Probability Distribution

Statistical Methods for Decision Making
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Probability Distributions
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What is Probability Distribution?
• In precise terms, a probability distribution is a total listing of the various
values the random variable can take along with the corresponding probability
of each value. A real life example could be the pattern of distribution of the
machine breakdowns in a manufacturing unit.
• The random variable in this example would be the various values the machine
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breakdowns could assume.
• The probability corresponding to each value of the breakdown is the relative
frequency of occurrence of the breakdown.
• The probability distribution for this example is constructed by the actual
breakdown pattern observed over a period of time. Statisticians use the term
“observed distribution” of breakdowns.

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Probability
distributions
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Discrete Continuous
Binomial Poisson Normal

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Binomial Distribution
• The Binomial Distribution is a widely used probability distribution of a discrete
random variable.
• It plays a major role in quality control and quality assurance function.

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• Reducing the number of defectives using the proportion defective control chart
(p chart) is an accepted practice in manufacturing organizations.
• Binomial distribution is also being used in service organizations like banks, and
insurance corporations to get an idea of the proportion customers who are
satisfied with the service quality.
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Conditions for Applying Binomial
Distribution (Bernoulli Process)
• Trials are independent and random.
• There are fixed number of trials (n trials).
• There are only two outcomes of the trial designated as success or failure.
• The probability of success is uniform through out the n trials
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Binomial Probability Function
• The probability of getting x successes out of n trials is indeed the definition of a Binomial
Distribution. The Binomial Probability Function is given by the following expression
x can take values 0, 1, 2, ………., n
• Where P(x) is the probability of getting x successes in n trials

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is the number of ways in which x successes can take place out of n trials
• p is the probability of success, which is the same through out the n trials.
• p is the parameter of the Binomial distribution

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Example for Binomial Distribution
• A bank issues credit cards to customers under the scheme of Master Card. Based
on the past data, the bank has found out that 60% of all accounts pay on time
following the bill. If a sample of 7 accounts is selected at random from the
current database, construct the Binomial Probability Distribution of accounts
paying on time.
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Solution
• This problem can be structured as a Bernoulli Process where an account paying on time is taken
as success and an account not paying on time is taken as failure. The random variable x
represents here an account paying on time, which can take values 0,1,2,3,4,5,6,7. You need to
prepare a table containing x and P(x) for all the values of x. Performing calculations using
Binomial Probability Function
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For x = 0, 1, 2, 3, 4, 5, 6, 7 is very tedious
• The best option is to use the Microsoft Excel to calculate the Binomial Probabilities both for
individual values and for the cumulative position. This facility is available under the option "Paste
Function". The form of the function is: n, p, O or 1) where x is the number of successes, n is the
number of trials, and p is the probability of success in each trial. The last term 0 or I performs a
logical operation. If you enter 0, the computer returns the individual probability value; if 1 is
entered, the computer gives the cumulative probability value
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Spreadsheet Showing the Solution
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Example problem 2 – binomial distribution
• Jones makes an average of 10 calls per day and has a success rate of 75%. Kate
makes and average of 16 calls per day but has a success rate of 45%.
– What is the probability of the salespersons making 6 sales on any given day?
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– What is the probability of the salespersons making upto 6 sales on any given day?
– What is the probability of the salespersons making atleast 6 sales on any given day?

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Mean and Standard Deviation of the
Binomial Distribution
• The mean µ of the Binomial Distribution is
• given by µ = E(x)= np
• The Standard Deviation σ is given by
• σ = 𝑛𝑝 (1 − 𝑝)
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• For the example problem in the previous two slides,
• Mean µ =7 * 0.6 =4.2
• Standard Deviation = 4.2 (1 − 0.60) = 1.30

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Poisson Distribution
• Poisson Distribution is another discrete distribution which also plays a major role
in quality control in the context of reducing the number of defects per standard
unit.
• Examples include number of defects per item, number of defects per

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transformer produced, number of defects per 100 m2 of cloth, etc.
• Other real life examples would include 1) The number of cars arriving at a
highway check post per hour; 2) The number of customers visiting a bank per
hour during peak business period.

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Poisson Process
• The probability of getting an event in a continuous interval such as length, area,
time and the like is constant.
• The probability of an event occurs in any one interval is independent of the

WIREJ2S1OC probability of event occurring in any other interval.
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• The probability of getting more than one event in an interval approaches 0 as

the interval becomes smaller.

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Poisson Probability Function
Poisson Distribution Formula
where
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P(x) = Probability of x events in an interval given an idea of λ
λ = Average number of events per unit
e = 2.71828(based on natural logarithm)
x = events per unit which can take values 0, 1, 2, 3,…………..∞
λ is the Parameter of the Poisson Distribution.

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Example
If on an average, 6 customers arrive every two minutes at a bank during the busy
hours of working, a) what is the probability that exactly four customers arrive in a
given minute? b) What is the probability that more than three customers will arrive
in a given minute?
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6 customers arrive every two minutes. Therefore , 3 customers arrive every minute.
That implies my lambda=3
P(X=4)=?
P(X>3)=? Implies 1-P(X< =3)?

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Spreadsheet showing Solution
Poisson Distribution Poisson Distribution

Question Solution (formula) Question Solution
Find P(X=4) =POISSON.DIST(4,3,0) Find P(X=4) 0.168031356
Find P(X > 3)

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i.e. Find 1 - P(X <= 3) =1-POISSON.DIST(3,3,1) i.e. Find 1 - P(X <= 3) 0.352768111
The above spreadsheet shows the formula and solution.

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Normal Distribution
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• The Normal Distribution is the most widely used continuous distribution. It occupies a unique place in the field
of statistics. In fact, the entire quality control function that employs the statistical techniques heavily will come
to a grinding halt without the use of the normal distribution. The control charts for reducing and stabilizing
variation relies on the normal distribution. Process capability studies to meet the customer specifications needs
the normal distribution. The whole subject matter inferential statistics is based on the normal distribution. In
all management functions including the human side, the observed frequency distributions encountered are all
fairly close to the normal distribution when the sample size is reasonably large.
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Properties of Normal Distribution
• The normal distribution is a continuous distribution looking like a bell.
Statisticians use the expression “Bell Shaped Distribution”.
• It is a beautiful distribution in which the mean, the median, and the mode are all
equal to one another.
• It is symmetrical about its mean.
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• If the tails of the normal distribution are extended, they will run parallel to the
horizontal axis without actually touching it. (asymptotic to the x-axis)
• The normal distribution has two parameters namely the mean µ and the standard
deviation σ

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Normal Probability Density Function
In the usual notation, the probability density function of the normal distribution is
given below:
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x is a continuous normal random variable with -∞ < x < ∞.

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Standard Normal Distribution
• The Standard Normal Variable is defined as follows:
• Please note that Z is a pure number independent of the unit of measurement.

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The random variable Z follows a normal distribution with mean=0 and standard
deviation =1.

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Example Problem
The mean weight of a morning breakfast cereal pack is 0.295 kg with a standard
deviation of 0.025 kg. The random variable weight of the pack follows a normal
distribution.
a)What is the probability that the pack weighs less than 0.280 kg?
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b)What is the probability that the pack weighs more than 0.350 kg?
c)What is the probability that the pack weighs between 0.260 kg to 0.340 kg?

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Solution-a)
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𝑥−µ
z= = (0.280-0.295)/0.025 = -0.6. Click “Paste Function” of Microsoft Excel, then click the
σ
“statistical” option, then click the standard normal distribution option and enter the z value. You get
the answer. Excel accepts directly both the negative and positive values of z. Excel always returns
the cumulative probability value. When z is negative, the answer is direct. When z is positive, the
answer is =1- the probability value returned by Excel. The answer for part a) of the question =
0.2743(Direct from Excel since z is negative). This says that 27.43 % of the packs weigh less than
0.280 kg.
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Solution-b)
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𝑥−µ
z= = (0.350-0.295)/0.025 =2.2. Excel returns a value of 0.9861. Since z is
σ
positive, the required probability is = 1-0.9861 =0.0139. This means that 1.39% of the
packs weigh more than 0.350 kg.

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Solution-c)
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For this part, you have to first get the cumulative probability up to 0.340 kg and then subtract the
𝑥−µ
cumulative probability up to 0.260. z = = (0.340-0.295)/0.025 =1.8(up to 0.340)
σ
𝑥−µ
z= = (0.260-0.295)/0.025 = -1.4(up to 0.260). These two probabilities from Excel are 0.9641 and
σ
0.0808 respectively. The answer is = 0.9641 - 0.0808 = 0.8833. This means that 88.33% of the packs
weigh between 0.260 kg and 0.340 kg.

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Example 2
A company produces a bolt of length 10mm for its customers The bolts produces
are normally distributed with average length of 10.01mm & standard deviation
0.06mm
(a) What is the probability that the bolt produced will be longer than 10.2 mm
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(b) The sales team is negotiating with a new customer who has more stringent
quality requirements. The new customer requires bolts shall be between 9.9 and
10.15 mm. What is the probability that a bolt produces by the current process will
be acceptable to the new customer
(c) What is the length for which 99% of bolts produced will be less that the length?
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Solution a)
The value required is greater than 10.2 (i.e. right tail)
The answer is 0.00077 = 0.077% probability

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Solution b)
Since the probability between 10.15 and 9.90 is needed, we need to subtract the
cumulative probability of 9.90 from the cumulative probability of 10.15
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Answer: 0.9568 i.e. 95.68% chance of meeting customer criteria.
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Solution c)
In this question the probability is given and we are required to calculate the value
below which (to left of which) 99% of area lies.
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Answer: 99% of bolts will be smaller than 10.14958 mm
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Statistical Methods for Decision Making

This file is meant for personal use by [email protected] only.

This file is meant for personal use by [email protected] only.

Binomial Poisson Normal

This file is meant for personal use by [email protected] only.

• It plays a major role in quality control and quality assurance function.

This file is meant for personal use by [email protected] only.

x can take values 0, 1, 2, ………., n

• Where P(x) is the probability of getting x successes in n trials

This file is meant for personal use by [email protected] only.

This file is meant for personal use by [email protected] only.

For x = 0, 1, 2, 3, 4, 5, 6, 7 is very tedious

This file is meant for personal use by [email protected] only.

This file is meant for personal use by [email protected] only.

This file is meant for personal use by [email protected] only.

• Examples include number of defects per item, number of defects per

transformer produced, number of defects per 100 m2 of cloth, etc.

This file is meant for personal use by [email protected] only.

• The probability of an event occurs in any one interval is independent of the

• The probability of getting more than one event in an interval approaches 0 as

This file is meant for personal use by [email protected] only.

This file is meant for personal use by [email protected] only.

This file is meant for personal use by [email protected] only.

Poisson Distribution Poisson Distribution

Find P(X > 3)

The above spreadsheet shows the formula and solution.

This file is meant for personal use by [email protected] only.

This file is meant for personal use by [email protected] only.

x is a continuous normal random variable with -∞ < x < ∞.

This file is meant for personal use by [email protected] only.

• Please note that Z is a pure number independent of the unit of measurement.

This file is meant for personal use by [email protected] only.

This file is meant for personal use by [email protected] only.

This file is meant for personal use by [email protected] only.

This file is meant for personal use by [email protected] only.

The answer is 0.00077 = 0.077% probability

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This file is meant for personal use by [email protected] only.

This file is meant for personal use by [email protected] only.

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