Modern filling machines are designed to work

efficiently and with high reliability. Machine

can fill toothpaste tubes to within 1 gram of
the desired level 80 percent of the time. A
visitor to the plant, watching filled tubes being
placed in to cartons, asked Whats the
chance that exactly half the pumps in a carton
selected at random will be filled to within 1
gram of the desired level? We can not make
an exact forecast, but probability distribution
enable us to give a pretty good answer to this
question.
Probability Distributions
G N Patel
Toss of a Fair Coin

Possible
Outcomes
from Two
Tosses from
a Ffir Coin
First Toss Second Toss Number of
Tails on
Two Tosses
Probability
of Possible
Outcomes
T T 2 0.5x0.5=0.25
T H 1 0.5x0.5=0.25
H T 1 0.5x0.5=0.25
H H 0 0.5x0.5=0.25
Sum 1.00
Probability Distribution
Values Probability
0 1/4 = .25
1 2/4 = .50
2 1/4 = .25
Probability Distribution of
Possible Number of Tails
Event: Toss 2 Coins. Count # Tails.
T
T
T T
Random Variable
Random Variable
Outcomes of an experiment expressed numerically
e.g. Toss a die twice; count the number of times
the number 4 appears (0, 1 or 2 times)


e.g. Toss a fair coin twice; count the number of
times the tail appears (0, 1 or 2 times)
Measure the time between customer arrival at a
retail outlet.
Discrete Random Variable
Discrete Random Variable
Obtained by Counting (0, 1, 2, 3, etc.)
Usually a finite number of different values
e.g. Toss a coin 5 times; count the number of tails
(0, 1, 2, 3, 4, or 5 times)
Probability Distribution
A frequency distribution is a listing of the
observed frequencies of all the outcomes of
an experiment that actually occurred when
the experiment was done, whereas a
probability distribution is a listing of the
probabilities of all the possible outcomes that
could result if the experiment were done.
Discrete Probability Distribution
List of All Possible [X
j
, P(X
j
) ] Pairs
X
j
= Value of random variable
P(X
j
) = Probability associated with value
Mutually Exclusive (Nothing in Common)
Collective Exhaustive (Nothing Left Out)
( ) ( )
0 1 1
j j
P X P X s s =

Summary Measures
Expected value (The Mean)
Weighted average of the probability distribution


e.g. Toss 2 coins, count the number of tails,
compute expected value
( )
( )
j j
j
E X X P X = =

( )
( )( ) ( )( ) ( )( )
0 .25 1 .5 2 .25 1
j j
j
X P X =
= + + =

Summary Measures
Variance
Weighted average squared deviation about the mean


e.g. Toss 2 coins, count number of tails, compute
variance
(continued)
( )
( ) ( )
2
2
2
j j
E X X P X o
(
= =


( ) ( )
( ) ( ) ( ) ( ) ( ) ( )
2
2
2 2 2
0 1 .25 1 1 .5 2 1 .25 .5
j j
X P X o =
= + + =

Bob Walter, who frequently invests in the stock market, carefully

studies any potential investment. He is currently examining the
possibility of investing in the Trinity Power Company. Through
studying past performance, Walter has broken the potential results
of the investment into five possible outcomes with accompanying
probabilities. The outcomes of annual rates of return on a single
share of stock that currently costs $150. Find the expected value
of the return for investing in a single share of Trinity Power. If
Walter purchases stock whenever the expected rate of return
exceeds 10 percent, will he purchase the stock according to the
following.

ROI ($) 0.00 10.00 15.00 25.00 50.00
Probability 0.20 0.25 0.30 0.15 0.10
Consider a case of fruit and vegetable wholesaler who sells
strawberries. This product has very limited useful life. If not sold
on the day of delivery, it is worthless. One case of strawberries
costs $20, and the wholesaler receives $50 for it. The wholesaler
can not specify the number of cases customers will cal for on any
day, but her analysis of past records has produced the following
information. Develop a conditional loss table considering
obsolescence losses and opportunity losses. Find the optimal stock
action based on expected loss.
Sales During
100 Days
Daily sales Number of
Days Sold
Probability of
each Number
Being Sold
10 15 0.15
11 20 0.20
12 40 0.40
13 25 0.25
Important Discrete Probability
Distributions
Discrete Probability
Distributions
Binomial
Binomial Probability Distribution
n Identical Trials
e.g. 15 tosses of a coin
2 Mutually Exclusive Outcomes on Each Trial
e.g. Head or tail in each toss of a coin; defective or
not defective light bulb
Trials are Independent
The outcome of one trial does not affect the
outcome of the other
Binomial Probability Distribution
Constant Probability for Each Trial
e.g. Probability of getting a tail is the same each
time we toss the coin
(continued)


Bernoulli Process:
1. Each trial has only two possible outcomes
(heads or tails, yes or no, success or failure, true
or false)
2. The probability of the outcome of any trial
remain fixed over time.
3. The trials are statistically independent:


p= probability of success
q= probability of failure = 1-p
r= number of success desired
n= number of trials undertaken
Probability of r success in n trial =
r n r
r
n
q p c







The binomial distribution describes discrete
data, resulting from an experiment known
as Bernoulli Process.

1. The tossing of a fair coin a fixed number of times
is a Bernoulli process and the outcome of such tosses
can be represented by binomial probability
distribution.

2. The success or failure in a test may also be
described by Bernoulli Process.


Ex: What is the probability of getting 2 heads if a fair coin
is tossed 3 times
n=3 p=0.5
r=2 q=0.5
Probability of 2 success in 3 trial



1. When p is small, the distribution is skewed to right
2. When p=0.5, the distribution is symmetrical
3. When p >0.5, the distribution is skewed to the left.
( ) ( )
( ) ( )
375 . 0
0.5 25 . 0 3
0.5 0.5 3c
1 2
2
=
=
=
Case let 1. A Survey found that 65% of all
financial consumer were very satisfied with their
primary financial institutions. If this figure still
holds true today, suppose 40 financial consumers
sampled randomly. What is the probability that
exactly 23 of the 40 are very satisfied with their
primary financial institution ?
p = 0.65 q= 1-p=0.35, n= 40,
r=23

( ) ( ) 0784 . 35 . 65 . 0
17 23
23
40
= c
For Binomial Distribution

Mean =
npq
np
=
=
o

Case let 2. The latest nationwide political poll indicated

that for Indian, who are randomly selected, the
probability that they are conservative is 070%, the
probability that they are liberal is 0.15% and 0.15%
are in middle of the road. Assuming that these
probability are accurate, answer the following
pertaining to a randomly chosen group of 10 Indian.
a). What is the probability that 4 are liberal?

b). What is the probability that none are
conservative?

c). What is the probability that two are middle of
the road?

d). What is the probability that at least eight are
liberal?
Binomial Probability Distribution
Function
( )
( )
( )
( )
( )
!
1
! !
: probability of successes given and
: number of "successes" in sample 0,1, ,
: the probability of each "success"
: sample size
n X
X
n
P X p p
X n X
P X X n p
X X n
p
n

=
Tails in 2 Tosses of Coin
X P(X)
0 1/4 = .25
1 2/4 = .50
2 1/4 = .25
Binomial Distribution
Characteristics
Mean

E.g.
Variance and
Standard Deviation



e.g.

( )
E X np = =
( )
5 .1 .5 np = = =
n = 5 p = 0.1
0
.2
.4
.6
0 1 2 3 4 5
X
P(X)
( ) ( )( )
1 5 .1 1 .1 .6708 np p o = = =
( )
( )
2
1
1
np p
np p
o
o
=
=
Binomial Distribution:
Demonstration Problem
n
p
q
P X P X P X P X
=
=
=
s = = + = + =
= + + =
20
06
94
2 0 1 2
2901 3703 2246 8850
.
.
( ) ( ) ( ) ( )
. . . .
( ) ( )
P X ( )
)!
( )( )(. ) .
. .
= =

= =

0
20!
0!(20 0
1 1 2901 2901
0 20 0
06 94
( ) ( )
P X ( )
!( )!
( )(. )(. ) .
. .
= =

= =

1
20!
1 20 1
20 06 3086 3703
1 20 1
06 94
( ) ( )
P X ( )
!( )!
( )(. )(. ) .
. .
= =

= =

2
20!
2 20 2
190 0036 3283 2246
2 20 2
06 94
G N Patel
Binomial
Table
n = 20 PROBABILITY
X 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
0 0.122 0.012 0.001 0.000 0.000 0.000 0.000 0.000 0.000
1 0.270 0.058 0.007 0.000 0.000 0.000 0.000 0.000 0.000
2 0.285 0.137 0.028 0.003 0.000 0.000 0.000 0.000 0.000
3 0.190 0.205 0.072 0.012 0.001 0.000 0.000 0.000 0.000
4 0.090 0.218 0.130 0.035 0.005 0.000 0.000 0.000 0.000
5 0.032 0.175 0.179 0.075 0.015 0.001 0.000 0.000 0.000
6 0.009 0.109 0.192 0.124 0.037 0.005 0.000 0.000 0.000
7 0.002 0.055 0.164 0.166 0.074 0.015 0.001 0.000 0.000
8 0.000 0.022 0.114 0.180 0.120 0.035 0.004 0.000 0.000
9 0.000 0.007 0.065 0.160 0.160 0.071 0.012 0.000 0.000
10 0.000 0.002 0.031 0.117 0.176 0.117 0.031 0.002 0.000
11 0.000 0.000 0.012 0.071 0.160 0.160 0.065 0.007 0.000
12 0.000 0.000 0.004 0.035 0.120 0.180 0.114 0.022 0.000
13 0.000 0.000 0.001 0.015 0.074 0.166 0.164 0.055 0.002
14 0.000 0.000 0.000 0.005 0.037 0.124 0.192 0.109 0.009
15 0.000 0.000 0.000 0.001 0.015 0.075 0.179 0.175 0.032
16 0.000 0.000 0.000 0.000 0.005 0.035 0.130 0.218 0.090
17 0.000 0.000 0.000 0.000 0.001 0.012 0.072 0.205 0.190
18 0.000 0.000 0.000 0.000 0.000 0.003 0.028 0.137 0.285
19 0.000 0.000 0.000 0.000 0.000 0.000 0.007 0.058 0.270
20 0.000 0.000 0.000 0.000 0.000 0.000 0.001 0.012 0.122
G N Patel
Demonstration
Use of the
Binomial Table

n = 20 PROBABILITY
X 0.1 0.2 0.3 0.4
0 0.122 0.012 0.001 0.000
1 0.270 0.058 0.007 0.000
2 0.285 0.137 0.028 0.003
3 0.190 0.205 0.072 0.012
4 0.090 0.218 0.130 0.035
5 0.032 0.175 0.179 0.075
6 0.009 0.109 0.192 0.124
7 0.002 0.055 0.164 0.166
8 0.000 0.022 0.114 0.180
9 0.000 0.007 0.065 0.160
10 0.000 0.002 0.031 0.117
11 0.000 0.000 0.012 0.071
12 0.000 0.000 0.004 0.035
13 0.000 0.000 0.001 0.015
14 0.000 0.000 0.000 0.005
15 0.000 0.000 0.000 0.001
16 0.000 0.000 0.000 0.000
17 0.000 0.000 0.000 0.000
18 0.000 0.000 0.000 0.000
19 0.000 0.000 0.000 0.000
20 0.000 0.000 0.000 0.000
( ) ( )
n
p
P X C
=
=
= = =
20
40
10 01171 20 10
10 10
40 60
.
( ) .
. .
G N Patel
Binomial Distribution using Table:
Demonstration Problem
n
p
q
P X P X P X P X
=
=
=
s = = + = + =
= + + =
20
06
94
2 0 1 2
2901 3703 2246 8850
.
.
( ) ( ) ( ) ( )
. . . .
P X P X ( ) ( ) . . > = s = = 2 1 2 1 8850 1150
= = = n p ( )(. ) . 20 06 1 20
2
2
20 06 94 1 128
1 128 1 062
o
o o
= = =
= = =
n p q ( )(. )(. ) .
. .
n = 20
PROBABILITY
X 0.05 0.06 0.07
0 0.3585 0.2901 0.2342
1 0.3774 0.3703 0.3526
2 0.1887 0.2246 0.2521
3 0.0596 0.0860 0.1139
4 0.0133 0.0233 0.0364
5 0.0022 0.0048 0.0088
6 0.0003 0.0008 0.0017
7 0.0000 0.0001 0.0002
8 0.0000 0.0000 0.0000

20 0.0000 0.0000 0.0000

G N Patel
Excels Binomial Function
n = 20
p = 0.06
X P(X)
0 =BINOMDIST(A5,B$1,B$2,FALSE)
1 =BINOMDIST(A6,B$1,B$2,FALSE)
2 =BINOMDIST(A7,B$1,B$2,FALSE)
3 =BINOMDIST(A8,B$1,B$2,FALSE)
4 =BINOMDIST(A9,B$1,B$2,FALSE)
5 =BINOMDIST(A10,B$1,B$2,FALSE)
6 =BINOMDIST(A11,B$1,B$2,FALSE)
7 =BINOMDIST(A12,B$1,B$2,FALSE)
8 =BINOMDIST(A13,B$1,B$2,FALSE)
9 =BINOMDIST(A14,B$1,B$2,FALSE)
G N Patel
Graphs of Selected Binomial Distributions
n = 4 PROBABILITY
X 0.1 0.5 0.9
0 0.656 0.063 0.000
1 0.292 0.250 0.004
2 0.049 0.375 0.049
3 0.004 0.250 0.292
4 0.000 0.063 0.656
P = 0.1
0.000
0.100
0.200
0.300
0.400
0.500
0.600
0.700
0.800
0.900
1.000
0 1 2 3 4
X
P
(
X
)

P = 0.5
0.000
0.100
0.200
0.300
0.400
0.500
0.600
0.700
0.800
0.900
1.000
0 1 2 3 4
X
P
(
X
)

P = 0.9
0.000
0.100
0.200
0.300
0.400
0.500
0.600
0.700
0.800
0.900
1.000
0 1 2 3 4
X
P
(
X
)

G N Patel