Managerial Statistics

Session 06

Prof. Amol S. Dhaigude

Slide 1
Recap session 05

Slide 2
Warm-up Exercise

Slide 3
 Discrete Probability Distributions
Session 04-06

Random Variables
Discrete Probability Distributions
Expected Value and Variance
Bivariate Distributions, Covariance,
and Financial Portfolios
Binomial Probability .40

Distribution .30

Poisson Probability .20

Distribution .10

Hypergeometric Probability
0 1 2 3 4
Distribution

Slide 4
 Hypergeometric Probability Distribution

The hypergeometric distribution is closely related

to the binomial distribution.

However, for the hypergeometric distribution:

the trials are not independent, and

the probability of success changes from trial

to trial.

Slide 5
 Hypergeometric Probability Distribution

Hypergeometric Probability Function

 r  N − r 
  
 x  n − x 
f ( x) =
N
 
n
where: x = number of successes
n = number of trials
f(x) = probability of x successes in n trials
N = number of elements in the population
r = number of elements in the population
labeled success
Slide 6
 Hypergeometric Probability Distribution

Hypergeometric Probability Function

r N −r
x n−x
   
f (x) = for 0 < x < r
N
n number of ways
  n – x failures can be selected
number of ways from a total of N – r failures
x successes can be selected in the population
from a total of r successes
in the population number of ways
n elements can be selected
from a population of size N

Slide 7
 Hypergeometric Probability Distribution

Hypergeometric Probability Function

The probability function f(x) on the previous slide

is usually applicable for values of x = 0, 1, 2, … n.

However, only values of x where: 1) x < r and

2) n – x < N – r are valid.

If these two conditions do not hold for a value of

x, the corresponding f(x) equals 0.

Slide 8
 Hypergeometric Probability Distribution

Example: Neveready’s Batteries

Bob Neveready has removed two dead batteries
from a flashlight and inadvertently mingled them
with the two good batteries he intended as
replacements. The four batteries look identical.
Bob now randomly selects two of the four
batteries. What is the probability he selects the two
good batteries?

Slide 9
 Hypergeometric Probability Distribution

Example: Neveready’s Batteries Using the

probability
function
 r  N − r   2  2   2!  2! 
 x  n − x   2  0   2!0!  0!2! 
f ( x ) =    =    =    = 1 = .167
N  4  4!  6
n 2  2!2! 
     
where:
x = 2 = number of good batteries selected
n = 2 = number of batteries selected
N = 4 = number of batteries in total
r = 2 = number of good batteries in total

Slide 10
 Hypergeometric Probability Distribution

Mean

 r 
E ( x) =  = n  
N

Variance

 r  r  N − n 
Var ( x) =  = n  1 − 
2

 N  N  N − 1 

Slide 11
 Hypergeometric Probability Distribution

Example: Neveready’s Batteries

• Mean

 r  2
 = n  = 2  = 1
N 4

• Variance

 2  2  4 − 2  1
 = 2  1 − 
2
 = = .333
 4  4  4 − 1  3

Slide 12
 Hypergeometric Probability Distribution

Consider a hypergeometric distribution with n trials

and let p = (r/n) denote the probability of a success
on the first trial.

If the population size is large, the term

(N – n)/(N – 1) approaches 1.

The expected value and variance can be written

E(x) = np and Var(x) = np(1 – p).

Note that these are the expressions for the expected

value and variance of a binomial distribution.

continued
Slide 13
 Hypergeometric Probability Distribution

When the population size is large, a hypergeometric

distribution can be approximated by a binomial
distribution with n trials and a probability of
success p = (r/N).

Slide 14
Classroom Exercise and Case Discussion

Slide 15
 Poisson Probability Distribution

A Poisson distributed random variable is often

useful in estimating the number of occurrences
over a specified interval of time or space

It is a discrete random variable that may assume

an infinite sequence of values (x = 0, 1, 2, . . . ).

Slide 16
 Poisson Probability Distribution

Examples of Poisson distributed random variables:

the number of knotholes in 14 linear feet of

pine board

the number of vehicles arriving at a toll

booth in one hour

Bell Labs used the Poisson distribution to model

the arrival of phone calls.

Slide 17
 Poisson Probability Distribution

Two Properties of a Poisson Experiment

1. The probability of an occurrence is the same

for any two intervals of equal length.

2. The occurrence or nonoccurrence in any

interval is independent of the occurrence or
nonoccurrence in any other interval.

Slide 18
 Poisson Probability Distribution

Poisson Probability Function

 x e−
f ( x) =
x!

where:
x = the number of occurrences in an interval
f(x) = the probability of x occurrences in an interval
 = mean number of occurrences in an interval
e = 2.71828
x! = x(x – 1)(x – 2) . . . (2)(1)

Slide 19
 Poisson Probability Distribution

Poisson Probability Function

Since there is no stated upper limit for the number

of occurrences, the probability function f(x) is
applicable for values x = 0, 1, 2, … without limit.

In practical applications, x will eventually become

large enough so that f(x) is approximately zero
and the probability of any larger values of x
becomes negligible.

Slide 20
 Poisson Probability Distribution

Example: Mercy Hospital

Patients arrive at the emergency room of Mercy
Hospital at the average rate of 6 per hour on
weekend evenings.
What is the probability of 4 arrivals in 30 minutes
on a weekend evening?

Slide 21
 Poisson Probability Distribution
Using the
Example: Mercy Hospital
probability
function
 = 6/hour = 3/half-hour, x = 4
3 4 (2.71828)−3
f (4) = = .1680
4!

Slide 22
 Poisson Probability Distribution

Example: Mercy Hospital

Poisson Probabilities
0.25

0.20
Probability

0.15
Actually,
the sequence
0.10 continues:
11, 12, 13 …
0.05

0.00
0 1 2 3 4 5 6 7 8 9 10
Number of Arrivals in 30 Minutes

Slide 23
 Poisson Probability Distribution

A property of the Poisson distribution is that

the mean and variance are equal.
=2

Slide 24
 Poisson Probability Distribution

Example: Mercy Hospital

Variance for Number of Arrivals
During 30-Minute Periods

=2=3

Slide 25
Classroom Exercise and Case Discussion

Slide 26
End of Session 06

Questions & Answers

Slide 27