AP ECON 2500 Session 4
AP ECON 2500 Session 4
AP ECON 2500 Session 4
Lee
Department of Economics York University
Topic 4 Random Variables and Probability Distributions
Reading: Chapter 4
Review Session 3:
#3.3
A: {either 1, 2 or 3 occurs}, B: {either 1, 3 or 5 occurs},
C: {4 does not occur}
a. P(A)=?
b. P(A and B) =?
c. P(C) =? Etc..
#3.5: Compute the number of ways you can select n elements from N elements
a. n = 2, N = 5, b. n = 3, N = 6, c. n = 5, N = 20
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#3.33. P(E1) = P(E2) = P(E3) =1/5, P(E4)=P(E5)=1/20, P(E6) = 1/10, P(E7) = 1/5
P(A) =?
P(B) = ?
P(A ∪ B) = ?
P(A ∩ B) =?
P(AC) = ?
P(BC) = ?
P(A ∪ AC)=?
P(AC ∩ B ) =?
#3.35
#3.54 A, B, C are mutually exclusive: P(A) = 0.30, P(B) = 0.55, P(C) = 0.15
a. P(A U B), b. P(A∩B), c. P(A/B) d. P(B U C)
#3.62
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Section 4.4 Other Discrete Distributions: Poisson and Hypergeometric
Hypergeometric Random Variable:
1. The experiment consists of randomly drawing n elements without replacement from a set of N
elements, r of which are S’s (for success) and (N – r) of which are F’s (for failure).
2. The hypergeometric random variable x is the number of S’s in the draw of n elements.
Hypergeometric Probability Distribution Function
𝑟 )(𝑁−𝑟)
(𝑥 N= the population size,
𝑛−𝑥
p(x) = n= the number of draws,
(𝑁
𝑛) r= the number of success in the population,
𝑛𝑟 2 𝑟(𝑁 − 𝑟)𝑛(𝑁 − 𝑛) x= the number of observed success
μ= ,𝜎 =
𝑁 𝑁 2 (𝑁 − 1)
Example:
A candy dish contains 30 jelly beans and 20 gumdrops. Ten candies are picked at random. What is
the probability that 5 of the 10 are gumdrops?
30 20
( )( )
p(5) = 5 5 = 0.215, μ = 10 × 20 = 4, 𝜎 2 = 10 × 30 × 10 × 40 = 0.9796
50 50 502 × 49
( )
10
Example 4.15: 6 male and 4 female applicants, and select 3, and x be the number of females who
are hired.
Prob of no female hired: The mean and std dev
4 6 3×4
( )( ) μ= = 1.2, 𝜎 2 = 0.56. 𝜎 = 075
10
p(0) = 0 3 = 0.1667
10
( )
3
4
p(x = 4) = ( ) 0.674 (1 − 0.67)0 = 0.202, or
4
331 165
( )( )
p(4) = 4 0 = 0.197
496
( )
4
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4.5 Probability Distributions for Continuous Random Variables
Continuous Probability Density Function
• The graphical form of the probability distribution for a continuous random variable x is a
smooth curve
• This curve, a function of x, is denoted by the symbol f(x) and is variously called a probability
density function (pdf), a frequency function, or a probability distribution.
• The areas under a probability distribution correspond to probabilities for x. The area A beneath
the curve between two points a and b is the probability that x assumes a value between a
and b.
Normal Distribution
1. Bell-shaped’ & symmetrical
2. Mean, median, and mode are
equal
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The Normal Distribution Density Function
2
1 (X−μ)
1 −
f(X) = e 2
2π
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The 68-95-99.7 Rule
• In the Normal distribution with mean µ and standard deviation σ:
▪ Approximately 68% of the observations fall within σ of µ.
▪ Approximately 95% of the observations fall within 2σ of µ.
▪ Approximately 99.7% of the observations fall within 3σ of µ.
Example:
• The distribution of Iowa Test of Basic Skills (ITBS) vocabulary scores for 7th-grade students in
Gary, Indiana, is close to Normal. Suppose the distribution is N(6.84, 1.55).
• Sketch the Normal density curve for this distribution.
• What percent of ITBS vocabulary scores are less than 3.74?
• What percent of the scores are between 5.29 and 9.94?
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Practice: The Standard Normal Table:
• P(0 < z < 1.96) = 0.4750
• P(–1.26 ≤ z ≤1.26) =0.7924
• P(z > 1.26) =0.1038
• P(–2.78≤ z≤ –2.00) = 0.0201
• P(z > –2.13) = .4834 + .5000 = .9834
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The Standard Normal Table: Practice how to read the table.
𝑥−𝜇 3.8 − 5
z= = = −0.12
𝜎 10
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Practice: Non-standard Normal μ = 5, σ = 10: P(2.9 < x< 7.1)= P(-0.21<z<0.21) = 0.1664
Practice: Non-standard Normal μ = 5, σ = 10: P(x > 8) = 0.3821
Practice: Non-standard Normal μ = 5, σ = 10: P(7.1 < X < 8) = 0.347
Example:
the weights of adults X~N(170, 25), or μ = 170 and σ=25. If you pick one adult, what is the probability
that the person:
• weighs from 150 to 190 Ibs?
• Weighs less than 140?
• Weighs at least 160?
• What is the maximum weight of the lightest 15% of the adult population?
• What is the minimum weight to be in the heaviest 30% of the adult populations?
Solutions:
P(150≤X≤190) = 0.5763;
P(X< ? ) = 0.15
σ=25
15%
0.15
? μ=170
Example:
• According to the Health and Nutrition Examination Study of 1976–1980, the heights (in inches)
of adult men aged 18–24 are N(70, 2.8).
• If exactly 10% of men aged 18–24 are shorter than a particular man, how tall is he?
• Z = –1.28
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Example:
You work in Quality Control for GE. Light bulb life has a normal distribution with
μ = 2000 hours and σ = 200 hours. What’s the probability that a bulb will last
A. between 2000 and 2400 hours?
B. less than 1470 hours?
0.4772 and 0.004
Example 4.19: A new model of auto mileage: mean of 27 and the standard deviation of 3
You purchased one and it does get less than 20 ➔ 0.01
Example 4.21
A daily production of paint, mean of 100,000 gallons and a standard deviation of 10,000.
Management provides incentives if the daily production exceeds the 90th percentile. What level of
production is for incentive? 112,800
• Practically, the Normal approximation can be used when both np ≥10 and n(1 − p) ≥10.
X approximately N (µ = np, σ2 = np(1 − p))
1. Useful because not all binomial tables exist
2. Requires large sample size
3. Gives approximate probability only
4. Need correction for continuity
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Example: Color blindness
• The frequency of color blindness (dyschromatopsia) in the Caucasian American male
population is about 8%.
• We take a random sample of size 125 from this population. What is the probability that six
individuals or fewer in the sample are color blind?
Sampling distribution of the count X: B(n = 125, p = 0.08) → np = 10
P(X ≤ 6) = BINOMDIST(6, 125, .08, 1) = 0.1198 or about 12%
Normal approximation for the count X: N(np = 125 × 0.08 = 10, √𝑛𝑝𝑞 =
Example 4.22
For a manufacturing product, defective rate is 6%, 200 were selected
a. Mean and standard deviation of defective
b. Prob of 20 or more defective
μ = 12, σ = 3.36, p(x ≥ 19.5) = 𝑝(𝑧 > 2.23) = 1 − 0.9871 = 0.0129
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4.7 Descriptive Methods for Assessing Normality
Determining Whether the Data Are from an Approximately Normal Distribution
1. Construct either a histogram or stem-and-leaf display for the data and note the shape of the
graph. If the data are approximately normal, the shape of the histogram or stem-and-leaf
display will be similar to the normal curve.
2. Compute the intervals 𝑥̅ ± s, 𝑥̅ ± 2𝑠, 𝑎𝑛𝑑 𝑥̅ ± 3𝑠 and determine the percentage of measurements
falling in each. If the data are approximately normal, the percentages will be approximately
equal to 68%, 95%, and 100%, respectively; from the Empirical Rule (68%, 95%, 99.7%).
3. Find the interquartile range, IQR, and standard deviation, s, for the sample, then calculate the
ratio IQR/s. If the data are approximately normal, then IQR/s ≈ 1.3.
4. Examine a normal probability plot for the data. If the data are approximately normal, the
points will fall (approximately) on a straight line.
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𝐼𝑄𝑅 2.75
𝑥̅ = 37, s = 2.4, = = 1.15
𝑠 2.4
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4.8 Other Continuous Distributions: Uniform and Exponential: This section is not included.
Uniform Distribution
• Continuous random variables that appear to have equally likely outcomes over their range of
possible values possess a uniform probability distribution.
• Suppose the random variable x can assume values only in an interval c ≤ x ≤ d. Then the
uniform frequency function has a rectangular shape.
The area = (base)(height)
1
= (d − c) × =1
(𝑑−𝑐)
𝑐+𝑑 𝑑−𝑐
mean: μ = , 𝑠𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝑑𝑒𝑣𝑖𝑎𝑡𝑖𝑛: 𝜎 =
2 √12
𝑏−𝑎
p(a < x < b) = , 𝑐≤𝑎≤𝑏≤𝑑
𝑑−𝑐
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Example 4.24
Thickness is uniform distribution with values between 150 and 200 millimeters. Any sheet less than 160
must be scrapped.
a. Mean and standard deviation
b. Graph
c. Calculate the prob of scrapped.
μ = 175, σ = 14.43, p(x < 160) = 0.2
Exponential Distribution
• The length of time between emergency arrivals at a hospital, the length of time between
breakdowns of manufacturing equipment, and the length of time between catastrophic
events (e.g., a stock market crash), are all continuous random phenomena that we might
want to describe probabilistically.
• The length of time or the distance between occurrences of random events like these can
often be described by the exponential probability distribution. For this reason, the exponential
distribution is sometimes called the waiting-time distribution.
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Probability Distribution for an Exponential Random Variable x
𝑥
1
Probability density function: f(x) = 𝑒 −𝜃 (x > 0)
𝜃
Mean: μ = θ
Standard deviation σ = θ
Finding the Area to the Right of a Number a for an Exponential Distribution
Example 4.25
Suppose the length of time (in hours) between emergency arrivals at a certain hospital is modeled as
an exponential distribution with = 2. What is the probability that more than 5 hours pass without an
emergency arrival?
Mean: μ = θ = 2, Standard Deviation: σ = θ = 2
Probability is the area A to the right of a = 5.
−𝑎⁄
A= 𝑒 𝜃 = 𝑒 −5/2 = 𝑒 −2.5 = 0.082085
Example 4.26
The length of life (x) of a magnetron tube has an exponential probability distribution with θ = 6.25.
a. The mean and standard deviation of x.
b. If a warranty period of 5 years, what percent is the replacement?
c. The prob between μ ± 2σ
6.25, 0.550671, 0.950213
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Review:
#4.11 A discrete random variable, x, P(x=22), P(20 or 24), P(x ≤ 23)
#4.12
#4.47: A poll found that 20% of adults do not work at all while on summer vacation. In a random
sample of 10 adults
a. Find P(x=3)
b. Find the prob of 2 or fewer do not work.
c. Mean and variance
15 106 − 15
( )( )
P(x = 2) = 2 10 − 2 = 0.280
106
( )
10
#4.70: The average number of bank failure = 52 per year, x be # bank failure
a. Mean and standard deviation: μ = λ = 52, σ = √𝜆 = 7.211
157−52
b. X = 157, z score = 7.211
= 14.56
c. P(x ≤ 8) = 0
#4.84-87
a. P(0 < z < 2) =? , 𝑏. 𝑃(0 < 𝑧 < 3) = ? , 𝑐. 𝑃(0 < 𝑧 < 0.8) = ? , P(−2 < z < 2)
#4.88-89
a. P(z > 𝑧0 ) = 0.05, 𝑏. 𝑃(𝑧 > 𝑧0 ) = 0.025, 𝑐. 𝑃(−𝑧0 < 𝑧 < 𝑧0 ) = 0.1664
#4.135: Exponential, θ = 1
3
a. P(x > 1) = 𝑒 −1/1 = 0.3678, 𝑏. 𝑃(𝑥 ≤ 3) = 1 − 𝑝(𝑥 > 3) = 1 − 𝑒 −1 = 0.950213
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