OSU5509: Unit 01 Session 1: Introduction to Probability Distributions

SESSION 1
INTRODUCTION TO PROBABILITY
DISTRIBUTIONS

Content

Learning Outcomes

Introduction

1.1 Random Variables

1.2 Discrete Probability Distributions
1.3 Continuous Probability Distributions
1.4 Expected Value and Standard Deviation of a Random Variable

Summary

Review Questions

Learning Outcomes

At the end of this session, you will be able to:

• Understand the concept of random variable and probability

distribution.
• Understand what is meant by discrete random variable and discrete
probability distribution.
• Understand what is meant by continuous random variable and
continuous probability distribution.
• Calculate the expected value and standard deviation of a discrete
random variable.
• Ascertain the most important and frequently used probability
distributions.

Introduction

You have already learnt about the way that decision makers express their
uncertainty about outcomes or events of interest, and accordingly different
ways used to compute the chances of occurrence of these outcomes/events.

For instance, consider the example below:

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OSU5509: Unit 01 Session 1: Introduction to Probability Distributions

You are given that two questions which each has 5 multiple choice answers.
We calculated the probability of getting full score for two questions.

You can find relevant probabilities using the Tree diagram as there are two
trials.

1st Question 2nd Question

correct 1/5 1/5 × 1/5 = 1/25

correct 1/5
incorrect 4/5 1/5 × 4/5 = 4/25

correct 1/5 4/5 × 1/5 = 4/25

incorrect 4/5
incorrect 4/5 4/5 ×4/5 = 16/25

In this case, the chance of receiving full score for two questions was 0.04.
Concerned event of receiving full score means answering two questions
correctly. In the same exercise, if you are interested of the event that correctly
answering to the questions, as you have two questions the results will be;

0, 1, 2:

where
0 – no questions are correctly answered
1 – only one question is correctly answered
2 – both questions are correctly answered

And these are associated with the probabilities of 16/25, 8/25 and 1/25
respectively.

Using this information you can predict the final score easily. The presentation
of all possible outcomes and its probabilities are called a probability
distribution. The above example can be referred as the probability distribution
of “number of questions correctly answering”. The total of the probabilities is
equal to 1.

Assume that you have to find the chance of answering all 10 questions
correctly when there are 10 questions to answer. According to the previous
knowledge of calculating the probabilities, it takes time to calculate as the
number of trials is higher. Development of a probability distribution as
applicable makes such cases relatively easy. In other words probability

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OSU5509: Unit 01 Session 1: Introduction to Probability Distributions

distribution can be presented as a mathematical function that provides the

probability of occurrence of outcomes in an experiment.

1.1 Random Variables

Now we know that, when an item/object /person is randomly selected from an

experiment, some outcomes occur. For any such outcome, numerical values
can be assigned.

Random Variable:

A variable that takes on different numerical values each

with an associated probability based on chance.

For instance, assume that quality manager inspects three products and getting
“complete” product or “incomplete” product. If he is interested of getting a
“complete” product, then all possible outcomes can assume values of 0,1,2 and
3.

x=0,1,2,3 are the assigned numerical values for each outcome and x is
the random variable which is defined as the “number of complete products”.

where
0 – no complete products
1 – only one complete product
2 – only 2 complete products
3 – all 3 are complete products

A probability is associated with each of these outcomes.

This uncertain variable “complete” (x) which receives numerical

values based on the outcomes of an experiment and which associated with a
probability for each outcome is called a random variable. However, quality
manager does not know which value will occur at any given trial. When
complete product is denoted by C and incomplete product is denoted by N, the
all possible outcomes are;

{(N,N,N), (N,N,C), (N,C,N), (N,C,C), (C,N,N), (C,N,C), (C,C,N),

(C,C,C)}

The probability distribution of number of “complete” products is:

No. of complete Products

P(x)
(x)

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OSU5509: Unit 01 Session 1: Introduction to Probability Distributions

0 1/8
1 3/8
2 3/8
3 1/8
∑=1

In the business world, you can find many examples. The average price of a
product over a given time period, the returns on investment after some years,
the estimated turnover rate at a company within the following months are few
examples.

There are two types of random variables: discrete random variable and
continuous random variable.

Activity 1.1 – Random Variables

1. Assume that there are 5 questions in a multiple-choice quiz. If x represent

the number of questions correctly answered, then list all possible values for x.

2. Suppose a life insurance company needs to conduct a survey to determine

number of elders over 60 years living in each household of its customers.
Determine the random variable in this survey.

3. Consider that you are in a product inspection line. You select 3 parts of the
product to test. The results of the test can be given in the terms of good or bad.
The probability that a part will pass the inspection is 0.90. Determine the
probability distribution for number of parts that pass the inspection?

1.2 Discrete Probability Distributions

In a household survey, the number of members in a family is determined by x

is a discrete random variable and the possible values are;

x= 2,3,4,5,6,7,8,9,10

This means that if we select any two consecutive outcomes; say that 5 and 6,
we can’t get an outcome between 5 and 6.

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OSU5509: Unit 01 Session 1: Introduction to Probability Distributions

In the example of getting full score for two questions, number of questions
correctly answered is a discrete random variable and it is determined by
counting the questions correctly answered. The possible outcomes are 0, 1, 2,
3.

The two examples given in the above: the random variable x is determined by
counting the number of members in a family or counting the number of
questions correctly answered is a discrete random variable.

Now you can notice that all the values for discrete random variable are
determined by counting.

Discrete Random Variable

A random variable that can only assume a finite number of

values or an infinite sequence of values such as 0,1,2,3,…..
is called a discrete random variable

Consider the experiment of tossing three coins and sample space consists of
eight outcomes:

{(H,H,H), (H,H,T), (H,T,H), (H,T,T), (T,H,H), (T,H,T), (T,T,H),

(T,T,T)}

If the random variable is defined as “number of heads” and it is

denoted by H then it can assume the values of 0,1,2 and 3. The
corresponding probabilities are 1/8, 3/8, 3/8 and 1/8 respectively.
These all the values, the random variable assume are countable and
hence H is a discrete variable and the resulted distribution is called
a discrete probability distribution.

In the case of school sports section survey, the number of games selected by
the students (there are only 3 games) can be considered as a discrete random
variable with the values;

x = 0,1,2,3

where
0 – no games selected
1 – only 1 game selected
2 – only 2 games selected
3 – all 3 games selected

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OSU5509: Unit 01 Session 1: Introduction to Probability Distributions

Each of these values is associated with a probability.

No. of games (x) P(x)

0 0.1
1 0.5
2 0.3
3 0.1
∑=1

This discrete random variable assumes only countable values and probabilities
associated with each outcome, are given in the above. Therefore, no. of games
selected follows a discrete probability distribution.

Discrete Probability Distributions-GRAPHICAL presentation

Presenting of all possible outcomes with their associate probabilities is termed

as the probability distribution. For instance consider the above mentioned
example on school sports section survey.

No. of games (x) P(x)

0 0.1
1 0.5
2 0.3
3 0.1
∑=1

This can be presented in a graph as follows. The probabilities associated with

the number of games are represented by the areas of the rectangles and their
base is one unit width and height corresponds to the probability. As the sum of
probabilities is equal to 1, the total area becomes 1.

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OSU5509: Unit 01 Session 1: Introduction to Probability Distributions

0.6

0.5

0.4

0.3

0.2

0.1

0
0 1 2 3
Total area = 1

As an example assume that if there are 25 outcomes, then the graph will be
more flat.

0.4

0.3

0.2

0.1

0
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
Total area = 1

Some Important Discrete Probability Distributions

Two such mostly applied theoretical discrete probability distributions are

Binomial distribution and Poisson distribution. There is another discrete
distribution that called hypergeometric distribution.

However, in this level we will examine the conditions and characteristics of

two processes of binomial and Poisson and where these two distributions
apply.

1.3 Continuous Probability Distributions

In the previous section we learnt about the situations involved in discrete

random variables and their probability distributions. Now we are going to
consider the situations where the variable of interest can assume any value
including decimal values in a given range. For instance, suppose that x is time
required you to travel from home to office, it can take any value between two
values: 1 minute to 60 minutes. Consider the temperature in the Colombo city
during the month of June. It may vary from 280 to 380 centigrade. It means
that the temperature in each day can take any value between 280 and 380

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OSU5509: Unit 01 Session 1: Introduction to Probability Distributions

centigrade. For other instances, height of a student picked at random from a

group of students or the amount of time that a person has to wait for the lift.
This type of random variables which can take any value in a range is called a
continuous random variable. Accordingly Continuous random variable can
take infinitely many values in a range.

Likewise, there are more examples in business applications for continuous

random variable which includes the measure of height, weight, distance, etc.
For these examples, the random variable is better explained by a continuous
probability distribution.

Continuous random variable is typically determined by measuring compared

to the discrete random variable which determined by counting.

Continuous Random Variable

Random variable that can assume any value in an interval is

called a continuous random variable.

Some Important Continuous Probability Distributions

As explained in the above, the continuous variable is determined by

measuring; measuring the water level in a reservoir, measuring the blood
pressure reading, measuring the life time of electric bulbs, measuring the time
between two units of a product etc. In these situations, a continuous
probability distribution can be used to approximate the possible outcomes of
the random variable. If the number of outcomes is large this approximation is
more appropriate.

Some specific continuous probability distributions are normal distribution,

uniform distribution, gamma distribution and exponential distribution. Mostly
applied very useful continuous distribution is the normal distribution as
random variable of many applications processes the characteristics of the
normal distribution. Therefore, in this unit we will study about the normal
probability distribution.

1.4 Expected Value (Mean) and Standard Deviation

As we have seen in the frequency distributions, probability distributions also

can be summarized by the mean and standard deviation of the distribution
which measure the center of the location and the spread of the probability
distribution. This lesson looks in to summary measures such as mean and the
standard deviation.

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OSU5509: Unit 01 Session 1: Introduction to Probability Distributions

Expected Value (mean)

The mean of the probability distribution is termed as the expected value of the
outcomes of an experiment. This is the most widely used measure of location.
The expected value of the discrete probability distribution is calculated as the
weighted average of the values of the random variable applying the respective
probabilities as the weights. Expected value of the discrete probability
distribution provides an average value when the experiment that generates
values for the random variable is repeated over the long run.

Expected Value (mean) of the Discrete Probability Distribution

E(x) = ∑ 𝒙 P(x)

Where x – values of the random variable

P(x) – associated probabilities of the values of random variable, x

For instance, consider issue of games selection by the students which the
probability distribution is:

No. of games (x) P(x)

0 0.1
1 0.5
2 0.3
3 0.1
∑=1

The expected value of the number of games selected is E(x) and

E(x) = ∑ 𝑥 P(x)

= 0×0.1 + 1×0.5 + 2×0.3 + 3×0.1

= 0 + 0.5 + 0.6 + 0.3

= 1.4

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OSU5509: Unit 01 Session 1: Introduction to Probability Distributions

Standard Deviation

Standard deviation is the most widely used measure of dispersion or spread in

a set of data. This also measures the dispersion of the values in a random
variable. The equation used to calculate the standard deviation is given below.

Standard Deviation of a Discrete Probability Distribution

x = √∑[𝒙 − 𝐄(𝒙)]𝟐 𝑷(𝒙)

Where x– values of the random variable
E(x) – Expected value of x
P(x) – associated probabilities of the values of the random variable x

For instance, consider the example used in expected value calculation. The
expected value of the number of games selected is E(x) = 1.4

The standard deviation of the distribution is:

x = √∑[𝑥 − E(𝑥)]2 𝑃(𝑥)

=
√{(0 − 1.4)2 x0.1 + (1 − 1.4)2 x0.5 + (2 − 1.4)2 x0.3 + (3 − 1.4)2 x0.1 }

= √0.196 + 0.08 + 0.108 + 0.256

= √0.64

= 0.8

Example 1.1: A manufacturing company in Sri Lanka used to purchase an

accessory from China. As these accessories are very expensive it is not
available in the stocks. They use the air freight for fast delivery. Therefore
after placing an order it takes few days for transportation. Company
experience that, lead time for transportation is vary from time to time. As per
the past records of the company, the probability distribution for the lead time
for transportation of the accessories is developed as follows:

The random variable x is the number of dates taken for the transportation
through air freight between the date placing the order and the receipt of the
accessories.

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OSU5509: Unit 01 Session 1: Introduction to Probability Distributions

x(no. days) P(x)

12 0.015
14 0.050
15 0.100
16 0.140
17 0.250
18 0.410
19 0.010
20 0.025
1. Find the average lead time for transportation.
2. Find the standard deviation for lead time for transportation.
3. Find the coefficient of variation for lead time.
4. How might the company use above summary measures.

Solution:
Assuming the given information, the probability distribution and other
computations are given below.

Discrete probability distribution

x(no. days) P(x)
12 0.015
14 0.050
15 0.100
16 0.140
17 0.250
18 0.410
19 0.010
20 0.025

∑=1

Expected lead time

x(no. days) P(x) x P(x)
12 0.015 0.18
14 0.050 0.70
15 0.100 1.50
16 0.140 2.24
17 0.250 4.25
18 0.410 7.38
19 0.010 0.19
20 0.025 0.50
∑=1 ∑ = 16.94

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OSU5509: Unit 01 Session 1: Introduction to Probability Distributions

Therefore, ∑ P(x) =1, and ∑ x P(x) = 16.94

µ = 16.94 days

1. Then expected lead time for transportation is 16.94 days. In a long run
average number of days taken for the transportation is 17 days.

2. Standard Deviation

x(number
P(x) x -E(x) [x -E(x)]2 [x-E(x)]2 P(x)
of days)
12 0.015 -4.94 24.4036 0.366054
14 0.050 -2.94 8.6436 0.43218
15 0.100 -1.94 3.7636 0.37636
16 0.140 -0.94 0.8836 0.123704
17 0.250 0.06 0.0036 0.0009
18 0.410 1.06 1.1236 0.460676
19 0.010 2.06 4.2436 0.042436
20 0.025 3.06 9.3636 0.23409
∑=1 ∑=2.0364

The standard deviation,

 = √∑[X − E(X)]2 P(X) = √2.0364 = 1.4270

3. Coefficient of variation
Coefficient of variation is used to measure the relative variation. As we
calculated the expected value for the lead time and its standard
deviation, the coefficient of variation is,
 1.4270
= = = 0.0842
µ 16.94

4. We know that there exists a relationship between the lead time,

customer services and inventory costs. By reducing the lead time, the
company can reduce the amount of inventory. When know the average
lead time and standard deviation of the lead time, company can plan
the orderings and inventory requirements too.

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OSU5509: Unit 01 Session 1: Introduction to Probability Distributions

Activity 1.2 – Probability Distributions

1. Discuss the difference between discrete and continuous distributions.

Discuss each situation, discrete and continuous with examples for
variables of interest.

2. A warehouse receives materials from several suppliers. According to the

experience of last 50 days, the warehouse officer noted that 6 trucks
arrived on 8 of those days, 7 trucks arrived on 25 of those days and 8
trucks arrived on 17 of those days.

Accordingly, determine the probability distribution for the random

variable of “number of trucks arrived”

3. Re-write the following probabilities when x is a discrete variable.

a. P(x<2)
b. P(x>4)
c. P(x≤4)
d. P(x≥2)

4. Municipal council has noticed that there is a heavy traffic in a particular

crossroads. Therefore, the number of vehicles reaching to the crossroads
during periods of relatively low traffic flow was investigated. It was found
that the number of vehicles reaching the crossroads per minute(x) is
presented by the probability distribution:

x P(x)
0 0.32
1 0.41
2 0.21
3 0.05
4 0.01
∑=1

a. Calculate the expected value, the variance and the standard deviation
of the random variable X.
b. Graph the probability distribution P(x).

5. A company used to purchase bulbs from the supplier A. Based on the past
records company maintained, it has been determined the following
probability distribution for the proportion of defective bulbs that received
from the supplier A.

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OSU5509: Unit 01 Session 1: Introduction to Probability Distributions

Proportion of
defectives Probability
0.01 0.4
0.02 0.3
0.04 0.2
0.05 0.1

The supplier A charges Rs. 120 per one unit of bulb and replace any
defective bulb free of charge, but company costs about Rs. 15 per each
in dealing with defective bulbs. Consider that company needs to
purchase 5000 bulbs from the supplier A. What is the total expected
cost to the company for the deal?

Summary

This session introduces the basic concepts of random variable and probability
distribution. Further, it discusses different situations that give rise to discrete
probability distribution and the concept of the expected value and standard
deviation and their applications. Further, in brief it presents the most useful
and frequently used discrete and continuous distributions

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