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# Random Variables and Probability

## Distributions: The Discrete Case

Nagarajan Krishnamurthy
Introduction to Business Statistics for EPGP 2015-16 batch
Indian Institute of Management Indore

## Thanks to Prof. Arun Kumar and Prof. Ravindra Gokhale,

co-instructors of QT1, AY 2012-13

## A random variable (R.V.) is a rule that assigns a numerical

value to each outcome of an experiment.

## A discrete random variable is one which can take finitely many

or countably infinitely many values. (The set of Natural
numbers is an example of a countably infinite set).
E.g. Number of heads in tossing 3 coins (or a coin thrice);
The sum of outcomes in the roll of a pair of dice etc.

## A continuous random variable can assume uncountably infinite

values.

Exercise

Discrete or Continuous?
1
Population in a particular state of India.
2
Total weight of consignments handled by a courier
company in a day.
3
Time to complete an exam.
4
Number of participants in an exit poll.

Exercise

Discrete or Continuous?
1
Total number of goals scored in a hockey game.
2
Life of a particular medicine.
3
Height of the Oceans tide at a given location.
4
Amount of rain on a particular day.
5
Number of train derailments in a year.

Probability Distribution

## A probability distribution (P. D.) of a random variable X is a

rule (represented via a function or table or graph) that assigns
a probability P(X = x) to each x in the domain of X .

Discrete P. D.
The probability distribution of a discrete random variable is
called a discrete probability distribution.
Let X be a discrete random variable which takes values from
the set {x1 , x2 , . . . , xn }.
If P(x) is the probability distribution of X , then
0 P(xi ) 1, for all i and
Pn
i=1 P(xi ) = 1.
Note that, in general, n might tend to .

Exercise

not?
x
0
P(x) 0.2

1
-2 3
0.3 0.3 0.2

Exercise

## Is the following a valid probability distribution? Why/ why

not?
x
P(x)

0
1
2
3
0.25 0.50 0.20 0.0

Expected Value
Given a random variable (R.V.) X , the expected value or mean
of X , E (X ) or is the mean of the values of the R.V.
obtained in n draws from the distribution of X as n .

Pn

i=1 xi

P(xi )

2 = E[(X )2 ] =

Pn

i=1 (xi

)2 P(xi ).

Exercise

## A random variable X can assume five values: 0,1,2,3,4. A

portion of the probability distribution of X is shown below:
x
0
P(x) 0.1

1
2
0.3 0.3

3 4
? 0.1

Exercise (continued...)
a) Find P(3).

Exercise (continued...)
a) Find P(3).
Ans. 1-0.8=0.2

## b) What is the probability that X is greater than 2?

Exercise (continued...)
a) Find P(3).
Ans. 1-0.8=0.2

## b) What is the probability that X is greater than 2?

Ans. P(X > 2) = P(X = 3) + P(X = 4) = 0.3.

## c) What is the probability that X is 3 or less?

Exercise (continued...)
a) Find P(3).
Ans. 1-0.8=0.2

## b) What is the probability that X is greater than 2?

Ans. P(X > 2) = P(X = 3) + P(X = 4) = 0.3.

## c) What is the probability that X is 3 or less?

Ans. P(X 3) = P(X = 0) + P(X = 1) + P(X =
2) + P(X = 3) = 0.9.

Exercise (continued...)

## d) Calculate the mean, variance, and standard deviation of the

random variable X .

Exercise
You can insure a \$50, 000 diamond for its total value by a
premium of D dollars. If the probability of theft in a given year
is estimated to be 0.01, what premium should the insurance
company charge if it wants the expected gain equal to \$1000?

Bernoulli Experiment

## An experiment that results in only two outcomes.

Example

1
2

3
4
5

Toss of a coin.
Choice of voters (Democratic candidate or Republican
candidate).
An item is defective or not.
Pass or fail.
Have a disease when you have certain symptoms or does
not have the disease.

Binomial Experiment

## *Repeated Bernoulli experiments.

Binomial Experiment

## n identical Bernoulli trials.

Label one of the outcomes as success and other as failure.
P(success)=p and P(failure)=1 p. p and 1 p are the
same for all trials.
Trials are independent.

Exercise

A jar contains five balls: three red and two white. Two balls
are randomly selected without replacement from the jar, and
the number of x red balls are recorded. Explain why x is or is
not a binomial random variable?

Binomial Distribution

## Probability of k success in n trial is

 
n
P(X = k) =
p k (1 p)nk
k
where k {0, 1, 2, 3, . . . , n}.

## Understanding the Distribution Formula

Probability of k successes is p k .
Probability of n k failures is (1 p)nk .

k successes in n trials can happen in kn ways.

Exercise

## Let x be a binomial random variable with n = 10 and p = 0.4.

Find these values:
a) P(x=4)

Exercise (continued...)

b) P(x 4)

Exercise (continued...)

c) P(x > 4)

Exercise (continued...)

d) P(x 4)

## Mean and Variance

Mean=np.

Variance=np(1 p) = npq.

## Standard deviation= npq

Exercise (continued...)

## e) Mean and variance.

Poisson distribution

## Poisson distribution is appropriate for a random variable that

counts the number of occurrences of an event of interest in a
given time interval.

Assumption

Example

## Traffic accidents in a day.

Speed limit violations in an hour.
Customers arriving at a bank in a day.

Poisson Distribution

## If =average number of events in an specified time interval

then chance that k events will happen in that time is
P(X = k) =
where k 0, 1, 2, 3, . . ..

k e
,
k!

## Mean and Variance

Mean=.

Variance= .

Standard deviation=

Exercise

## Let X be a Poisson random variable with mean = 2.

Calculate the following probabilities:
a) P(X=0)

Exercise

b) P(X = 1)

c) P(X > 1)

Exercise

d) P(X = 5)

Exercise
Airport Safety: The increased number of small commuter
planes in major airports has heightened concern over air safety.
An eastern airport has recorded a monthly average of five near
misses on landings and takeoffs in the past 5 years.
1
Find the probability that during a given month there are
no near-misses on landings and takeoffs at the airport.
2
Find the probability that during a given month there are
five near-misses.
3
Find the probability that there are at least five
near-misses during a particular month.

Exercise

## Twenty people are asked to select a number from 0 to 9.

Eight of them choose a 4, 5, or 6.
1
If the choice of any one number is as likely as any other,
what is the probability of observing eight or more choices
of the numbers 4, 5, or 6?
2
What conclusions would you draw from the results of part
1 above?

Exercise

## In a food processing and packaging plant, there are, on an

average, two packaging machine breakdowns per week.
1
What is the probability that there are no machine
breakdowns in a given week?
2
Calculate the probability that there are no more than two
machine breakdowns in two weeks?