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COMPLETE
BUSINESS
STATISTICS
by
AMIR D. ACZEL
&
JAYAVEL SOUNDERPANDIAN
6th edition.
3-2
Chapter 3
Random Variables
3-3
3 Random Variables
Using Statistics
Expected Values of Discrete Random Variables
Sum and Linear Composite of Random Variables
Bernoulli Random Variable
The Binomial Random Variable
The Geometric Distribution
The Hypergeometric Distribution
The Poisson Distribution
Continuous Random Variables
Uniform Distribution
The Exponential Distribution
3-4
3 LEARNING OBJECTIVES
After studying this chapter you should be able to:
Distinguish between discrete and continuous random variables
Explain how a random variable is characterized by its probability
distribution
Compute statistics about a random variable
Compute statistics about a function of a random variable
Compute statistics about the sum or a linear composite of a
random variable
Identify which type of distribution a given random variable is
most likely to follow
Solve problems involving standard distributions manually using
formulas
Solve business problems involving standard distributions using
spreadsheet templates.
3-5
If girl and boy are each equally likely [P(G) = P(B) = 1/2], and the
gender of each child is independent of that of the previous child,
then the probability of each of these 16 possibilities is:
(1/2)(1/2)(1/2)(1/2) = 1/16.
3-6
Random Variables
Now count the number of girls in each set of four sequential births:
Notice that:
• each possible outcome is assigned a single numeric value,
• all outcomes are assigned a numeric value, and
• the value assigned varies over the outcomes.
BBBB 0
BGBB
GBBB 1
BBBG
BBGB
GGBB
GBBG X
BGBG 2
BGGB
GBGB
BBGG
BGGG
GBGG 3
GGGB
GGBG
GGGG 4 Points on the
Real Line
Sample Space
3-8
Since the random variable X = 3 when any of the four outcomes BGGG, GBGG,
GGBG, or GGGB occurs,
P(X = 3) = P(BGGG) + P(GBGG) + P(GGBG) + P(GGGB) = 4/16
The probability distribution of a random variable is a table that lists the
possible values of the random variables and their associated probabilities.
x P(x)
0 1/16
1 4/16 The Graphical Display for this
2 6/16 Probability Distribution
3 4/16 is shown on the next Slide.
4 1/16
16/16=1
3-9
0.3
Probability, P(X)
4/16 4/16
0.2
0.1
1/16 1/16
0.0
0 1 2 3 4
Number of Girls, X
3-10
Example 3-1
Consider the experiment of tossing two six-sided dice. There are 36 possible
outcomes. Let the random variable X represent the sum of the numbers on
the two dice: x P(x)* Probability Distribution of Sum of Two Dice
2 1/36
3 2/36 0.17
2 3 4 5 6 7 4 3/36
5 4/36 0.12
1,1 1,2 1,3 1,4 1,5 1,6 8 6 5/36
p(x)
2,1 2,2 2,3 2,4 2,5 2,6 9 7 6/36
0.07
3,1 3,2 3,3 3,4 3,5 3,6 10 8 5/36
4,1 4,2 4,3 4,4 4,5 4,6 11 9 4/36
10 3/36 0.02
5,1 5,2 5,3 5,4 5,5 5,6 12 11 2/36 2 3 4 5 6 7 8 9 10 11 12
x
6,1 6,2 6,3 6,4 6,5 6,6 12 1/36
1
* Note that: P(x) (6 (7 x) 2 ) / 36
3-11
Example 3-2
Probability Distribution of the Number of Switches
The Probability Distribution of the Number of Switches
x P(x)
0.4
0 0.1
1 0.2 0.3
2 0.3
P(x)
3 0.2 0.2
4 0.1
0.1
5 0.1
1 0.0
0 1 2 3 4 5
x
2. P(x) 1
all x
Corollary: 0 P( X ) 1
3-14
2 0.3 0.6 0 .6
F(x)
0 .5
3 0.2 0.8 0 .4
0 .3
4 0.1 0.9 0 .2
0 .1
5 0.1 1.0 0 .0
1.00 0 1 2
x
3 4 5
3-15
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
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
Note: P(X > 1) = P(X > 2) = 1 – P(X < 1) = 1 – F(1) = 1 – 0.3 = 0.7
3-17
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
Note: P(1 < X < 3) = P(X < 3) – P(X < 0) = F(3) – F(0) = 0.8 – 0.1 = 0.7
3-18
2.3
3 4 5
The mean is also known as the expected value (or expectation) of a random
variable, because it is the value that is expected to occur, on average.
x P(x) xP(x)
The expected value of a discrete random 0 0.1 0.0
variable X is equal to the sum of each 1 0.2 0.2
value of the random variable multiplied by 2 0.3 0.6
3 0.2 0.6
its probability. 4 0.1 0.4
E ( X ) xP ( x ) 5 0.1 0.5
all x 1.0 2.3 = E(X) =
3-19
A Fair Game
Suppose you are playing a coin toss game in which you are
paid $1 if the coin turns up heads and you lose $1 when the
coin turns up tails. The expected value of this game is E(X) =
0. A game of chance with an expected payoff of 0 is called a
fair game.
x P(x) xP(x)
-1 0.5 -0.50
1 0.5 0.50 -1 1
0
1.0 0.00 = E(X)=
3-20
* Theterms success and failure are simply statistical terms, and do not have
positive or negative implications. In a production setting, finding a defective
product may be termed a “success,” although it is not a positive result.
3-30
There are 25 = 32 possible sequences of H and T (S and F) in the sample space for this
experiment. Of these, there are 10 in which there are exactly 2 heads (X=2):
HHTTT HTHTH HTTHT HTTTH THHTT THTHT THTTH TTHHT TTHTH TTTHH
10 (1/32)
Number of outcomes Probability of each
with 2 heads outcome with 2 heads
In general:
1. The probability of a given sequence 2. The number of different sequences of n trials that
of x successes out of n trials with result in exactly x successes is equal to the number
probability of success p and of choices of x elements out of a total of n elements.
probability of failure q is equal to: This number is denoted:
n n!
pxq(n-x) nCx
x x!( n x)!
3-33
1 .999 .977 .919 .737 .528 .337 .187 .087 .031 .007 .000 .000 .000
2 1.000 .999 .991 .942 .837 .683 .500 .317 .163 .058 .009 .001 .000
3 1.000 1.000 1.000 .993 .969 .913 .813 .663 .472 .263 .081 .023 .001
4 1.000 1.000 1.000 1.000 .998 .990 .969 .922 .832 .672 .410 .226 .049
h F(h) P(h)
Cumulative Binomial Deriving Individual Probabilities
Probability Distribution and 0 0.031 0.031
from Cumulative Probabilities
Binomial Probability 1 0.187 0.156
Distribution of H,the 2 0.500 0.313 F (x ) P ( X x ) P(i )
all i x
Number of Heads 3 0.813 0.313 P(X) = F(x) - F(x - 1)
Appearing in Five Tosses of 4 0.969 0.156
a Fair Coin 5 1.000 0.031 For example:
1.000
P (3) F (3) F (2)
.813.500
.313
3-35
0
.50
.000
.60
.000
.70
.000
F ( x) P( X x) P(i)
alli x
1 .000 .000 .000
2 .004 .000 .000
F (3) P( X 3) 0.002
3 .018 .002 .000
4 .059 .009 .001
... ... ... ...
3-36
V ( X ) npq
2
V ( H ) (5)(.5)(.5) 1.25
2
H
P(x)
P(x)
0.3 0.3 0.3
Binomial Probability: n=10 p=0.1 Binomial Probability: n=10 p=0.3 Binomial Probability: n=10 p=0.5
n = 10
P(x)
P(x)
P(x)
0.2 0.2 0.2
Binomial Probability: n=20 p=0.1 Binomial Probability: n=20 p=0.3 Binomial Probability: n=20 p=0.5
n = 20
P(x)
P(x)
P(x)
0.1 0.1 0.1
The negative binomial distribution is useful for determining the probability of the
number of trials made until the desired number of successes are achieved in a
sequence of Bernoulli trials. It counts the number of trials X to achieve the
number of successes s with p being the probability of success on each trial.
s
Negative Binomial Distributi on : The mean is :
p
x 1
P( X x) s ( x s)
p (1 p) 2 s (1 p )
s 1
The variance is :
p2
3-40
Geometric distribution:
x1
P ( x ) pq
where x = 1,2,3, . . . and p and q are the binomial parameters.
The mean and variance of the geometric distribution are:
1 2 q
2
p p
3-43
Example:
A recent study indicates that Pepsi-Cola
has a market share of 33.2% (versus P (1) (. 332 )(. 668 ) (11) 0 .332
40.9% for Coca-Cola). A marketing
research firm wants to conduct a new P ( 2 ) (. 332 )(. 668 ) ( 2 1) 0 .222
taste test for which it needs Pepsi
drinkers. Potential participants for the
test are selected by random screening of
P (3) (. 332 )(. 668 ) (3 1) 0 .148
soft drink users to find Pepsi drinkers.
What is the probability that the first P ( 4 ) (. 332 )(. 668 ) ( 4 1) 0 .099
randomly selected drinker qualifies?
What’s the probability that two soft drink
users will have to be interviewed to find
the first Pepsi drinker? Three? Four?
3-44
Example:
Suppose that automobiles arrive at a
2
10 2
1 5 1
2
1
8
4
2! 8!
5
dealership in lots of 10 and that for 1! 1! 4 ! 4 !
P (1) 0.556
time and resource considerations, 10 10 10 ! 9
only 5 out of each 10 are inspected 5 5
5! 5!
for safety. The 5 cars are randomly
2 10 2 2! 8!
chosen from the 10 on the lot. If 2 2 8
out of the 10 cars on the lot are below 1 5 2 1 3
1! 1! 3 ! 5! 2
standards for safety, what is the P( 2) 0.222
10 10 10 ! 9
probability that at least 1 out of the 5
5 5
cars to be inspected will be found not 5! 5!
meeting safety standards?
Thus, P(1) + P(2) =
0.556 + 0.222 = 0.778.
3-47
Poisson D istribution :
xe
P( x) for x = 1,2,3,...
x!
where is the mean of the distribution (which also happens to be the variance) and
e is the base of natural logarithms (e=2.71828...).
3-49
Example 3-5:
Telephone manufacturers now offer 1000
different choices for a telephone (as combinations
of color, type, options, portability, etc.). A .2 0 e .2
company is opening a large regional office, and P ( 0) = 0.8187
0 !
each of its 200 managers is allowed to order his .21 e .2
or her own choice of a telephone. Assuming
P (1) = 0.1637
12 ! .2
independence of choices and that each of the .2 e
P (2) = 0.0164
1000 choices is equally likely, what is the 2 !
.2 3 e .2
probability that a particular choice will be made P ( 3) = 0.0011
by none, one, two, or three of the managers? 3!
• Poisson assumptions:
The probability that an event will occur in a short
interval of time or space is proportional to the size of the
interval.
In a very small interval, the probability that two events
will occur is close to zero.
The probability that any number of events will occur in
a given interval is independent of where the interval
begins.
The probability of any number of events occurring over
a given interval is independent of the number of events
that occurred prior to the interval.
3-52
=1.0 =1.5
0.4 0.4
0.3 0.3
P(x)
P( x)
0.2 0.2
0.1 0.1
0.0 0.0
0 1 2 3 4 0 1 2 3 4 5 6 7
X X
=4 =10
0.2 0.15
0.10
P (x)
P(x)
0.1
0.05
0.0 0.00
0 1 2 3 4 5 6 7 8 9 10 0 1 2 3 4 5 6 7 8 9 1011121314151617181920
X X
3-53
P(x)
the probability
1 0.375 0.1
that the task 0.1
2 0.375 0.0 takes between
3 0.125 0 1 2 3 0.0
C1 2 and 3 1 2 3 4 5 6
1.000 Minutes
minutes.
3-54
0.10
P(x)
P(x)
P(x)
0.05
0.00
0.0
. 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 7
Minutes Minutes Minutes
Minutes to Complete Task: Probability Density Function When a continuous random variable has been subdivided into
infinitesimally small intervals, a measurable probability can
only be associated with an interval of values, and the
probability is given by the area beneath the probability density
f(z)
A continuous random variable is a random variable that can take on any value in an
interval of numbers.
The probabilities associated with a continuous random variable X are determined by the
probability density function of the random variable. The function, denoted f(x), has the
following properties.
F(x) = P(X x) =Area under f(x) between the smallest possible value of X (often -) and
the point x.
3-56
F(b)
F(a)
} P(a X b)=F(b) - F(a)
0
a b x
f(x)
x
0 a b
3-57
a a1 b1 b
x
3-58
E(X) = 2.5
0.4
The entire area under f(x) = 1/5 * 5 = 1.00
0.3
f(x)
.0.0
-1 0 1 2 3 4 5 6
x
3-59
f(x)
f (x) ex for x 0, 0
1
1
The mean and standard deviation are both equal to .
The cumulative distribution function is: 0
0 1 2 3
F(x) 1 ex for x 0. Time
3-61
Example
The time a particular machine operates before breaking down (time between
breakdowns) is known to have an exponential distribution with parameter = 2. Time is
measured in hours. What is the probability that the machine will work continuously for
at least one hour? What is the average time between breakdowns?
F (x ) 1 e P ( X x ) e x
x
1 1
P ( X 1) e ( 2 )(1)
E(X ) .5
2
.1353
3-62