Introductory Business Statistics

Chapter 9:

Random Variables
 Random Variables
Types of Random Variables

Discrete: if the set of values it can take on are

countable
(whole numbers)
Continuous: can take on any value within a range
(real numbers)
 Random Variables
could be $10, $18 or $20 (for Tubular, Radical and
Epic respectively).
𝑷 ( 𝐓𝐮𝐛𝐮𝐥𝐚𝐫|𝐑𝐞𝐭𝐚𝐢𝐥 )=𝟎. 𝟒𝟓𝟓 𝑷 ( 𝐑𝐚𝐝𝐢𝐜𝐚𝐥|𝐑𝐞𝐭𝐚𝐢𝐥 ) =𝟎. 𝟏𝟏𝟖
𝑷 ( 𝐄𝐩𝐢𝐜|𝐑𝐞𝐭𝐚𝐢𝐥 )=𝟎 .𝟒𝟐𝟕
Probabili
Car Wash Price ty

Tubular $10 0.445

Radical $18 0.118
Epic $20 0.427
 Mean of Discrete Random
Variables
𝑬 ( 𝑿 )=𝝁=𝒙 𝟏 𝒑 ( 𝒙 𝟏 ) + 𝒙 𝟐 𝒑 ( 𝒙 𝟐 ) + …+ 𝒙 𝒌 𝒑 ( 𝒙 𝒌 )
Probabili
Car Wash Price ty

Tubular $10 0.445

Radical $18 0.118
Epic $20 0.427

𝑬 ( 𝑿 )=$ 𝟏𝟎 ( 𝟎. 𝟒𝟒𝟓 ) +$ 𝟏𝟖 ( 𝟎.𝟏𝟏𝟖 ) +$ 𝟐𝟎 ( 𝟎. 𝟒𝟐𝟕 )=$ 𝟏𝟓. 𝟏𝟏

Measure of spread?
 Let’s Play Roulette

A $1 bet on a single number or “straight up” has a

chance of winning times with a payoff of $35.
 Let’s Play Roulette
A $1 bet on a single number or “straight up” has a
chance of winning times with a payoff of $35.

( )
𝑬 ( 𝑿 )=∑ 𝒙 ∙ 𝒑 ( 𝒙 ) =− $ 𝟏
𝟑𝟕
𝟑𝟖 ( )
+$ 𝟑𝟓
𝟏
𝟑𝟖
=− $ 𝟎 . 𝟎𝟓𝟐𝟔
 Let’s Play Roulette

A $1 bet on a square or “corner” has better odds. A

corner bet has a chance of winning times with a
payoff of $8.
 Let’s Play Roulette

A $1 bet on a square or “corner” has better odds. A

corner bet has a chance of winning times with a
payoff of $8.
 Let’s Play Roulette
A $1 bet on a square or “corner” has better odds. A
corner bet has a chance of winning times with a
payoff of $8.

( ) ( )
𝑬 ( 𝑿 )=∑ 𝒙 ∙ 𝒑 ( 𝒙 ) =− $ 𝟏
𝟏𝟕
𝟏𝟗
+$ 𝟖
𝟐
𝟏𝟗
=− $ 𝟎 .𝟎𝟓𝟐𝟔

Let’s measure the

spread!
 Variance of
Unique formula for , must be done using
formulas in Excel.
𝟐
𝝈 =𝑽𝒂𝒓 ( 𝑿 )=∑ ( 𝒙 𝒊𝟐− 𝑬 ( 𝑿 ) ) 𝒑 ( 𝒙 𝒊) 𝟐
𝟐

𝝈 =𝑽𝒂𝒓 ( 𝑿 )=( ∑ 𝒙𝒊 𝒑 ( 𝒙 𝒊) ) − ( 𝑬 ( 𝐗 ) )
𝟐

𝝈=√ 𝑽𝒂𝒓 ( Standard

𝑿)
Deviation
 Variance of
A $1 bet on a single number or “straight up”

𝝈 =𝑽𝒂𝒓 ( 𝑿 )=( ∑ 𝒙 𝒑 ( 𝒙 𝒊) ) − ( 𝑬 ( 𝐗 ) )
𝟐 𝟐 𝟐
𝒊
𝟐 𝟐
𝝈 = 𝑽𝒂𝒓 ( 𝑿 )= (𝟑𝟑 .𝟐𝟏𝟏 ) − ( −𝟎 . 𝟎𝟓𝟐𝟔 )
𝟐
𝝈 = 𝟑𝟑 .𝟐𝟎𝟖
𝝈=𝟓.𝟕𝟔𝟑 Standard
 Variance of
A $1 bet on a square or “corner”

𝝈 =𝑽𝒂𝒓 ( 𝑿 )=( ∑ 𝒙 𝒑 ( 𝒙 𝒊) ) − ( 𝑬 ( 𝐗 ) )
𝟐 𝟐 𝟐
𝒊
𝟐 𝟐
𝝈 = 𝑽𝒂𝒓 ( 𝑿 )= (𝟕 . 𝟔𝟑𝟏𝟔 ) − ( −𝟎 . 𝟎𝟓𝟐𝟔 )
𝟐
𝝈 = 𝟕 .𝟔𝟐𝟖𝟖
𝝈=𝟐.𝟕𝟔𝟐 Standard
 Which is a safer bet?

Expected
Play
Payout
Single
Number
Find for the Insurance Example

Probabilit
Claim
y
𝑬 ( 𝑿 )=$ 𝟏𝟒𝟓 .𝟐𝟖
$0 0.976
$250 0.011 𝝈=$ 𝟏,𝟑𝟎𝟒 . 𝟔𝟒
$10,000 0.010
$17,000 0.003
Your Turn!
 Chapter 11:

Binomial Distribution
 Binomial Distribution
The binomial probability distribution is a discrete
probability distribution that describes
probabilities for experiments in which there are
two mutually exclusive (disjoint) outcomes.

These two outcomes are generally referred to as

success and failure.
 Criteria for Binomial Probability
Experiment
An experiment is said to be a binomial
experiment if

1. The experiment is performed a fixed number of

times. Each repetition of the experiment is
called a trial.
2. The trials are independent. This means that
the outcome of one trial will not affect the
outcome of other trials.
3. For each trial, there are two mutually
exclusive (disjoint) outcomes: success or
 Binomial Probability Experiment?
Allen Iverson has a free throw percentage of for
his career. He is fouled shooting a -pointer and
gets three shots from the line. The number of
free throws made is recorded.
 Binomial Probability Experiment?
Allen Iverson has a free throw percentage of for
his career. He is fouled shooting a -pointer and
gets three shots from the line. The number of
free throws made is recorded.

1. Fixed number of trials?

2. Trials independent?
3. Two disjoint outcomes? What is
success/failure?
 Binomial Probability Experiment?
Suppose a local animal rescue has German
Shepherd’s, Rottweiler’s and Pitbull’s. An owner
comes to take two dog’s home, doesn’t care which
breeds she takes home, and randomly chooses two
dogs. The number of German Shepherd’s is recorded.
 Binomial Probability Experiment?
Suppose a local animal rescue has German
Shepherd’s, Rottweiler’s and Pitbull’s. An owner
comes to take two dog’s home, doesn’t care which
breeds she takes home, and randomly chooses two
dogs. The number of German Shepherd’s is recorded.

1. Fixed number of trials?

2. Trials independent?
3. Two disjoint outcomes? What is success/failure?
4. Is the probability of success the same for each
 Binomial Probability Experiment?
According to a recent poll, of college students said
they received COVID vaccinations. Suppose a simple
random sample of college students is obtained and
the number students who claim they had COVID
vaccinations is recorded.

1. Fixed number of trials?

2. Trials independent?
3. Two disjoint outcomes? What is success/failure?
4. Is the probability of success the same for each
 Binomial Probability Distribution
Function
The probability of obtaining successes in
independent trials of a binomial experiment is
given by

where is the probability of success.

 Binomial Probability Distribution
Example
According to UPenn statistics, of students are involved
in at least one club, sport, or school related organization.
In a random sample of students, what is the probability
that…

a) exactly participate in at least one activity?

b) fewer than participate in at least one activity?
c) at least participate in at least one activity?
 Binomial Probability Distribution
Example
According to UPenn statistics, of students are involved
in at least one club, sport, or school related organization.
In a random sample of students, what is the probability
that…
a) exactly participate in at least one activity?

1. Fixed number of trials?

2. Trials independent?

3. Two disjoint outcomes? What is success/failure?

4. Is the probability of success the same for each

 Binomial Probability Distribution
Example
According to UPenn statistics, of students are involved
in at least one club, sport, or school related organization.
In a random sample of students, what is the probability
that…
a) exactly participate in at least one activity?

❑ 𝟓 𝟏𝟎
𝑷 ( 𝑿 =𝟓 )=𝟏𝟓 𝑪 𝟓 ( 𝟎 . 𝟖𝟔 ) ( 𝟎 .𝟏𝟒 )

𝟏𝟓 !
𝑷 ( 𝑿=𝟓 )= ( 𝟎 . 𝟖𝟔 )𝟓 ( 𝟎 .𝟏𝟒 )𝟏𝟎
𝟓! (𝟏𝟓 − 𝟓 ) !
 Binomial Probability Distribution
Example
According to UPenn statistics, of students are involved
in at least one club, sport, or school related organization.
In a random sample of students, what is the probability
that…
a) exactly participate in at least one activity?

❑ 𝟓 𝟏𝟎
𝑷 ( 𝑿 =𝟓 )=𝟏𝟓 𝑪 𝟓 ( 𝟎 . 𝟖𝟔 ) ( 𝟎 .𝟏𝟒 )

𝟓 𝟏𝟎
𝑷 ( 𝑿=𝟓 )=𝟑𝟎𝟎𝟑 ( 𝟎 .𝟖𝟔 ) ( 𝟎 . 𝟏𝟒 ) ≈ 𝟎 . 𝟎𝟎𝟎𝟎𝟎𝟒𝟎𝟖𝟔
 Binomial Probability Distribution
Example
According to UPenn statistics, of students are involved
in at least one club, sport, or school related organization.
In a random sample of students, what is the probability
that…
b) fewer than participate in at least one activity?

𝑷 ( 𝑿 <𝟏𝟑 ) =𝑷 ( 𝟎 ) + 𝑷 ( 𝟏 ) +𝑷 ( 𝟐 ) +…+𝑷 (𝟏𝟐)

❑ 𝟎 𝟏𝟓 ❑ 𝟏 𝟏𝟒 ❑ 𝟏𝟐 𝟑
¿ 𝑪 (𝟎 .𝟖𝟔 ) (𝟎 .𝟏𝟒) + 𝑪 (𝟎 .𝟖𝟔) (𝟎 .𝟏𝟒 ) +…+ 𝑪 (𝟎 .𝟖𝟔) (𝟎 .𝟏𝟒)
𝟏𝟓 𝟎 𝟏𝟓 𝟏 𝟏𝟓 𝟏𝟐
 Binomial Probability Distribution
Example
According to UPenn statistics, of students are involved
in at least one club, sport, or school related organization.
In a random sample of students, what is the probability
that…
b) fewer than participate in at least one activity?

𝑷 ( 𝑿 <𝟏𝟑 ) =𝑷 ( 𝟎 ) + 𝑷 ( 𝟏 ) +𝑷 ( 𝟐 ) +…+𝑷 (𝟏𝟐)

𝑷 ( 𝑿 <𝟏𝟑 ) =𝟏 − 𝑷 ( 𝑿 ≥ 𝟏𝟑 )=𝟏 − ( 𝑷 ( 𝟏𝟑 ) + 𝑷 (𝟏𝟒 ) +𝑷 ( 𝟏𝟓 ) )

 Binomial Probability Distribution
Example
According to UPenn statistics, of students are involved
in at least one club, sport, or school related organization.
In a random sample of students, what is the probability
that…
b) fewer than participate in at least one activity?

𝑷 ( 𝑿 <𝟏𝟑 ) =𝟏 − ( 𝑷 (𝟏𝟑 ) + 𝑷 ( 𝟏𝟒 ) + 𝑷 ( 𝟏𝟓 ) )

¿ 𝟏 − ( 𝟏𝟓
❑
𝑪𝟏𝟑 ( 𝟎 .𝟖𝟔 )𝟏𝟑 ( 𝟎 .𝟏𝟒 )𝟐 +…+ 𝟏𝟓
❑
𝑪𝟏 𝟓 ( 𝟎 . 𝟖𝟔 )𝟏 𝟓 ( 𝟎. 𝟏𝟒 )𝟎 )

≈ 𝟏− ( 𝟎. 𝟐𝟖𝟗𝟕+𝟎.𝟐𝟒𝟓𝟐+𝟎. 𝟏𝟎𝟒𝟏 )=𝟏− 𝟎.𝟔𝟒𝟖=𝟎.𝟑𝟓𝟐

 Binomial Probability Distribution
Example
According to UPenn statistics, of students are involved
in at least one club, sport, or school related organization.
In a random sample of students, what is the probability
that…
b) fewer than participate in at least one activity?

𝑷 ( 𝑿 <𝟏𝟑 ) ≈ 𝟎 . 𝟑𝟓𝟐=𝟑𝟓 . 𝟐 %
 Binomial Probability Distribution
Example
According to UPenn statistics, of students are involved
in at least one club, sport, or school related organization.
In a random sample of students, what is the probability
that…
c) at least participate in at least one activity?

𝑷 ( 𝑿 ≥ 𝟏𝟑 )=𝑷 (𝟏𝟑 ) + 𝑷 ( 𝟏𝟒 ) + 𝑷 ( 𝟏𝟓 )
❑ 𝟏𝟑 𝟐 ❑ 𝟏𝟒 𝟏 ❑ 𝟏𝟓 𝟎
¿ 𝑪 (𝟎 .𝟖𝟔) (𝟎 .𝟏𝟒 ) + 𝑪 (𝟎 .𝟖𝟔) (𝟎 .𝟏𝟒 ) + 𝑪 (𝟎 .𝟖𝟔 ) (𝟎 .𝟏𝟒 )
𝟏𝟓 𝟏𝟑 𝟏𝟓 𝟏𝟒 𝟏𝟓 𝟏𝟓
≈ 𝟎 . 𝟐𝟖𝟗𝟕+𝟎 .𝟐𝟓𝟒𝟐+𝟎 . 𝟏𝟎𝟒𝟏=𝟎 . 𝟔𝟒𝟖
 Binomial Probability Distribution
Example
According to UPenn statistics, of students are involved
in at least one club, sport, or school related organization.
In a random sample of students, what is the probability
that…
c) at least participate in at least one activity?

𝑷 ( 𝑿 ≥ 𝟏𝟑 ) ≈ 𝟎 . 𝟔𝟒𝟖=𝟔𝟒 . 𝟖 %
 Binomial Probability Distribution
Example
According to UPenn statistics, of students are involved
in at least one club, sport, or school related organization.
In a random sample of students, what is the probability
that…
a) exactly participate in at least one activity?

𝑷 ( 𝑿=𝟓 )=𝐁𝐈𝐍𝐎𝐌 . 𝐃𝐈𝐒𝐓 (𝟓, 𝟏𝟓, 𝟎.𝟖𝟔 , 𝐅𝐀𝐋𝐒𝐄 )

Exactly 5
 Binomial Probability Distribution
Example
According to UPenn statistics, of students are involved
in at least one club, sport, or school related organization.
In a random sample of students, what is the probability
that…
b) fewer than participate in at least one activity?

𝑷 ( 𝑿 <𝟏𝟑 ) =𝑷 ( 𝟎 ) + 𝑷 ( 𝟏 ) +𝑷 ( 𝟐 ) +…+𝑷 (𝟏𝟐)

𝑷 ( 𝑿 ≤ 𝟏𝟐 )=𝐁𝐈𝐍𝐎𝐌 . 𝐃𝐈𝐒𝐓 (𝟏𝟐 ,𝟏𝟓 ,𝟎 . 𝟖𝟔 , 𝐓𝐑𝐔𝐄 )

¿ 𝟎 . 𝟑𝟓𝟐 Cumulative
 Binomial Probability Distribution
Example
According to UPenn statistics, of students are involved
in at least one club, sport, or school related organization.
In a random sample of students, what is the probability
that…
c) at least participate in at least one activity?

𝑷 ( 𝑿 ≥ 𝟏𝟑 )=𝟏 − 𝑷 ( 𝑿 ≤ 𝟏𝟐)
¿𝟏− 𝐁𝐈𝐍𝐎𝐌 . 𝐃𝐈𝐒𝐓 (𝟏𝟐,𝟏𝟓,𝟎.𝟖𝟔, 𝐓𝐑𝐔𝐄 )
Excel gives area to the left
¿ 𝟎 . 𝟔𝟒𝟖
Your Turn!
 Homework

Pearson & Written

Thank you
&
Good Day!