)3 (.2)53
3!2!

10(.8)3 (.2) 2 .2048

Note 6 of 5E

Example
What is the probability that more than 3 shots
hit the target?
P ( x 3) C45 p 4 q 54 C55 p 5 q 55
5!
5!
4
1

(.8) (.2)
(.8)5 (.2) 0
4!1!
5!0!

5(.8) 4 (.2) (.8)5 .7373

Note 6 of 5E

Cumulative
Probability Tables
You can use the cumulative probability
tables to find probabilities for selected
binomial distributions.

Find
Find the
the table
table for
for the
the correct
correct value
value of
of n.
n.

Find
Find the
the column
column for
for the
the correct
correct value
value of
of
p.
p.

The
The row
row marked
marked k
k gives
gives the
the cumulative
cumulative
probability,
=6 ofk)
probability, P(x
P(x k)
k) == P(x
P(x == 0)
0) ++
++ P(x
P(x
k)
Note=
5E

Example
k

p = .80

.000

.007

.058

.263

.672

1.000

What is the probability that exactly 3

shots hit the target?
P(
P(xx == 3)
3) == P(x
P(x 3)
3) P(x
P(x 2)
2)
== .263
.263 -- .058
.058
== .205
Check from formula:
.205
P(x = 3) = .2048

Note 6 of 5E

Example
k

p = .80

.000

.007

.058

.263

.672

1.000

What is the probability that more

than 3 shots hit the target?
P(
P(xx >> 3)
3) == 11 -- P(x
P(x 3)
3)
== 11 -- .263
.263 == .737
.737

Check from formula:

P(x > 3) = .7373

Note 6 of 5E

Example
Would it be unusual to find that none
of the shots hit the target?

P(
P(xx == 0)
0) == P(x
P(x 0)
0) == 00
What is the probability that less than 3 shots hit
the target?

P(
P(xx << 3)
3) == P(x
P(x 2)
2) == 0.058
0.058
What is the probability that less than 4 but more
than 1 shots hit the target?

P(1<
P(1<xx << 4)
4) == P(x
P(x 3)
3) -- P(x
P(x 1)
1)
== .263-.007=.256
.263-.007=.256

Note 6 of 5E

Example

Here is the probability distribution

for x = number of hits. What are
the mean and standard deviation
for x?
Mean
Mean:: np
np 55(.(.88)) 44
Standard
deviation
:: npq
Standard
deviation
npq
55(.(.88)(.
)(.22)) ..89
89

Note 6 of 5E

The Poisson Random Variable

The Poisson random variable x is often a model for
data that represent the number of occurrences of a
specified event in a given unit of time or space.

Examples:
The number of calls received by a
switchboard during a given period of time.
The number of machine breakdowns in a day
The number of traffic accidents at a given
intersection during a given time period.
Note 6 of 5E

The Poisson Probability

Distribution
Let x a Poisson random variable. The
probability of k occurrences of this event is
k e
P( x k )
k!
For
Forvalues
valuesof
ofkk==0,0,1,1,2,2,
The
Themean
meanand
and
standard
standarddeviation
deviationof
ofthe
thePoisson
Poissonrandom
random
variable
variableare
are
Mean:
Mean:

Standard
deviation:
Standard deviation:

Note 6 of 5E

Example
The average number of traffic accidents on a
certain section of highway is two per week.
Find the probability of exactly one accident
during a one-week period.
k

2e
e

P( x 1)
k!
1!

2e

.2707

Note 6 of 5E

Cumulative
Probability Tables
You can use the cumulative probability
tables to find probabilities for selected Poisson
distributions.

Find
Find the
the column
column for
for the
the correct
correct value
value of
of ..

The
The row
row marked
marked k
k gives
gives the
the cumulative
cumulative
probability,
probability, P(x
P(x k)
k) == P(x
P(x == 0)
0) ++
++ P(x
P(x == k)
k)
Note 6 of 5E

Example
k
0
1
2
3
4
5
6
7
8

=2
.135
.406
.677
.857
.947
.983
.995
.999
1.000

What is the probability that there is

exactly 1 accident?

P(
P(xx == 1)
1) == P(x
P(x 1)
1) P(x
P(x 0)
0)
== .406
.406 -- .135
.135
== .271
Check from formula:
.271
P(x = 1) = .2707

Note 6 of 5E

Example
k
0
1
2
3
4
5
6
7
8

=2
.135
.406
.677
.857
.947
.983
.995
.999
1.000

What is the probability that 8 or

more accidents happen?
P(
P(xx 8)
8) == 11 -- P(x
P(x << 8)
8)
== 11 P(x
P(x 7)
7)
== 11 -- .999
.999 == .001
.001

Note 6 of 5E

The Hypergeometric
Probability Distribution

m
m
m
m
m
m
m

A bowl contains M red M&M candies and NM blue M&M candies. Select n candies from
the bowl and record x the number of red
candies selected. Define a red M&M to be
a success.
The probability of exactly k successes in n trials is
M
k

M N
nk
N
n

C C
P( x k )
C

Note 6 of 5E

The Mean and Variance

Mean
Mean:: nn

M
M

NN

Variance
Variance :: nn

22

M
M NN M
M

NN NN

NN nn

NN 11
Note 6 of 5E

Example
A package of 8 AA batteries contains 2
batteries that are defective. A student randomly
selects four batteries and replaces the batteries
in his calculator. What is the probability that
all four batteries work?
Success = working battery
N=8
M=6
n=4

6
4

C C
P ( x 4)
8
C4

2
0

6(5) / 2(1)
15

8(7)(6)(5) / 4(3)(2)(1) 70
Note 6 of 5E

Example
What are the mean and variance for the
number of batteries that work?
M
6
n
4 3
N
8

6
4
8
2

N
2

N M N n

N N 1

4
.4286
7
Note 6 of 5E

Key Concepts
The Binomial Random Variable
1. Five characteristics: n identical trials, each resulting in
either success S or failure F; probability of success is p and
remains constant from trial to trial; trials are independent; and
x is the number of successes in n trials.
2. Calculating binomial probabilities
a. Formula: P ( x k ) C n p k q n k
k
b. Cumulative binomial tables
3. Mean of the binomial random variable: np
4. Variance and standard deviation: 2 npq and npq
npq
Note 6 of 5E

Key Concepts
II. The Poisson Random Variable
1. The number of events that occur in a period of time or
space, during which an average of such events are expected
to occur
2. Calculating Poisson probabilities
a. Formula:
b. Cumulative Poisson tables

kkee
PP((xxkk))
kk!!

3. Mean of the Poisson random variable: E(x)

4. Variance and standard deviation: 2 and

Note 6 of 5E

Key Concepts
III. The Hypergeometric Random Variable
1. The number of successes in a sample of size n from a finite
population containing M successes and N M failures
2. Formula for the probability of k successes in n trials:

CCkMkMCCnMnMkkNN
PP((xxkk))
CCnNnN

3. Mean of the hypergeometric random variable:

nn

M
M
NN

4. Variance and standard deviation:

nn

22

M
M NNM
M
NN NN

NNnn

NN11
Note 6 of 5E