Prepared by

H.R.Sampath
F M/ BI / HM/ T M/ E B
M 1 2 3 3
Faculty of Management Studies
Sabaragamuwa University of Sri Lanka
Business Statistics
Probability
Probability means
Basic Concepts in Probability
Types of Probability
Classical Probability / Priori Probability
Relatively Frequency of Occurrence
Subjective probability
Conditional probability
Marginal and Joint probability
What already discussed
Independence of Two Events
Theoretical or probability distribution
Types of Probability Distribution
Discrete Probability Distribution
Continuous Probability Distribution
Binomial Distribution

What We Discuss Today
Independence of Two Events

When events A and B have no influence on one another, we say that event A and B
are independent.

If the event A and B are independent, the probability of occurrence of any one of
them does not depend upon that of other. And the probability of;

P (B/A) = P(B)

P (A/B) = P(A)
Theoretical or Probability Distribution
A distribution based on expectation on the basis of past experience is
known as theoretical distribution or probability distribution.

Here random experiment is used as the model and probabilities are
given by a function of the random variable called probability function.
Types of Probability Distribution
Discrete Probability Distribution

Continuous Probability Distribution
Discrete Probability Distribution
If a random variable is a discrete variable, its probability distribution is called a
discrete probability distribution.
e.g. Suppose you flip a coin two times. This simple statistical experiment can have
four possible outcomes: HH, HT, TH, and TT. Now, let the random variable X
represent the number of Heads that result from this experiment. The random
variable X can only take on the values 0, 1, or 2, so it is a discrete random
variable.
The probability distribution for this statistical experiment appears below.






The above table represents a discrete probability distribution because it relates each
value of a discrete random variable with its probability of occurrence.
Number of Heads Probability
0 0.25
1 0.50
2 0.25
Continuous Probability Distribution
If a random variable is a continuous variable, its probability distribution is called a
continuous probability distribution.

The equation used to describe a continuous probability distribution is called a
probability density function. Sometimes, it is referred to as a density function, a
PDF, or a pdf.

Example for use of density function is calculation of probability that the random
variable X was less than or equal to a in a normal distribution curve.
Continuous Probability Distribution cont
The shaded area in the graph represents the probability that the random variable X is
less than or equal to a. This is a cumulative probability. However, the probability
that X is exactly equal to a would be zero. A continuous random variable can take
on an infinite number of values. The probability that it will equal a specific value
(such as a) is always zero.
Situations where we use Discrete
Probability Distribution
There are several usages of Discrete Probability Distribution;
Binomial probability distribution
Hypergeometric probability distribution
Multinomial probability distribution
Negative binomial distribution
Poisson probability distribution


Situations where we use Continuous
Probability Distribution
There are several usages of Continuous Probability Distribution;
Normal probability distribution
Chi-square distribution
F distribution
Student's t distribution
Binomial Distribution
It is one of the simplest and most frequently used discrete probability
distribution.

This method is very useful in situations where it involving two events
such as success and failure.

It describe the distribution of probabilities where there are only two
mutually exclusive outcomes for each trial of an experiment.
Properties of Binomial Distribution
The experiment consist of a fixed number, n of trials

The result of each trial can be classified into one of two categories:
success or failure

The probability, p, of a success remain constant from trial to trial

Each trial of the experiment is independent of the other trial.
Example for Binomial Distribution
Consider the following statistical experiment.

You flip a coin 2 times and count the number of times the coin lands
on heads. This is a binomial experiment because:

The experiment consists of repeated trials. We flip a coin 2 times.

Each trial can result in just two possible outcomes - heads or tails.

The probability of success is constant - 0.5 on every trial.

The trials are independent; that is, getting heads on one trial does
not affect whether we get heads on other trials.
Notations in Binomial Distribution
The following notation is helpful, when we talk about binomial probability.

X : The number of successes that result from the binomial experiment.

n : The number of trials in the binomial experiment.

P : The probability of success on an individual trial.

Q or (1-P): The probability of failure on an individual trial. (This is equal to 1 - P.)

n
C
r
: The number of combinations of n things, taken r at a time.
Example of Binomial Distribution
Suppose we flip a coin two times and count the number of heads (successes). The
binomial random variable is the number of heads, which can take on values of 0, 1,
or 2. The binomial distribution is presented below.

Number of heads Probability
0 0.25
1 0.50
2 0.25
The binomial distribution has the following properties:
The mean of the distribution (
x
) is equal to n * P .
The variance (
2
x
) is n * P * ( 1 - P ).
The standard deviation (
x
) is sqrt[ n * P * ( 1 - P ) ].
Binomial Probability
The binomial probability refers to the probability that a binomial
experiment results in exactly x successes.






In the above table, we see that the binomial probability of getting
exactly one head in two coin flips is 0.50.

Given x, n, and P, we can compute the binomial probability based on
the following formula:
Number of heads Probability
0 0.25
1 0.50
2 0.25
Calculation of Binomial Probability

We can compute the binomial probability based on the following
formula:




Where;
P(X=x) =
n
C
x
* P
x
* (1 - P)
n - x
n
C
x
=
n!
x!(n-x)!
Exercise of Binomial Distribution
Suppose a die is tossed 5 times. What is the probability of getting
exactly 2 fours?

Answer;

This is a binomial experiment in which the number of trials (n) is
equal to 5, the number of successes (x) is equal to 2, and the
probability of success (p) on a single trial is 1/6 or about 0.167.

Therefore, the binomial probability is:
P(X= x) =
n
C
x
* p
x
* (1 - p)
n x
P(X= 2) =
5
C
2
* (0.167)
2
* (0.833)
3
P(X= 2) = 0.161
5 Shift 2
5
C
2
=
Cumulative Binomial Probability
A cumulative binomial probability refers to the probability that the
binomial random variable falls within a specified range (e.g., is
greater than or equal to a stated lower limit and less than or equal to a
stated upper limit).

For example, we might be interested in the cumulative binomial
probability of obtaining 45 or fewer heads in 100 tosses of a coin.
This would be the sum of all these individual binomial probabilities.
P(X=1) + P(X=2) + P(X=3)..........+P(X=45)
Exercise of Cumulative Binomial Distribution
Suppose a die is tossed 5 times. What is the probability of getting less
than 3 four?

Answer;

Here the number of trials (n) is equal to 5, the number of successes (x)
will be 1 or 2, and the probability of success (p) on a single trial is 1/6
or about 0.167.

Therefore, the binomial probability is:
P(X<3) = P(X=1)+P(X=2)

P(X<3) =
5
C
1
* (0.167)
1
* (0.833)
4
+
5
C
2
* (0.167)
2
* (0.833)
3


P(X<3) = 0.563
Exercises
1. For a binomial distribution with n= 5 and p= 0.125, find;
i. P(X=3) ii. P(X>1) iii. P(X3)

2. For a binomial distribution with n= 10 and p=0.25, find
i. P(X=2) ii. P(X>2) iii. P(X3)

3. For a binomial distribution with n=8 and p=0.35, use binomial
distribution table and find,
i. P(X=5) ii. P(X>3) iii. P(X6)

4. For a binomial distribution with n=12 and p=0.15, use binomial
distribution table and find,
i. P(X=3) ii. P(X4) iii. P(X5)