MEDITERRANEAN SCHOOL OF

BUSINESS

PROGRAM: UPM
COURSE: Business Statistics 1
PROFESSOR: Hend Ghazzai
TERM
:
1
 Statistics for

Business and Economics

8th Edition

Chapter 5

Discrete Random Variables and Probability Distributions

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Ch. 4-2
HALL
 Chapter Goals
After completing this chapter, you should be able to:
Interpret the mean and standard deviation for a discrete random
variable
Describe when to apply the binomial distribution
Use the binomial probability distribution to find probabilities
Use the hypergeometric and Poisson discrete probability
distributions to find probabilities
Explain covariance and correlation for jointly distributed discrete
random variables

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Random Variables
Random Variable
◦ Represents a possible numerical value from a random
experiment

Random
Variables

Ch. 5 Discrete Continuous Ch. 6

Random Variable Random Variable

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 Discrete Random Variable
Takes on no more than a countable number of values

Examples:

◦ Roll a die twice

Let X be the number of times 4 comes up

(then X could be 0, 1, or 2 times)

◦ Toss a coin 5 times.

Let X be the number of heads
(then X = 0, 1, 2, 3, 4, or 5)

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 Continuous Random Variable
Can take on any value in an interval
◦ Possible values are measured on a continuum

Examples:

◦ Weight of packages filled by a mechanical filling process

◦ Temperature of a cleaning solution
◦ Time between failures of an electrical component

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Probability Distributions for Discrete Random Variables

Let X be a discrete random variable and x be one of its

possible values
 The probability that random variable X takes
specific value x is denoted P(X = x)
 The probability distribution function of a random
variable is a representation of the probabilities for
all the possible outcomes.
 Can be shown algebraically, graphically, or with
a table

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Probability Distributions for Discrete
Random Variables
Experiment: Toss 2 Coins. Let X = # heads.
Show P(x) , i.e., P(X = x) , for all values of x:

4 possible outcomes
Probability Distribution
T T x Value Probability
0 1/4 = .25

T H 1 2/4 = .50
2 1/4 = .25

H T

Probability
.50

.25
H H
0 1
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Probability Distribution
Required Properties

 0 ≤ P(x) ≤ 1 for any value of x

 The individual probabilities sum to 1;

(The notation indicates summation over all possible x values)

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 Cumulative Probability Function

The cumulative probability function, denoted F(x0), shows

the probability that X does not exceed the value x0

Where the function is evaluated at all values of x0

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 Cumulative Probability Function

Example: Toss 2 Coins. Let X = # heads.

x Value P(x) F(x)

0 0.25 0.25
1 0.50 0.75
2 0.25 1.00

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 Derived Properties
Derived properties of cumulative probability
distributions for discrete random variables

Let X be a discrete random variable with cumulative probability

distribution F(x0). Then

1. 0 ≤ F(x0) ≤ 1 for every number x0

2. for x0 < x1, then F(x0) ≤ F(x1)

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4.3 Properties of
Discrete Random Variables

Expected Value (or mean) of a discrete

random variable X:

◦ Example: Toss 2 coins, x P(x)

0 .25
x = # of heads,
1 .50
compute expected value of x:
2 .25

E(x) = (0 x .25) + (1 x .50) + (2 x .25)

= 1.0
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 Variance and
Standard Deviation
Variance of a discrete random variable X

Can also be expressed as

Standard Deviation of a discrete random variable X

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 Standard Deviation Example

◦ Example: Toss 2 coins, X = # heads,

compute standard deviation (recall E[X] = 1)

Possible number of heads = 0,

1, or 2

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Properties of Random Variables

Let a and b be any constants.

a)

i.e., if a random variable always takes the value a,

it will have mean a and variance 0

b)

i.e., the expected value of b·X is b·E(x)

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Linear Functions of Random Variables
Let random variable X have mean µx and variance σ2x
Let a and b be any constants.
Let Y = a + bX
Then the mean and variance of Y are

so that the standard deviation of Y is

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 Probability Distributions

Probability
Distributions

Ch. 5 Discrete Continuous Ch. 6

Probability Probability
Distributions Distributions

Binomial Uniform

Poisson Normal

Hypergeometric Exponential

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4.4 The Binomial Distribution

Probability
Distributions

Discrete
Probability
Distributions

Binomial

Poisson

Hypergeometric

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 Bernoulli Distribution

Consider only two outcomes: “success” or “failure”

Let P denote the probability of success
Let 1 – P be the probability of failure
Define random variable X:
x = 1 if success, x = 0 if failure
Then the Bernoulli probability distribution is

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 Mean and Variance of a
Bernoulli Random Variable

The mean is µx = P

The variance is σ2x = P(1 – P)

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 Binomial Probability Distribution
 A fixed number of observations (Trials) , n
 e.g., 15 tosses of a coin; ten light bulbs taken from a warehouse
 Two mutually exclusive and collectively exhaustive categories (outcomes)
 e.g., head or tail in each toss of a coin; defective or not defective light bulb
 Generally called “success” and “failure”
 Probability of success is P , probability of failure is 1 – P
 Constant probability for each observation
 e.g., Probability of getting a tail is the same each time we toss the coin
 Observations are independent
 The outcome of one observation does not affect the outcome of the other

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Binomial Random Variable
Denote by
X the number of successes among the n trials of a binomial experiment.

X is a discrete random variable that takes n+1 possible values.

P( x successes in the n independent trials)???

23
 Developing the
Binomial Distribution

The number of sequences with x successes in n independent

trials is:

Where n! = n·(n – 1)·(n – 2)· . . . ·1 and 0! = 1

These sequences are mutually exclusive, since no two can

occur at the same time

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 The Binomial Distribution

n! X n-X
P(x) = P (1- P)
x ! (n - x )!
P(x) = probability of x successes in n trials,
with probability of success P on each trial
Example: Flip a coin four
times, let x = # heads:
x = number of ‘successes’ in sample,
n=4
(x = 0, 1, 2, ..., n)
n = sample size (number of independent P = 0.5
trials or observations) 1 - P = (1 - 0.5) = 0.5
P = probability of “success” x = 0, 1, 2, 3, 4

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Example:
Calculating a Binomial Probability
What is the probability of one success in five
observations if the probability of success is 0.1?
x = 1, n = 5, and P = 0.1

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 Shape of Binomial Distribution
The shape of the binomial distribution depends on the values
of P and n
Mean P(x) n = 5 P = 0.1
.6
 Here, n = 5 and P = 0.1 .4
.2
0 x
0 1 2 3 4 5

.6
P(x) n = 5 P = 0.5
 Here, n = 5 and P = 0.5
.4
.2
0 x
0 1 2 3 4 5
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Mean and Variance of a
Binomial Distribution

Mean

 Variance and Standard Deviation

Where n = sample size

P = probability of success
(1 – P) = probability of failure

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 Binomial Characteristics
Examples

Mean .6
P(x) n = 5 P = 0.1
.4
.2
0 x
0 1 2 3 4 5

.6
P(x) n = 5 P = 0.5
.4
.2
0 x
0 1 2 3 4 5
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 Using Binomial Tables
N x … p=.20 p=.25 p=.30 p=.35 p=.40 p=.45 p=.50
10 0 … 0.1074 0.0563 0.0282 0.0135 0.0060 0.0025 0.0010
1 … 0.2684 0.1877 0.1211 0.0725 0.0403 0.0207 0.0098
2 … 0.3020 0.2816 0.2335 0.1757 0.1209 0.0763 0.0439
3 … 0.2013 0.2503 0.2668 0.2522 0.2150 0.1665 0.1172
4 … 0.0881 0.1460 0.2001 0.2377 0.2508 0.2384 0.2051
5 … 0.0264 0.0584 0.1029 0.1536 0.2007 0.2340 0.2461
6 … 0.0055 0.0162 0.0368 0.0689 0.1115 0.1596 0.2051
7 … 0.0008 0.0031 0.0090 0.0212 0.0425 0.0746 0.1172
8 … 0.0001 0.0004 0.0014 0.0043 0.0106 0.0229 0.0439
9 … 0.0000 0.0000 0.0001 0.0005 0.0016 0.0042 0.0098
10 … 0.0000 0.0000 0.0000 0.0000 0.0001 0.0003 0.0010

Examples:
n = 10, x = 3, P = 0.35: P(x = 3|n =10, p = 0.35) = .2522
n = 10, x = 8, P = 0.45: P(x = 8|n =10, p = 0.45) = .0229
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Using Binomial Tables
n = 10, x = 8, P = 0.70: P(x = 8|n =10, p = 0.70) = ???

31
Cumulative Binomial Table
N=10, p=0.3
P(X)=P(0)+P(1)+P(2)+P(3)+P(4)+P(5)+P(6)=0.989

32
4.5 The Poisson Distribution

Probability
Distributions

Discrete
Probability
Distributions

Binomial

Poisson

Hypergeometric

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 The Poisson Distribution
The Poisson distribution is used to determine the probability of
a random variable which characterizes the number of
occurrences or successes of a certain event in a given
continuous interval (such as time, surface area, or length).

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 The Poisson Distribution
Examples:
The number of failures in a large computer system during a given day
The number of errors per 100 pages of a textbook.
The number of delivery trucks to arrive at a central warehouse in an hour.

35
 The Poisson Distribution
(continued)
Assume an interval is divided into a very large number of equal subintervals where
the probability of the occurrence of an event in any subinterval is very small.
Poisson distribution assumptions
1. The probability of the occurrence of an event is constant for all subintervals.
2. There can be no more than one occurrence in each subinterval.
3. Occurrences are independent; that is, an occurrence in one interval does not
influence the probability of an occurrence in another interval.

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 Poisson Distribution Function
The expected number of events per unit is the parameter  (lambda), which is a
constant that specifies the average number of occurrences (successes) for a
particular time and/or space

where:
X is a Poisson Random Variable representing the number of successes over a given time or space. No
upper limit for the values taken by X.
P(x) = the probability of x successes over a given time or
space, given 
 = the expected number of successes per time or space unit,  > 0
e = base of the natural logarithm system (2.71828...)

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Poisson Distribution Characteristics
Mean and variance of the Poisson distribution

Mean

 Variance and Standard Deviation

where  = expected number of successes per time or space unit

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 Using Poisson Tables


X 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90

0 0.9048 0.8187 0.7408 0.6703 0.6065 0.5488 0.4966 0.4493 0.4066

1 0.0905 0.1637 0.2222 0.2681 0.3033 0.3293 0.3476 0.3595 0.3659
2 0.0045 0.0164 0.0333 0.0536 0.0758 0.0988 0.1217 0.1438 0.1647
3 0.0002 0.0011 0.0033 0.0072 0.0126 0.0198 0.0284 0.0383 0.0494
4 0.0000 0.0001 0.0003 0.0007 0.0016 0.0030 0.0050 0.0077 0.0111
5 0.0000 0.0000 0.0000 0.0001 0.0002 0.0004 0.0007 0.0012 0.0020
6 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0001 0.0002 0.0003
7 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

Example: Find P(X = 2) if  = .50

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 Graph of Poisson Probabilities

Graphically:
 = .50
=
X 0.50
0 0.6065
1 0.3033
2 0.0758
3 0.0126
4 0.0016
5 0.0002
6 0.0000
7 0.0000 P(X = 2) = .0758

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Poisson Distribution Shape

The shape of the Poisson Distribution depends on the parameter  :

 = 0.50  = 3.00

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Example
Customers arrive at a photocopying machine at an average rate of 2 every five minutes. Assume
that these arrivals are independent, with a constant arrival rate, and that this problem follows a
Poisson model, with X denoting the number of arriving customers in a 5-minute period and mean
λ = 2. Find the probability that more than two customers arrive in a 5-minute period.

42
4.6 The Hypergeometric Distribution

Probability
Distributions

Discrete
Probability
Distributions

Binomial

Poisson

Hypergeometric

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 The Hypergeometric Distribution

“n” trials in a sample taken from a finite population of size N

Sample taken without replacement
Outcomes of trials are dependent
Concerned with finding the probability of “X” successes in the sample where
there are “S” successes in the population

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The Hypergeometric Distribution
Example
A professor wants to select a sample of 5 students from a group of 30 students to help him in a
research project. 18 students are males and 12 students are female. What is the probability of
selecting 3 females?

In this example, what is n, N, S, and X?

45
 Hypergeometric
Probability Distribution

Where
N = population size
S = number of successes in the population
N – S = number of failures in the population
n = sample size
x = number of successes in the sample
n – x = number of failures in the sample

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 Using the
Hypergeometric Distribution
■Example: 3 different computers are checked from 10 in the department.
4 of the 10 computers have illegal software loaded. What is the
probability that 2 of the 3 selected computers have illegal software
loaded?
N = 10 n=3
S=4 x=2

The probability that 2 of the 3 selected computers have illegal software loaded is 0.30,
or 30%.

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 Jointly Distributed
Discrete Random Variables

A joint probability distribution is used to express the probability

that simultaneously X takes the specific value x and Y takes
the value y, as a function of x and y

The marginal probability distributions are

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Properties of Joint
Probability Distributions

Properties of Joint Probability Distributions of Discrete Random

Variables

Let X and Y be discrete random variables with joint probability

distribution P(x, y)

1. 0 ≤ P(x, y) ≤ 1 for any pair of values x and y

2. the sum of the joint probabilities P(x, y) over all possible

pairs of values must be 1

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 Independence
The jointly distributed random variables X and Y are said to be
independent if and only if their joint probability distribution is the
product of their marginal probability functions:

for all possible pairs of values x and y

A set of k random variables are independent if and only if

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 Covariance
Let X and Y be discrete random variables with means μX and
μY

The expected value of (X - μX)(Y - μY) is called the covariance

between X and Y
For discrete random variables

An equivalent expression is

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 Correlation
The correlation between X and Y is:

-1 ≤ ρ ≤ 1
ρ=0 no linear relationship between X and Y
ρ > 0 positive linear relationship between X and Y
◦ when X is high (low) then Y is likely to be high (low)
◦ ρ = +1 perfect positive linear dependency

ρ < 0 negative linear relationship between X and Y

◦ when X is high (low) then Y is likely to be low (high)
◦ ρ = -1 perfect negative linear dependency
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 Covariance and Independence

The covariance measures the strength of the linear relationship between

two variables

If two random variables are statistically independent, then covariance

between them is 0
◦ The converse is not necessarily true

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 Chapter Summary

Defined discrete random variables and probability distributions

Discussed the Binomial distribution

Discussed the Poisson distribution

Discussed the Hypergeometric distribution

Defined covariance and the correlation between two random variables

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