Topic 2 Probability Distributions Advanced Mathematics for Business

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Advanced Mathematics for
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V1.0
Advanced Mathematics for
Business
Topic 2:
Probability Distributions
Probability Distributions Topic 2 - 2.2
Scope and Coverage
This topic will cover:
Simple probability revision
Probability distributions
Standard scores (z-scores)
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Standard scores (z-scores)
Probability Distributions Topic 2 - 2.3
Learning Outcomes
By the end of this topic students will be able to:
recall the rules of simple probability
use key probability distributions:
- Binomial distribution
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Binomial distribution
- Poisson distribution
- Exponential distribution
- Normal distribution
calculate z-scores
Topic 2 Probability Distributions Advanced Mathematics for Business
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Probability Distributions Topic 2 - 2.4
Probability
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Probability Distributions Topic 2 - 2.5
Definitions and Properties - 1
Sample space
- Set of all possible outcomes
Event
- One or more outcomes
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Probability Distributions Topic 2 - 2.6
E
2
Rules of Probability
Mutually exclusive events
- events that cannot occur
together
P(E or E ) P(E ) + P(E )
E
1
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P(E
1
or E
2
) = P(E
1
) + P(E
2
)
Non-mutually exclusive events
P(E
1
or E
2
) = P(E
1
) + P(E
2
) -
P(E
1
E
2
)
E
1
E
2
E
1
E
2
Topic 2 Probability Distributions Advanced Mathematics for Business
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Probability Distributions Topic 2 - 2.7
Rules of Probability
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Probability Distributions Topic 2 - 2.8
Probability Distribution
Discrete
- Number of customers per hour
Number Frequency
Empirical
Probability
0 10 0.0833
1 17 0 1417
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- Therefore seek model Probability Mass Functions
that give P(X = x)
1 17 0.1417
2 42 0.3500
3 34 0.2833
4 12 0.1000
5 5 0.0417
120 1
Probability Distributions Topic 2 - 2.9
Probability Distribution
Continuous
- height of customers
Height Frequency
Empirical
Probability
163 -165 1 0.005
166 -168 4 0.020
169 -171 14 0.070
172 -174 29 0.145
175 -177 44 0.220
178 -180 46 0 230
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- therefore seek model probability density
functions that lead to P(x
l
< X < x
h
)
178 -180 46 0.230
181 -183 35 0.175
184 -186 18 0.090
187 -189 7 0.035
190 -192 2 0.010
200 1
Topic 2 Probability Distributions Advanced Mathematics for Business
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Probability Distributions Topic 2 - 2.10
Definitions and Properties - 2
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Probability Distributions Topic 2 - 2.11
Binomial Distribution (motivation)
A TRIAL has two possible outcomes
- P(success) = p, P(failure) = 1 - p
- Pass or fail training, medical treatment works or not,
aeroplane engine works or not, meet SLA or not etc.
Number of such trials n takes place
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Number of such trials, n, takes place
- 10 workers undergo training how many might pass?
- 1000 patients are treated, how many may recover?
- 4 working engines on aeroplane, how many will fail?
Q ~ B(n, p)
Probability Distributions Topic 2 - 2.12
The Binomial Distribution
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Topic 2 Probability Distributions Advanced Mathematics for Business
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Probability Distributions Topic 2 - 2.13
Binomial Distribution - Example
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Probability Distributions Topic 2 - 2.14
Binomial Distribution Approach - 1
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Probability Distributions Topic 2 - 2.15
Binomial Distribution Approach - 2
Probability distribution X ~ B(10,0.6)
x P(X = x) P(X x)
0 0.0001
1 0.0016
2 0.0106
3 0.0425
4 0.1115
0.0001
0.0017
0.0123
0.0548
0.1662
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P(X 8) = 1- P(X 7) = 1 0.8327 = 0.1673
5 0.2007
6 0.2508
7 0.2150
8 0.1209
9 0.0403
10 0.0060
0.1662
0.3669
0.6177
0.8327
0.9536
0.9940
1.0000
Topic 2 Probability Distributions Advanced Mathematics for Business
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Probability Distributions Topic 2 - 2.16
Binomial Distribution and
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Probability Distributions Topic 2 - 2.17
The Poisson Distribution
Rare event A in background of not A
- Large n and small p, np =
Probability of a number of independent, randomly
occurring successes (or failures) within a specified
interval
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interval
- Number of customers arriving at end of queue
- Number of print errors per area
- Number of machine breakdowns per year
A ~ Po ()
Probability Distributions Topic 2 - 2.18
Poisson Distribution
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Topic 2 Probability Distributions Advanced Mathematics for Business
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Probability Distributions Topic 2 - 2.19
Poisson Distribution - Example
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Probability Distributions Topic 2 - 2.20
Poisson Distribution - Example
Probability Distribution X ~ Po(6)
x P(X = x) P(X x)
0 0.0025
1 0.0149
2 0.0446
0.0025
0.0174
0.0620
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3 0.0892
4 0.1339
5 0.1606
6 0.1606
7 0.1377
8 0.1033
P(x > 8) = 1 0.8472 = 0.1528
0.1512
0.2851
0.4457
0.6063
0.7440
0.8472
Probability Distributions Topic 2 - 2.21
The Exponential Distribution
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Topic 2 Probability Distributions Advanced Mathematics for Business
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Probability Distributions Topic 2 - 2.22
Exponential Distribution - Example
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Probability Distributions Topic 2 - 2.23
Exponential Distribution - Example
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= 0.1474
Probability Distributions Topic 2 - 2.24
The Normal Distribution - 1
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= 1
= 0
Topic 2 Probability Distributions Advanced Mathematics for Business
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Probability Distributions Topic 2 - 2.25
The Normal Distribution - 2
Either tables or
software can then give
partial areas under the
curve which indicate
P(Z < z)
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probabilities of
particular values of z
occurring.
P(Z > z) P(0 < Z < z)
Probability Distributions Topic 2 - 2.26
Example
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-2.5 0 z
Probability Distributions Topic 2 - 2.27
Recap
By the end of this topic students will be able to:
recall the rules of simple probability
use key probability distributions;
- Binomial distribution
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Binomial distribution
- Poisson distribution
- Exponential distribution
- Normal distribution
calculate z-scores
Topic 2 Probability Distributions Advanced Mathematics for Business
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Probability Distributions Topic 2 - 2.28
Topic 2 Probability Distributions
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Any Questions?