Probability Distribution

Probability Distribution
• We can think of a probability distribution as a
theoretical frequency distribution.
• Frequency distribution expresses distribution of frequencies
over different values of the concerned variables while
probability distribution expresses distribution of probability
values over different values of concerned random variable.
• Frequency distribution is related to certainty in outcome while
probability distribution to uncertainty.
• 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.
Conditions for Probability Distribution
[X, p(X)] is said to constitute a probability
distribution if:
1. X is a random variable
2. p(x) > = 0
3. Σp(x) = 1.
Expected Value (Exercise-1)
• Bill Johnson has just bought a VCR from Jim’s Videotape
Service at a cost of $300. He now, has the option of
buying an extended service warranty offering 5 years
of coverage for $100. After talking to friends and
reading reports, Bill believes the following
maintenance expenses could be incurred during the
next five years:

• Find the expected value of the anticipated

maintenance costs. Should Bill pay $100 for the
Expected Value (Exercise-2)
• Steven T. Opsine, supervisor of traffic signals for the Fairfax County
division of the Virginia State Highway Administration, must decide
whether to install a traffic light at the reportedly dangerous intersection
of Dolley Madison Blvd. and Lewinsville Rd. Toward this end, Mr. Opsine
has collected data on accidents at the intersection:

• S.H.A. policy is to install a traffic light at an intersection at which the

monthly expected number of accidents is higher than 7. According to this
criterion, should Mr. Opsine recommend that a traffic light be installed at
this intersection?
Exercise 3
Sonali Bank head office has kept the record of number of grievances of the
employees file per week for last 50 weeks. The results are as follows:

Grievances 0 1 2 3 4
Week 2 18 25 4 1
Required:
a) Develop probability distribution of above data.
b) Determine the cumulative probability distribution of above data.
c) Identify the random variable
d) Determine the expected value of the random variable and explain the
results.
e) Determine the variance and standard deviation of the random variable.
 Exercise 4
A contractor is interested in the total cost of project on which he
intends to build. He estimates that materials will cost Tk. 25,000 and
labor cost will be Tk. 900 per day. If the project takes x days to
complete, the total labor cost will be 900x and the total cost of the
project will be 25000+900x.
The constructor firm’s subjective probability assessment of rightly
completion time of the project is indicated below:
x 10 11 12 13 14
P(x) 0.10 0.30 0.30 0.20 0.10

Required:
a) Compute the expected cost of the project.
b) Compute the variance of cost of the project.
c) Compute the S.D. of cost of the project.
Use of Expected Values in Decision Making
• Let us look at the case of 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 in Table 5-6.
Exercise 5
• Airport Rent-a-Car is a locally operated business in competition with several
major firms. ARC is planning a new deal for prospective customers who want
to rent a car for only one day and will return it to the airport. For $35, the
company will rent a small economy car to a customer, whose only of her
expense is to fill the car with gas at day’s end. ARC is planning to buy number
of small cars from the manufacturer at a reduced price of $6,300. The big
question is how many to buy. Company executives have decided the following
distribution of demands per day for the service:

• The company intends to offer the plan 6 days a week (312 days per year) and
anticipates that its variable cost per car per day will be $2.50. After the end of
one year, the company expects to sell the cars and recapture 50 percent of the
original cost. Disregarding the time value of money and any noncash
expenses, use the expected-loss method to determine the optimal number of
cars for ARC to buy.
Types of Probability Distributions
• Discrete Probability Distributions: In a discrete
probability distribution, the variable under
consideration is restricted to take only a limited
number of values, which can be listed. It is also known
as probability mass function (PMF).
• Continuous Probability Distributions: 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. It is also known as probability density
function (PDF).
The Binomial Distribution
• One widely used probability distribution of a discrete
random variable is the binomial distribution.
• 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.
• The tossing of a fair coin a fixed number of times is a
Bernoulli process, and the outcomes of such tosses
can be represented by the binomial probability
distribution.
Use of the Bernoulli Process
1. Each trial (each toss, in this case) has only two
possible outcomes: heads or tails, yes or no, success
or failure.
2. 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.
3. The trials are statistically independent; that is, the
outcome of one toss does not affect the outcome of
any other toss.
Binomial Formula

• Where,
• p = characteristic probability or probability of success
• q = 1 – p = probability of failure
• r = number of successes desired
• n = number of trials undertaken
Measures of Central Tendency and Dispersion for the Binomial Distribution

• Where,
• p = characteristic probability or probability of success
• n = number of trials undertaken

• Where,
• p = characteristic probability or probability of success
• q = 1 – p = probability of failure
• n = number of trials undertaken
Binomial Distribution (Exercise 6)
• Harley Davidson, director of quality control for the Kyoto Motor
company, is conducting his monthly spot check of automatic
transmissions. In this procedure, 10 transmissions are
removed from the pool of components and are checked for
manufacturing defects. Historically, only 2 percent of the
transmissions have such flaws. (Assume that flaws occur
independently in different transmissions.)
a) What is the probability that Harley’s sample contains more
than two transmissions with manufacturing flaws?
b) What is the probability that none of the selected
transmissions has any manufacturing flaws?
Binomial Distribution (Exercise 7)
• A recent study of how Americans spend their leisure time
surveyed workers employed more than 5 years. They
determined the probability an employee has 2 weeks of
vacation time to be 0.45, 1 week of vacation time to be 0.10,
and 3 or more weeks to be 0.20. Suppose 20 workers are
selected at random. Answer the following questions:
a) What is the probability that 8 have 2 weeks of vacation
time?
b) What is the probability that only one worker has 1 week of
vacation time?
c) What is the probability that at most 2 of the workers have
3 or more weeks of vacation time?
d) What is the probability that at least 2 workers have 1 week
of vacation time?
Binomial Distribution (Exercise 8)
• The City Bank of Durham has recently begun a new credit
program. Customers meeting certain credit requirements can
obtain a credit card accepted by participating area merchants
that carries a discount. Past numbers show that 25 percent of
all applicants for this card are rejected. Given that credit
acceptance or rejection is a Bernoulli process, out of 15
applicants, what is the probability that:
(a) Exactly four will be rejected?
(b) Exactly eight?
(c) Fewer than three?
(d) More than five?
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
Conditions for Poisson Distribution
• Events occur one at a time: Two or more events do not occur
simultaneously.
• Events occur independently: The occurrence of one event
does not affect the probability of another event occurring.
• Constant average rate (λ): The mean number of events (λ, or
"lambda") in each interval is constant over time or space.
• Proportional to the length of the interval: The probability of
a given number of events is proportional to the size of the
interval (e.g., more time = more expected events).
• Rare events in small intervals: In a very small interval, the
probability of more than one event is negligible (close to zero).
Calculating Poisson Probabilities
Poisson Distribution as an Approximation of the Binomial Distribution
• The Poisson distribution can be a reasonable approximation of the
binomial, but only under certain conditions.
• These conditions occur when n is large and p is small, that is, when the
number of trials is large and the binomial probability of success is small.
• The rule most often used by statisticians is that the Poisson is a good
approximation of the binomial when n is greater than or equal to 20
and p is less than or equal to 0.05.
• In cases that meet these conditions, we can substitute the mean of the
binomial distribution (np) in place of the mean of the Poisson distribution
(λ) so that the formula becomes
Poisson Distribution (Exercise 9)
• On average, five birds hit the Washington Monument and are
killed each week. Bill Garcy, an official of the National Parks
Service, has requested that Congress allocate funds for
equipment to scare birds away from the monument. A
Congressional subcommittee has replied that funds cannot be
allocated unless the probability of more than three birds being
killed in week exceeds 0.7. Will the funds be allocated?
Poisson Distribution (Exercise 10)
Southwestern Electronics has developed a new calculator that
performs a series of functions not yet performed by any other
calculator. The marketing department is planning to demonstrate
this calculator to a group of potential customers, but it is worried
about some initial problems, which have resulted in 4 percent of the
new calculators developing mathematical inconsistencies. The
marketing VP is planning on randomly selecting a group of
calculators for this demonstration and is worried about the chances
of selecting a calculator that could start malfunctioning. He believes
that whether or not a calculator malfunctions is a Bernoulli process,
and he is convinced that the probability of a malfunction is really
about 0.04.
a) Assuming that the VP selects exactly 50 calculators to use in
the demonstration, and using the Poisson distribution as an
approximation of the binomial, what is the chance of getting
at least three calculators that malfunction?
b) No calculators malfunctioning?
Poisson Distribution (Exercise 11)
The U.S. Bureau of Printing and Engraving is responsible for
printing this country’s paper money. The BPE has an
impressively small frequency of printing errors; only 0.5 percent
of all bills are too flawed for circulation. What is the probability
that out of a batch of
1,000 bills:
a) None are too flawed for circulation?
b) Ten are too flawed for circulation?
c) Fifteen are too flawed for circulation?
The Normal Distribution: A Distribution Of A Continuous Random Variable
• A very important continuous probability distribution is the
normal distribution.
• Several mathematicians were instrumental in its development,
including the eighteenth-century mathematician–astronomer
Karl Gauss. In honor of his work, the normal probability
distribution is often called the Gaussian distribution.
• It has some properties that make it applicable to a great many
situations in which it is necessary to make inferences by taking
samples.
• The normal distribution comes close to fitting the actual
observed frequency distributions of many phenomena,
including human characteristics (weights, heights, and IQs),
outputs from physical processes (dimensions and yields), and
other measures of interest to managers in both the public and
private sectors.
Characteristics of the Normal Probability Distribution

• The curve has a single peak; thus, it is unimodal. It has the bell shape.
• The mean of a normally distributed population lies at the center of its
normal curve.
• Because of the symmetry of the normal probability distribution, the
median and the mode of the distribution are also at the center; thus, for
a normal curve, the mean, median, and mode are the same value.
• The two tails of the normal probability distribution extend indefinitely
and never touch the horizontal axis. (Graphically, of course, this is
impossible to show.)
Characteristics of the Normal Probability Distribution
• To define a particular normal probability distribution, we need
only two parameters: the mean (μ) and the standard deviation
(σ).
Areas under the Normal Curve
• No matter what the values of μ and σ are for a normal
probability distribution, the total area under the normal curve
is 1.00, so that we may think of areas under the curve as
probabilities.
• Mathematically, it is true that:
1. Approximately 68 percent of all the values in a normally
distributed population lie within ±1 standard deviation from
the mean.
2. Approximately 95.5 percent of all the values in a normally
distributed population lie within ±2 standard deviations from
the mean.
3. Approximately 99.7 percent of all the values in a normally
distributed population lie within ±3 standard deviations from
the mean.
Areas under the Normal Curve
Using the Standard Normal Probability Distribution Table

Where
• x = value of the random variable with which we are concerned
• μ = mean of the distribution of this random variable
• σ = standard deviation of this distribution
• z = number of standard deviations from x to the mean of this distribution
• The Standard Normal Probability Distribution Table is organized in terms
of standard units, or z values. It gives the values for only half the area
under the normal curve, beginning with 0.0 at the mean.
• Because the normal probability distribution is symmetrical, the values
true for one half of the curve are true for the other. We can use this one
table for problems involving both sides of the normal curve.
Normal Distribution (Exercise 12)
We have a training program designed to upgrade the supervisory skills of
production-line supervisors. Because the program is self-administered,
supervisors require different numbers of hours to complete the program. A study
of past participants indicates that the mean length of time spent on the program
is 500 hours and that this normally distributed random variable has a standard
deviation of 100 hours.
i. What is the probability that a participant selected at random will require more than
500 hours to complete the program?
ii. What is the probability that a candidate selected at random will take between 500 and
650 hours to complete the training program?
iii. What is the probability that a candidate selected at random will take more than 700
hours to complete the program?
iv. Suppose the training-program director wants to know the probability that a
participant chosen at random would require between 550 and 650 hours to complete
the required work.
v. What is the probability that a candidate selected at random will require fewer than
580 hours to complete the program?
vi. What is the probability that a candidate chosen at random will take between 420 and
570 hours to complete the program?
Normal Distribution (Exercise 13)
The manager of a Spiffy Lube auto lubrication shop is trying to
revise his policy on ordering grease gun cartridges. Currently, he
orders 110 cartridges per week, but he runs out of cartridges 1
out of every 4 weeks. He knows that, on average, the shop uses
95 cartridges per week. He is also willing to assume that
demand for cartridges is normally distributed.
a) What is the standard deviation of this distribution?
b) If the manager wants to order enough cartridges so that his
probability of running out during any week is no greater than
0.2, how many cartridges should he order per week?
Normal Distribution (Exercise 14)
Maurine Lewis, an editor for a large publishing company,
calculates that it requires 11 months on average to complete the
publication process from manuscript to finished book, with a
standard deviation of 2.4 months. She believes that the normal
distribution well describes the distribution of publication times.
Out of 19 books she will handle this year, approximately how
many will complete the process in less than a year?