Scribd
Upload
20 views40 pages

Distributions

This document provides an outline and introduction to key concepts related to probability and probability distributions. It discusses probability, types of probability, Bayes' theorem and its applications, and important probability distributions including the binomial, Poisson, and normal distributions. Key points covered include an introduction to probability and how it can help with decision making under uncertainty, the definition and calculation of probability, Bayes' theorem and how it revises probabilities based on new information, and an overview of common probability distributions and their uses.

Uploaded by

Vijaya Bala
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
20 views40 pages

Distributions

This document provides an outline and introduction to key concepts related to probability and probability distributions. It discusses probability, types of probability, Bayes' theorem and its applications, and important probability distributions including the binomial, Poisson, and normal distributions. Key points covered include an introduction to probability and how it can help with decision making under uncertainty, the definition and calculation of probability, Bayes' theorem and how it revises probabilities based on new information, and an overview of common probability distributions and their uses.

Uploaded by

Vijaya Bala
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 40

Probability & Probability

Distributions
Outline
1. Introduction to Probability
2. Types of Probability
3. Bayes Theorem and its Applications
4. Binomial Distribution
5. Poisson Distribution
6. Normal distribution
Introduction
• Managers will have to cope with uncertainty in many decision
situations. Concepts of probability will help you measure uncertainty
and perform associated analyses that are essential in making effective
business decisions.
Question
• What is the probability that a man lives for 1000 years?
• Ans – Empirical Probability
Probability – Meaning & Concepts
• Probability refers to chance or likelihood of a particular event-taking
place.

• An event is an outcome of an experiment.

• An experiment is a process that is performed to understand and observe


possible outcomes.

• Set of all outcomes of an experiment is called the sample space.


Example

• In a manufacturing unit three parts from the assembly are selected.


You are observing whether they are defective or non-defective.
Determine
a) The sample space.
b) The event of getting at least two defective parts.
Solution
Definition of Probability
3 Extreme Values of Probability
Types of Probability
• A Priori Classical Probability
• Empirical Probability
• Subjective Probability
Mutually Exclusive Events
Independent Events
• Two events A and B are said to be independent if the occurrence of A
is in no way influenced by the occurrence of B. Likewise occurrence of
B is in no way influenced by the occurrence of A.
Rules for Computing Probability
Rules for Computing Probability
Example for Addition Rules
• From a pack of well-shuffled cards, a card is picked up at random.

1) What is the probability that the selected card is a King or a Queen?


2) What is the probability that the selected card is a King or a
Diamond?
Solution to Part 1)
Solution to part 2)
Multiplication Rule
Multiplication Rule
Multiplication Rule
Multiplication Rule
Marginal Probability
• Contingency table consists of rows and columns of two attributes at
different levels with frequencies or numbers in each of the cells. It is a
matrix of frequencies assigned to rows and columns.
• The term marginal is used to indicate that the probabilities are
calculated using a contingency table (also called joint probability
table).
Marginal Probability - Example
Solution
a) What is the probability that a randomly selected family is a buyer of the Car?
• 80/200 =0.40.

b) What is the probability that a randomly selected family is both a buyer of car
and belonging to income of Rs. 10 lakhs and above?
• 42/200 =0.21.

c) A family selected at random is found to be belonging to income of Rs 10 lakhs


and above. What is the probability that this family is buyer of car?
• 42/80 =0.525. Note this is a case of conditional probability of buyer given
income is Rs. 10 lakhs and above.
Marginal Probability - Problem
Solution
CD No CD

AC 20 50 70

No AC 20 10 30

40 60 100

P(CD/AC) = 20/70
Bayes’ Theorem
• Bayes’ Theorem is used to revise previously calculated probabilities
based on new information.
• Developed by Thomas Bayes in the 18th Century.
• It is an extension of conditional probability.
Bayes’ Theorem

Many modern machine learning techniques rely on Bayes' theorem. For instance, spam filters use
Bayesian updating to determine whether an email is real or spam, given the words in the email.
Additionally, many specific techniques in statistics, such as calculating p-values or interpreting
medical results, are best described in terms of how they contribute to updating hypotheses using
Bayes' theorem.
Bayes’ Theorem
Bayes’ Theorem - Problem
• A drilling company has estimated a 40% chance of striking oil for their
new well.
• A detailed test has been scheduled for more information. Historically,
60% of successful wells have had detailed tests, and 20% of
unsuccessful wells have had detailed tests.
• Given that this well has been scheduled for a detailed test, what is the
probability that the well will be successful?
Solution
Success No Success

DT 24 12 36

No DT 16 48 64

40 60 100

P(S/DT) = 24/36 = 0.67


What is a Probability Distribution
• In precise terms, a probability distribution is a total listing of the various values
the random variable can take along with the corresponding probability of each
value. A real life example could be the pattern of distribution of the machine
breakdowns in a manufacturing unit.
• The random variable in this example would be the various values the machine
breakdowns could assume.
• The probability corresponding to each value of the breakdown is the relative
frequency of occurrence of the breakdown.
• The probability distribution for this example is constructed by the actual
breakdown pattern observed over a period of time. Statisticians use the term
“observed distribution” of breakdowns.
Binomial Distribution
• The Binomial Distribution is a widely used probability distribution of a discrete
random variable.
• It plays a major role in quality control and quality assurance function.
Manufacturing units do use the binomial distribution for defective analysis.
• Reducing the number of defectives using the proportion defective control chart (p
chart) is an accepted practice in manufacturing organizations.
• Binomial distribution is also being used in service organizations like banks, and
insurance corporations to get an idea of the proportion customers who are
satisfied with the service quality.
Defective vs Defects
• In a 1000 lines Code Program, if n number of lines have problems, it is
called defective
• However, the type of problem in each problematic line is called a
defect
• Binomial deals with defective analysis, while poisson deals with the
number of defects

• A computer is said to be defective. Binomial


• The type of defects in each defective computer. Poisson
Defective vs Defects
• Preparing a Project Report
• Number of Defective pages in the Report – Binomial (Defective/Non
Defective)
• Number of defects per page – Poisson
• We could say - Without Poisson , there is no Binomial
• Binomial deals with % defective
• Poisson deals with number of defects per item
• Number of people arriving at an atm - Poisson
Defective vs Defects
• Bank – Dissatisfied Customers percentage is Binomial
• Number of complaints made by each customer – Poisson

• Ashok Leyland chooses Leather covers


• Defective covers – Binomial
• Types of Defects in each cover – black spots, thread cuts etc - Poisson
Conditions for Applying Binomial Distribution (Bernoulli Process)

• Trials are independent and random.


• There are fixed number of trials (n trials).
• There are only two outcomes of the trial designated as success or
failure.
• The probability of success is uniform through out the n trials
Binomial Probability Function
Example for Binomial Distribution
• A bank issues credit cards to customers under the scheme of Master
Card. Based on the past data, the bank has found out that 60% of all
accounts pay on time following the bill. If a sample of 7 accounts is
selected at random from the current database, construct the Binomial
Probability Distribution of accounts paying on time.

• Work Out Using Python


Mean and Standard Deviation of the Binomial Distribution

You might also like