Session-II

Probability Theory
Outline
• The concept of Probability.

• Definition of Probability.

• Exercise.

• Fundamental Concepts of Probability.

• Exercise.
 The Concept of Probability
• Nothing in life is certain. In everything we do, we gauge the
chances of successful outcomes, from business to Interview to
the weather.
• Managers often base their decisions on an analysis of
uncertainties such as the following:
 what are the chances that a new product launched in the
market is well received by the customers?

 What are the chances that a new investment is profitable ?

 What is the likelihood that a new advertisement campaign

will increase the sales?
• Probability is a measure of uncertainty.

• It is a numerical measure of chances or likelihoods

associated with various outcomes or events.

• Outcomes or events are the basic elements to which

we apply probability.

• As a numerical scale what are the values probability

measure can take?
 Probability as a Numerical Measure
of the Likelihood of Occurrence

Increasing Likelihood of Occurrence

0 .5 1
Probability:

The event The occurrence The event

is very of the event is is almost
unlikely just as likely as certain
to occur. it is unlikely. to occur.
 Basic Concepts of Probability
Experiment: Any activity that generates well defined outcomes

Random Experiment:
An experiment with two are more results and there is
uncertainty about the occurrence of a specific result.
Other features are:
-- it is repeatable,
-- all results can be described.
Event:A specific outcome of a single trial of a random experiment
.
Sample Space : The set of all possible events associated with a
random experiment and is denoted by S or ‘Ω’.
Probability: The probability of an event , E, denoted P(E), is the
likelihood of that event occurring.
 Types of Events
• Event : A specific outcome of a single trial of a
random experiment
• Equally Likely Events: Events having the same
probability of occurrence.
• Mutually Exclusive Events: Events which can not
occur Jointly .
• Independent Events: Occurrence of one event
does not influence the probability of occurrence
of the other event
• Collectively Exhaustive Events: Events which add
up to the sample space:
 Defining Probability
In general there are three ways of defining probability:

• The first is Mathematical or classical method where we use

mathematics/ logic to calculate probability.

• The second is empirical method where we directly observe the

probability.

• The third is subjective method where we have an opinion or

hunch about the chance of something happening.
 Defining Probability
Classical Method
𝑵𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝒐𝒖𝒕𝒄𝒐𝒎𝒆𝒔 𝒘𝒉𝒆𝒓𝒆 𝒕𝒉𝒆 𝒆𝒗𝒆𝒏𝒕 𝒐𝒄𝒄𝒖𝒓𝒊𝒏𝒈
Probability of an event =
𝑻𝒐𝒕𝒂𝒍 𝒏𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝒑𝒐𝒔𝒔𝒊𝒃𝒍𝒆 𝒐𝒖𝒕𝒄𝒐𝒎𝒆𝒔

Empirical Method
Probability of an event = The observed relative frequency of an event
in a very large number of trials

Subjective Method
Probability of an event = ‘belief’ of a person regarding the occurrence of an
event based on what ever evidence is available.
We generally compute Probability using the classical method
as follows:

If an experiment has n outcomes and if the number of

ways that an event E can occur is m, then the
probability of E, P(E), is

9
 Exercise
Classify the following probability estimates as
classical, empirical and subjective.
1. The probability of a tie in T 20 cricket match is 0.02.
2. The probability that minister resigns from the cabinet is
0.5

3. The probability of two sixes with two dice is 1/36 .

4. The probability that you will visit Europe this year is 0.8

5. The probability that the company break- evens is : 1/3

 Defining Probability
• Probability is a measure of Uncertainty
• We can define probability in three ways

Classical Method
𝑵𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝒐𝒖𝒕𝒄𝒐𝒎𝒆𝒔 𝒘𝒉𝒆𝒓𝒆 𝒕𝒉𝒆 𝒆𝒗𝒆𝒏𝒕 𝒐𝒄𝒄𝒖𝒓𝒊𝒏𝒈
Probability of an event =
𝑻𝒐𝒕𝒂𝒍 𝒏𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝒑𝒐𝒔𝒔𝒊𝒃𝒍𝒆 𝒐𝒖𝒕𝒄𝒐𝒎𝒆𝒔

Empirical Method
Probability of an event = The observed relative frequency of an event
in a very large number of trials

Subjective Method
Probability of an event = ‘belief’ of a person regarding the occurrence of an
event based on what ever evidence is available.
 Probability Rules
• Rule 1.
The probability of any event (E) is a number between zero and
one.
0 < P(E) < 1
• Rule 2.
The sum of the probabilities of all basic outcomes in the
sample space must equal one
P(S)=P(E1)+P(E2)+P(E3)+....+P(En)=1

• Rule 3.
The Complement of an event is the remainder of the sample
space beyond the event

P (E’) = 1 - P (E)
4. Addition Rule : For Any two events A and B.

P(A U B) = P(A) + P(B) – P(A ∩ B), if (A& B are not mutually exclusive)

= P(A) + P(B), if ( A&B are mutually exclusive)

A
B A A
BB

A B A B =0
5 : Conditional Probability

• It is the probability of an event ‘A’ occurring given the occurrence of the

event ‘B’ . This can be defined as Probability of A given B

P(A/B) = P(A ∩ B)/ P (B), P(B) ≠ 0

• Similarly we can also define the probability of occurrence of ‘B’ given the
occurrence of ‘A’ :

P(B/A) = P(A ∩ B)/ P(A), P(A) ≠ 0

6: Multiplication Rule of probability

P(A ∩B) = P(A).P(B) (for independent events)
= P(A/B).P(B) = P(B/A).P(A) (otherwise)
 7. The of Total Probability Rule
The law of total probability:
P( A)  P( A  B)  P( A  B )

In terms of conditional probabilities we can write:

P( A)  P( A  B)  P( A  B )
 P( A B) P( B )  P( A B ) P( B )
8. Bayes’ Rule
For any two events A and B
P(B/A) = P(A/B).P(B)
P(A)
With total probability rule we can write

P(B/A) = P(A/B).P(B)
P(A/B) P(B)+P( A/ B̅ )P(B̅ )
 Conditional Probability (VS) Joint probability

• for any two events, A, B defined on a sample space :

P (A∩B) : means probability that both A and B

occurs jointly and is called Joint probability.

P(A/B) : means probability that A occurs given that

B has already occurred and is called
conditional Probability
 Problems on Probability
1. What is the probability of getting at least two
heads when we toss a coin three times?

2. What is the probability getting a king when a card

is drawn from a well shuffled pack of cards.
 Problem.3
An e-commerce website gets 2,385 visitors on a particular day.
Among these,1790 visitors explore the products by looking at
more pages at the site. Among these 1790 visitors who explore
the products ,387 make a purchase.
1. If a visitor is chosen at random from all these who visited
the site, what is the probability that the visiter explored
the site?
2. If a visitor is choosen at random from all those who
visited the site, what is the probability that he made a
purchase?
3. If a visitor who is chosen from all those who explored the
products , what is the probability the visitror made a
purchase.
4. Which of the proceeding three probabilities are relevent
for designing of the home page that leads to product
pages?
Example:4
What is the probability for a leap year to have
52 Mondays and 53 Sundays?
Ans:
A leap year shall have 366 days, that is 52 weeks and 2 days. The two days
can have only one possibility of becoming 52 Mondays and 53 Sundays: 1st
day Saturday and 2nd day Sunday. Thus the required probability = 1/7.
 Examples on conditional probability
• A company has equal number of male and female
employees. 5% of male employees belongs to HR
department. Find the probability that a randomly selected
employee is a male belonging to HR department.
 Examples on Probability
( addition rule)
1)What is the probability of getting a clubs or a
king when two cards are drawn at random from a
pack of well shuffled cards.

2)What is the probability of getting a clubs or a

hearts when two cards are drawn at random from a
pack of well shuffled cards.
 Problems on Probability
3) Suppose 40% of the population in a city are exposed
to a television commercial on Vivo mobiles and 34% are
exposed to Vivo’s FM radio advertisement. Also it is
known that 10% of the populations is exposed to
both means of advertising. If a randomly chosen
person is taken then what is the probability that he is
exposed to at least one of the two ertisements.
 Examples on Multiplication rule
Probability
Example:1
Three cards are drawn from a pack of well shuffled cards, find
the probability that they are an ace, a king and a queen.
Ans:4/52*4/51*4/50

Example:2
A consulting firm gets job A with a probability of 0.45, if it gets
job A , the chance that it will get another job B is 0.9. What is
the probability that firm will get both the jobs.
 Bay’s Theorem
Example:1
Suppose a person has two coins in his purse, one is a fair coin
and the other is two headed. He takes a coin out at random
and tosses it and it turned out to be head. What is the
probability that the tossed coin is two headed?

• Sol: Let A = Event that head turns up.

B = Event that the coin is two headed
We need to find P (B/A) = P (A/𝐁) P (B) /P(A)
= (1 x1/2)/(3/4)
Example: 2
• In a software company there are 500 employees of which
300 are males and 200 are females. Of these, 100 males and
60 females plan to travel by car. An employee selected at
random from the software company found to be planning to
travel by car. What is the probability that the selected
employee is a male.

Ans: Let B = Event of selected employee is a male.

A = Event that employee is travelling by car
P(A/B).P(B)
we have to find out P(B/A) =
𝑷(𝑨)
Example: 3
Two machines are used to produce bolts. Suppose that
machine-I , produces 2 good bolts and 3 defective bolts and
machine-II, produces 3 good and 4 defective bolts. One
machine is selected at random and a bolt is taken from it and
found to be defective one. What is the probability that
machine-I was selected?
Example 4
An economist believes that during periods of high economic
growth, the Rupee appreciates with probability 0.70; in periods of
moderate economic growth, the Rupee appreciates with probability
0.40; and during periods of low economic growth, the Rupee
appreciates with probability 0.20.

During any period of time, the probability of high economic

growth is 0.30, the probability of moderate economic growth is
0.50, and the probability of low economic growth is 0.20.

Suppose the Rupee has been appreciating during the present

period. What is the probability we are experiencing a period of
high economic growth?
Partition of sample space:
Event A  Appreciation
H - High growth P(H) = 0.30 P( A H )  0.70
P( A M )  0.40
M - Moderate growth P(M) = 0.50 P( A L)  0.20
L - Low growth P(L) = 0.20

We need to calculate
P ( H  A)
P ( H A) 
P ( A)
P ( H  A)

P ( H  A)  P ( M  A)  P ( L  A)
P( A H ) P( H )

P ( A H ) P ( H )  P ( A M ) P ( M )  P ( A L) P ( L)
( 0.70)( 0.30)

( 0.70)( 0.30)  ( 0.40)( 0.50)  ( 0.20)( 0.20)
0.21 0.21
 
0.21 0.20  0.04 0.45
 0.467
Example 4
If a large competitor will buy a small firm, the
firm stock will rise with probability 0.85. The
purchase of the company has a 0.40 probability.
What is the probability that a purchase will take
place and firm stock will rise.
 Exercise:5
A problem can be solved independently by three students,
A, B and C with respective probabilities: 1/2, 1/3 and 1/4.
What is the probability that the problem is solved?
 Recap: Probability Theory
• Probability is a numerical measure of
uncertainty associated with the occurrence of
an event.
• Fundamental concepts of probability.
• Definition of probability : three approaches
• Rules of probability: “seven rules”
• Examples on probability.
 We generally compute Probability using the
classical method as follows:

• Some times it is difficult to count the number of Possible

Outcomes in an random experiment. Consider the following
experiment:

A bag contains 6 red 4 white and 8 blue balls. Of these balls 3 balls
are drawn at random. How many number of possible Outcomes are
there in this random experiment.

• In this context we shall use the concepts of permutations and

combinations for a quick algebraic method of counting 34
 Combinations (Order is not Important)
Combinations are the possible selections of ‘r’ items from a group of ‘n’ items n
 
regardless of the order of selection. The number of combinations is denoted by  r
and is read as n choose r. An alternative notation is n C r. We define the number
of combinations of “ r ” out of “ n ” elements as:

 n n!
  n C r 
r r! (n  r)!
Forexample:
 n 6! 6! 6 * 5 * 4 * 3 * 2 *1 6 * 5 * 4 120
 6 C3       20
r 3!(6  3)! 3!3! (3 * 2 *1)(3* 2 *1) 3 * 2 *1 6
Permutations (Order is important)

Permutations are the possible ordered selections of

r items out of a total of n objects. The number of
permutations of n objects taken r at a time is denoted
by nP r, where

P  n!
n r (n  r )!
Fo rexa m p le:
6! 6! 6 * 5 * 4 * 3 * 2 *1
6 P3     6 * 5 * 4  120
(6  3)! 3! 3 * 2 *1
Problem 1
A bag contains 6 red 4 white and 8 blue balls. Of
these balls 3 balls are drawn at random then find
the probability that

a) 1 is red and 2 are white.

b) 2 are blue and 1 is red.

.
Problem 2
A committee of 4 people are to be appointed from 3 officers of
production department, 4 officers of purchase department, 2
officers of sales department and 1 chartered accountant.

Then find the probability of forming the committee in the

following manner :

a) There must be one officer from each department.

b) It should have at least one from the purchase department.

c) The Chartered accountant must be a member in the

committee.
 Random Variables
• Meaning of a Random variable.

• Types of Random Variables.

• Probability Distribution Function of Random variable.

• Characteristics of a random variable

• Theoretical Probability Distribution Functions.

- Uniform Probability Distribution.
- Binomial Probability Distribution.
- Poisson Probability Distribution.
- Normal Probability Distribution.
 What is a Random Variable?

A random variable is a variable whose numerical

values are determined by the outcome of a
random experiment.
 Example of a Random Variable
• Random variables assigns a real number to each outcome of a
particular random experiment.

Experiment: Tossing a coin twice

sample space
S

-3 -2 -1 0 1 2 3
 Definition of a Random Variable
• Random variables assigns a real number to each outcome
of a particular random experiment.
A Random Variable ‘ X ’ can be defined as X : S → R

-3 -2 -1 0 1 2 3
 Types of Random Variables
Two types:

• Discrete Random Variables.

• Continuous Random Variables.

 Discrete Random Variables

Random variables that can assume a countable

number of values are called discrete.
ex: tossing a coin, throwing a dice etc.
 Discrete Random Variable
Examples

Experiment Random Possible

Variable Values
Make 100 Sales Calls # Sales 0, 1, 2, ..., 100

Inspect 70 Bolts # Defective 0, 1, 2, ..., 70

Answer 33 Questions # Correct 0, 1, 2, ..., 33

Count Cars at Toll # Cars 0, 1, 2, ......

Between 11:00 & 1:00 Arriving
 Continuous
Random Variable

A continuous random variable is a random

variable which can take infinitely many values in
an interval.
Ex: Arrival time of flight between 6.00 A.M to 6.30 A.M
 Continuous Random Variable
Examples

Experiment Random Possible

Variable Values
Weight 100 People Weight 45.1, 78, ...
Measure Part Life Hours 900, 875.9, ...
Amount spent on food $ amount 54.12, 42, ...
Measure Time Inter-Arrival 0, 1.3, 2.78, ...
Between Arrivals Time
Random Variable and Probability Distribution

• A random variable X is a numerical outcome of a

random experiment
• The distribution of a random variable is the collection
of possible outcomes along with their probabilities:
– Discrete case: Pr( X  x)  p ( x)

b
– Continuous case: Pr(a  X  b)   p ( x)dx
a
Probability Distributions of Random
Variables
Probability Distribution Function(PDF) of a
Random Variable

The probability distribution Function of a

random variable is a graph, table, or formula
that specifies the probability associated with
each possible value the random variable can
assume.
 Requirements for the
Probability Distribution of a
Discrete Random Variable x
1. p(x) ≥ 0 for all values of x
2.  p(x) = 1

where the summation of p(x) is over all possible

values of x.
Discrete Probability Distribution
Example
Experiment: Toss 2 coins.
r.v = x = Count number of tails.
Probability Distribution Function
Values of x Probabilities, p(x)
0 1/4 = .25
1 2/4 = .50
2 1/4 = .25

© 1984-1994 T/Maker Co.

Ex:2
Consider the experiment of different possible orderings
of boy (B) and girl (G) in four sequential births. So the
sample space is:

BBBB BGBB GBBB GGBB

BBBG BGBG GBBG GGBG
BBGB BGGB GBGB GGGB
BBGG BGGG GBGG GGGG
 Random Variables
Now count the number of girls in each set of four sequential births:

BBBB (0) BGBB (1) GBBB (1) GGBB (2)

BBBG (1) BGBG (2) GBBG (2) GGBG (3)
BBGB (1) BGGB (2) GBGB (2) GGGB (3)
BBGG (2) BGGG (3) GBGG (3) GGGG (4)

The count of the number of girls is a random variable:

A random variable, X, is a function that assigns a single, but variable, value to

each element of a sample space.
Random Variables (Continued)

BBBB 0
BGBB
GBBB
BBBG 1
BBGB
GGBB
GBBG X
BGBG 2
BGGB
GBGB
BBGG
BGGG
GBGG 3
GGGB
GGBG
GGGG 4 Points on the
Real Line
Sample Space
 Probability Distribution of a random
variable
Since the random variable X = 3 when any of the four outcomes BGGG, GBGG,
GGBG, or GGGB occurs,
P(X = 3) = P(BGGG) + P(GBGG) + P(GGBG) + P(GGGB) = 4/16
The probability distribution of a random variable is a table or graph that lists
the possible values of the random variables and their associated probabilities.

x P(x)
0 1/16
1 4/16
2 6/16
3 4/16
4 1/16
16/16=1
Random Variables (Continued)

Probability Distribution of the Number of Girls in Four Births

0.4
6/16

0.3
Probability, P(X)

4/16 4/16

0.2

0.1
1/16 1/16

0.0
0 1 2 3 4
Number of Girls, X
 Summary Measures of
Probability Distribution
1. Expected Value (Mean of probability distribution)
• It is the weighted average of all possible values
•  = E(x) = xp(x)
2. Variance
• Weighted average of squared deviation about
mean
•  2 = E[(x 2(x 2 p(x)
3. Standard Deviation = 𝑉𝑎𝑟𝑖𝑎𝑛𝑐𝑒 = σ
Summary Measures Calculation
Table

x p(x) x p(x) x– (x – 2 (x – 2p(x)

Total xp(x) (x 2 p(x)

Ex:1
The PDF of a r . v ‘ X ’ is given below, then
find the value of k , mean and variance of X.

X 1 2 3 4 5
P(X) k 2k 3k 4k 5k
Theoretical Probability Distributions:
• Binomial Distribution.

• Poisson Distribution.

• Uniform Distribution.

• Normal Distribution
 Binomial Distribution
Number of ‘r’ successes in a sample of n observations
(trials)
• Number of heads in 15 spins of roulette wheel
• Number of defective items in a batch of 5 items
• Number correct on a 33 question exam
• Number of customers who purchase out of 100
customers who enter store (each customer is
equally likely to purchase)
 Binomial Probability
Characteristics of a Binomial Experiment
• The experiment consists of n identical trials.
• There are only two possible outcomes on each trial. We
will denote one outcome by S (for success) and the other
by F (for failure).
• The probability of S remains the same from trial to trial.
This probability is denoted by p, and the probability of
F is denoted by q. Note that q = 1 – p.
• The trials are independent.
• The binomial random variable x is the number of S’s in
n trials.
Deriving Binomial Distribution Formula:
 Binomial Probability Distribution
The probability distribution of Binomial random variable is given as

 n  x n x n!
p( x)    p q  p x (1  p ) n  x
 x x ! ( n  x )!

p(x) = Probability of x ‘successes in n trials’

p = Probability of a ‘Success’ on a single trial
q = 1–p
n = Number of trials
x = Number of ‘Successes’ in n trials
(x = 0, 1, 2, ..., n)
n – x = Number of failures in n trials
 Binomial Probability Distribution
Example
Ex 1: Toss a coin 5 times in a row. Note number of
tails. What’s the probability of 3 tails?
n!
p( x)  p x (1  p ) n  x
x !( n  x )!

5!
p (3)  .53 (1  .5)53
3!(5  3)!

 .3125
Mean, Variance, and Standard Deviation of the
Binomial Distribution

Mean of a binomial distribution:

  E ( X )  np For example, if H counts the number of

heads in five tosses of a fair coin :
Variance of a binomial distribution:
  E ( H )  (5)(.5)  2.5
H

  V ( X )  npq
2

  V ( H )  (5)(.5)(.5)  1.25
2
H

Standard deviation of a binomial distribution:

  SD( H )  1.25  1.118

 = SD(X) = npq H
 dbinom(x, 20, 0.4)

0.00 0.05 0.10 0.15

0
10
20

x
30
Binomial PDF

40
50
Ex:1
A salesperson goes door-to-door in a residential area to
demonstrate the use of a new household appliance to potential
customers. At the end of a demonstration, the probability that the
potential customer would place an order for the product is a
constant 0.21, Then find out:

a)If the salesperson makes 15 demonstrations, what is the

probability that there would be exactly 4 orders?

b) If the salesperson makes 16 demonstrations, what is the

probability that there would be at most 4 orders?
Poisson Probability Distribution
 Poisson Probability Distribution
• Discovered by a French mathematician S. D. Poisson .

• It is a Discrete Probability Distribution .

• It is useful to find out the probability of occurrence of an event

over a specified interval of time or space.

• In general, if we count the number of times a event occurs during a

fixed interval, then that number would follow a Poisson distribution

Examples:
• the number of telephone calls received per hour by an office.
• the number of strikes per year in an Organization.
• the number of customers arrive in a mall in a specific time interval.
• the number of games postponed due to rain during a baseball season.
• the number of leakages in 10 miles of a pipe line.
• the number of twins born out of given number of births in a locality.
Practical Use of Poisson PDF
The Poisson PDF is generally used to model rare events like:
i) Distribution of telephone calls going through a switch board.
ii) The number of vehicles arriving at a tollgate in a specific
time interval.
iii) The number of accidents on a given day at an intersection.

iv) No of defective items in a lot of manufactured items.

v) The number of twins born out of given number of births in a

locality.
Characteristics of a Poisson Random Variable
• In general, if we count the number of times a rare event occurs during a
fixed interval, then that number would follow a Poisson distribution.

• Fixed interval can be time or area or volume (any unit of measurement).

• The probability that an event occurs in a given unit of time, area, or

volume is the same for all units.

• The number of events that occur in one unit of time, area, or volume is
independent of the number that occur in any other mutually exclusive
unit.

• The mean number of successes(events)that occur in the fixed interval

denoted by .

• The actual number of successes that occur in the fixed iterval is denoted
by ‘x’.
 Poisson Probability Distribution
•Discovered by a French mathematician S.D.Poisson .

•It is a discrete Probability Distribution function.

• It is useful to find out the probability of occurrence of an event

over a specified interval of time or space.
ex:
i) The number of arrivals at a car wash per 1 hour.

ii) The number of repairs needed in 10 miles of a highway .

iii) The number of leakages in 100 miles of a pipe line

 Poisson Probability Distribution
• A Poisson distribution is the probability distribution that results from a Poisson
experiment.

• What is a Poisson Experiment ?

A Poisson experiment is a random experiment that has the following properties:

• The experiment results in outcomes that can be classified as successes or failures.

• The average number of successes (λ) that occurs in a specified region is known.

• The probability that a success will occur is proportional to the size of the region.

• The probability that a success will occur in an extremely small region is virtually zero

• Specified region could take many forms: length, area, volume, period of time, etc.
• In general, if we count the number of times a event occurs
during a fixed interval, then that number would follow a
Poisson distribution.

• Examples of Poisson distribution in practice:

 the number of telephone calls received per hour by an office.

 the number of strikes per year in an Organization.
 the number of customers arrive in a mall in a specific time interval.
 the number of games postponed due to rain during a baseball
season.
 the number of leakages in 10 miles of a pipe line.
 the number of twins born out of a given number of births in a
locality.
 Poisson Probability Distribution
Function

–
 ex
P(x | ) = (x = 0, 1, 2, 3, . . .)
x !

 2 
p(x|λ) = Probability of x given 
 = Mean number of events in an interval
e = 2.71828 . . . (base of natural logarithm)
x = Number of events per unit
 Poisson Probabilities
Ex:1
The number of typological errors in a text book
are Poissonly distributed with a mean of 1.5
errors per 10 pages. What is the probability that
a randomly selected 10 pages of the text book
does not contain any error?
Poisson Distribution Example
Customers arrive in a
booking counter at a
rate of 72 per hour.
What is the probability
of 4 customers arriving
in 3 minutes? © 1995 Corel Corp.
Poisson Distribution Solution
72 Per Hr. = 1.2 Per Min. = 3.6 Per 3 Min. Interval

-
 e
x
p( x) 
x!
 3.6 
4 -3.6
e
p (4)   .1912
4!
 Thinking Challenge
You work in Quality Assurance
for a Bank. A clerk enters 75
words per minute with 6 errors
per hour. What is the
probability of 0 errors in a 255-
word cash transaction?
 Poisson Distribution Solution:
Finding *
• 75 words/min = (75 words/min)(60 min/hr)
= 4500 words/hr
• 6 errors/hr= 6 errors/4500 words
= .00133 errors/word
• In a 255-word transaction (interval):
 = (.00133 errors/word )(255 words)
= .34 errors/255-word transaction
Poisson Distribution Solution:
Finding p(0)*

-
 e
x
p( x) 
x!
 .34 
0 -.34
e
p (0)   .7118
0!
 dbinom(x, 20, 0.4)

0.00 0.05 0.10 0.15

0
10
20

x
30
Binomial PDF

40
50
Probability Distributions for Continuous Random
Variables
Probability Distributions for Continuous Random Variables

“The Normal Probability Distribution”

• Before we discuss about the normal probability distribution

we shall discuss about the probability distribution of a
continuous random variable

• A continuous random variable is one for which the outcome

can be any value in an interval of the real number line.

• We don’t calculate P(X = x1), we calculate P(a < X < b), where
a and b are real numbers
 Continuous Random Variable
Examples

Experiment Random Possible

Variable Values
Weight 100 People Weight 45.1, 78, ...
Measure Part Life Hours 900, 875.9, ...
Amount spent on food $ amount 54.12, 42, ...
Measure Time Inter-Arrival 0, 1.3, 2.78, ...
Between Arrivals Time
 Continuous Probability Density Function
The graphical form of the probability distribution for a
continuous random variable x is a smooth curve.

Discrete PDF Continuous PDF

• Because an interval contains infinitely many values, we
can not list each value taken by the continuous random
variable and then it’s associated probability.

• In fact the probability that a continuous random variable

taking a specific value is Zero.

 For a continuous random variable

P( X= x1) = 0.

• For a continuous r.v we need a special method to find

out the probabilities associated with the values of the
variable.
 Continuous Probability Density Function

The areas under a probability distribution correspond to

probabilities for x. The area A beneath the curve between
two points a and b is the probability that x assumes a
value between a and b
Area as a Measure of
Probability
0.40
P(a ≤ X ≤ b ) = a
∫ b P(x) dx = 0.40

.
 The Normal Probability Distribution
 The most important continuous probability distribution in the entire field of
statistics is the normal probability distribution.
 Describes many random processes or continuous phenomena in practical
problems. It is also called as Gaussian Distribution.
 If a r.v is effected by a number of independent causes and the effect of each
cause is not overwhelmingly large compared to others then the r.v will
closely follow a normal distribution.
 Its graph, called the normal curve, is the bell-shaped curve of which
approximately describes many phenomena that occur in nature, industry,
and research.
ex: Physical measurements in areas such as weights, Heights, lengths,
Business world variables like: prices, incomes, sales, etc can be used to
approximate discrete probability distributions

 Basis for classical statistical inference.

 Probability Density Function
 1   x  
2

1   
 2    
f (x)  e
 2
This is a bell shaped curve with different
centers and spreads depending on  and

where
µ = Mean of the normal random variable x
 = Standard deviation
π = 3.1415 . . .
e = 2.71828 . . .
Normal Distribution Curve
 Properties of Normal distribution

1. The distribution is bell shaped and symmetrical around mean.

2. The mean of normal distribution is µ and SD is .
3. For Normal Distribution Mean = Median = Mode
4. The height of the normal curve depends on mean and spread depends
on variance.
5. The area under normal curve is 1.
6. The range of a normal distributed variable X is, - ∞ ≤ X ≤ ∞ .
7. Normal curve is asymptotic to the horizontal axis.
8. If several independent random variables are normally distributed then
their sum will also be normally distributed.
 Key Areas under the Normal Curve
The 68%, 95% and (99% rule)
 Since we know the shape of the curve, we can calculate the area under the
curve
 The area under the curve tells us about the probability.

About 68% of the area

For normal distributions
lies within 1 standard
μ + 1 σ ~ 68%
deviation of the mean
μ + 2 σ ~ 95%
μ + 3 σ ~ 99.9 %
68%

-3σ -2σ -σ μ σ 2σ 3σ

About 95% of the area lies within 2

standard deviations

About 99.9% of the area lies within 3 standard

deviations of the mean
Effect of Varying Parameters ( & )

Changing μ effects the Centre of the curve

Changing σ effects the spread of the curve
 Normal Distribution
Probability
Probability is
d
area under
curve!
P(c  x  d)  
c
f (x)dx ?

f(x)

x
c d
 Family of Normal
Distributions
Normal distributions differ by Each distribution would
mean & standard deviation. require its own table.

f(x)

x That’s an infinite
number of tables!
 Standard Normal Distribution
The standard normal distribution is a normal
distribution with µ = 0 and  = 1. A random variable
with a standard normal distribution, denoted by the
symbol z, is called a standard normal random variable.
 The Standard Normal Table:
P(0 < z < 1.96)
Standardized Normal
Probability Table (Portion)
Z .04 .05 .06 =1
1.8 .4671 .4678 .4686
.4750
1.9 .4738 .4744 .4750
2.0 .4793 .4798 .4803
= 0 1.96 z
2.1 .4838 .4842 .4846 Shaded area
Probabilities exaggerated
 The Standard Normal Table:
P(–1.26  z  1.26)
Standardized Normal Distribution
=1

.3962 .3962 P(–1.26 ≤ z ≤ 1.26)

= .3962 + .3962
= .7924
–1.26 1.26 z
=0
 Non-Standard Normal
Distribution
Normal distributions differ by Each distribution would
mean & standard deviation. require its own table.

f(x)

x That’s an infinite
number of tables!
 The Standard Normal Distribution
The standard normal distribution has a mean of 0 and a
standard deviation of 1.
 Using z-scores any normal distribution can be transformed into
the standard normal distribution.

–4 –3 –2 –1 0 +1 +2 +3 +4 z
μ
 Standardize the
Normal Distribution

x
z
Normal  Standardized Normal
Distribution : N(,   Distribution: N(0,1)
 =1

 x = 0 z
One table!
 The Standard Normal Table:
P(0 < z < 1.96)
Standardized Normal
Probability Table (Portion)
Z .04 .05 .06 =1
1.8 .4671 .4678 .4686
.4750
1.9 .4738 .4744 .4750
2.0 .4793 .4798 .4803
= 0 1.96 z
2.1 .4838 .4842 .4846 Shaded area
Probabilities exaggerated
 Normal Distribution to Standard
Normal Distribution

If x is a normal random variable with mean μ and

standard deviation , then the random variable z,
defined by the formula
x µ
z


has a standard normal distribution. The value z describes

the number of standard deviations between x and µ.
 Standard Normal Distribution
 Problem
• Each normal distribution with its own values of mean and standard
deviation would need its own calculation of the area under various
points on the curve
• We agree to use the standard normal distribution
• It is also Bell shaped with =0,  =1
• All normal distributions can be converted into the standard normal
curve by subtracting the mean( μ ) and dividing by the standard
deviation (σ ):

• This procedure is applicable to any normal distribution problem.

• To find the probability that x is in a a specific interval simply
convert the x interval into z interval and use the table for answering
the probability question.
 The Standard Scores (z scores)
The standard score, or z-score, represents the number of
standard deviations a random variable x falls from the mean.

Ex:The test scores for a civil service exam are normally

distributed with a mean of 152 and a standard deviation of 7.
Find the standard z-score for a person with a score of:
(a) 161 (b) 148 (c) 152

(a) (b) (c)

Converting Normal distribution into Standard
Normal Distribution
(Normal Distribution)

x 100 115
Z (Standard Normal Distribution)

SAME
Z 0 1
 Non-standard Normal μ = 5, σ = 10:
P(2.9  x  7.1)
x 7.1 5
z   .21
 10
Normal Standardized Normal
Distribution Distribution
 = 10 =1
.1664

.0832 .0832

2.9 5 7.1 x -.21 0 .21 z

Shaded area exaggerated
 Non-standard Normal μ = 5, σ = 10:
P(7.1  X  8)
x 7.1 5 x 85
z   .21 z   .30
 10  10
Normal Standardized Normal
Distribution Distribution
 = 10 =1

.1179
.0347
.0832

=5 7.1 8 x =0 .21 .30 z

Probabilities are depicted by areas under the Curve

• Total area under the curve

is 1
• The area in red is equal to
p(z > 1)
• The area in blue is equal to
p(-1< z <0)
• Since the properties of the
normal distribution are
known, areas can be looked
up on tables.
 Strategies for finding probabilities for the
standard normal random variable.

• Draw a picture of standard normal distribution

depicting the area of interest.
• Re-express the area in terms of shapes like the
one on top of the Standard Normal Table
• Look up the areas using the table.
• Do the necessary addition and subtraction.
 Finding probabilities of normal
random variables
Example:1
Assume that a r.v ‘ X ’ follows normal distribution
with mean = 70 and variance = 36. Then what is the
probability that ‘ x ’ is
i) > 75
ii)< 64
ii) > 85
iii) 75 < X < 85
 Example:2

Suppose you work in Quality

Control for Philips. Light bulb
life has a normal distribution
with  = 2000 hours and  = 200
hours. What’s the probability
that a bulb will last
A. between 2000 and 2400
hours?
B. less than 1470 hours?
Example: 3
Assume that the test scores of college admission
test are normally distributed with a mean of 450
and sd of 100.
i. What percentage of students taking the test score between 400
and 450?
ii. Suppose a student receives a score of 630. What percentage of
students taking the test score better?
iii. If a particular university will not admit anyone scoring below
480, what percentage of persons taking the test would be
acceptable to the university
 Solution* P(2000  x  2400)
x 2400  2000
z   2.0
 200
Normal Standardized Normal
Distribution Distribution
 = 200 =1

.4772

 = 2000 2400 x =0 2.0 z

 Solution* P(x  1470)
x 1470  2000
z   2.65
 200
Normal Standardized Normal
Distribution Distribution
 = 200 =1
.5000

.0040 .4960

1470  = 2000 x –2.65  = 0 z

Case Study
A training program was designed to upgrade the technical skills
of clerical staff in Banks. A past study indicates that the length of
time spent on the program is normally distributed random
variable with mean is 500 hours and SD of 100 hours. Then
a) What is the probability that a randomly selected participant
will require more than 500 hours to complete the program.
b) What is the probability that candidate selected at random
will require between 500 hours to 650 hours to complete the
program.
c) What is the probability that a candidate selected at random
requires fewer than 580 hours to complete the program.
d) What is the probability that a candidate selected at random
can complete within 450.
e) What is the probability that a candidate chosen at random
will take between 420 hours and 570 hours.
 Finding the values of Z given the Probability
• Generally we find the probability that a standard normal
random variable will be within a given interval
• Sometimes we may be interested in the reverse: finding the
value of Z with a given probability.
Ex:1
Find the value of standard normal variable “Z” such that
the probability that the z lies between ‘ 0 to Z ’ is 0.4.
Ex:2
Find the value of the standard normal variable “Z” that
cuts of an area of 0.90 to it’s left
Ex:3
Find the value of “Z” that the area to it’s right is 20%
 The Inverse Z transformation
• Earlier we moved from X to Z by the transformation
(𝑥− µ)
Z=


• We use the inverse transformation when we want to move form

Z to X.
x = µ + z

That is we want to find out from a given Probability to the value or

values of a normal random variable X.
 The Z transformation
We have a r.v, X ≈ N( µ  )

We want to find out say P( X> x0)

(𝑥− µ)
We converted X into Z by the transformation Z =


We found out the probability of P( Z >z0) from the tables

 The Inverse Z transformation

Start with the probability of a given value of X

Then write the probability of X into Probability of Z

From the table find out the value of Z corresponding to this probability

Then convert z into X by the inverse transformation x = µ + z

 Example:1
The amount of fuel consumed by the engines of a jetliner
on a flight between two cities is normally distributed
random variable, “X” with µ = 5.7 tons and σ = 0.5 tons.
Carrying too much fuel is inefficient as it slows down
the plane. If however too little fuel is loaded on the
plane, an emergency landing may be necessary. The
airline would like to determine the amount of fuel to
load so that there will be 99% probability that the plane
will arrive at it’s destination.
Solution
• Given X ͠ N( 5.7, 0.5 ), then we have to find the value of X such that it
corresponds to 99% probability.
• For this we shall find out the value of Z corresponding to 99% probability
from the tables and use the transformation: x=µ+zσ to find the
corresponding value of “x”.
• From table, the Z value corresponding to 0.99 probability is 2.33.
• Thus X = 5.7 + 2.33(0.5) = 6.86
• Thus we need 6.86 tons of fuel to ensure the plane reaching it’s
destination at a probability of 99%.
Case Study
A training program was designed to upgrade the technical skills
of clerical staff in Banks. A past study indicates that the length of
time spent on the program is normally distributed random
variable with mean is 500 hours and SD of 100 hours. Then
a) What is the probability that a randomly selected participant
will require more than 500 hours to complete the program.
( Inverse Z :If a randomly selected participant has a 50% chance
of successfully completing the program how many minimum
hours of training is required ?)
a) What is the probability that candidate selected at random
will require between 500 hours to 650 hours to complete the
program.
( Inverse Z :If a randomly selected candidate has chance of 43.3%
of successfully completing the program what is the minimum
and maximum hours of training is required)
Case Study
A training program was designed to upgrade the technical skills
of clerical staff in Banks. A past study indicates that the length of
time spent on the program is normally distributed random
variable with mean is 500 hours and SD of 100 hours. Then
a) What is the probability that a randomly selected participant
will require more than 500 hours to complete the program.
( If a randomly selected participant has a 50% chance of
successfully completing the program how many minimum hours
of training is required ?)
a) What is the probability that candidate selected at random
will require between 500 hours to 650 hours to complete the
program.
( If a randomly selected candidate has chance of 43.3% of
successfully completing the program what is the minimum and
maximumhours of training is required)
 Continuous Probability Distributions
1.Uniform Probability Distribution:
• A random variable X is said to have a continuous uniform
distribution over an interval if it’s PDF is given by:

P(X) = k, if a < X < b Graph of uniform PDF

0, otherwise.
𝟏 1
where, k = --------
𝒃−𝒂 𝑏−𝑎

Mean = 1/(b-a) 0 a b
variance = (b-a)2/12
• The uniform probability distribution provides a model for continuous random
variables that are evenly distributed over a certain interval.
• That is, a uniform random variable is one that is just as likely to assume a value in
one interval as it is to assume a value in any other interval of equal size.
• The density function forms a rectangle with base b−a and constant height 1/b−a. As a result,
the uniform distribution is often called the rectangular distribution.