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Business Analytics Chapter 5

This document discusses probability distributions and different types of random variables. It covers discrete and continuous random variables. Discrete variables can take on count values while continuous variables can take on fractional values. The document then discusses probability distribution functions which graphically represent data and relate the data to known distributions. Three common continuous probability distributions are discussed: the uniform, normal, and exponential distributions. The uniform distribution has equal probability across its range, the normal distribution is characterized by its mean and standard deviation, and the exponential distribution is used by airlines to model waiting times.

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118 views

Business Analytics Chapter 5

This document discusses probability distributions and different types of random variables. It covers discrete and continuous random variables. Discrete variables can take on count values while continuous variables can take on fractional values. The document then discusses probability distribution functions which graphically represent data and relate the data to known distributions. Three common continuous probability distributions are discussed: the uniform, normal, and exponential distributions. The uniform distribution has equal probability across its range, the normal distribution is characterized by its mean and standard deviation, and the exponential distribution is used by airlines to model waiting times.

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Lecture Chapter 5:

 Section 5.6
 Random Variable: an outcome of experimentation (your data)
 Can be discrete or continuous
 Discrete Random Variable: finite, no fractions whatsoever
 Example: number of children per household, number of speeding tickets
per person
 Can assign a probability
 Continuous: fractional
 Example: time from work to school, mile time (time, height, weight,
distance)
 Cannot assign a probability to a continuous variable
 In 361B we look at continuous variables
 ***REMEMBER you cannot do a specific probability for a number
 CANNOT do this P (x = 90) in continuous
 Probability distribution (Probability Density Function): This is graphical
representation of data
 Can be normal, bimodal, ect.
 We must relate our data to a known type of distribution so we can understand the
behavior of the data
 Example: Students
First Test Scores:

90 89 90 90 60 71 75 80 92 75
 If we are trying to find the probability that P(x>=90) 3/10
 We can categorize on excel with a histogram
 Once you create the histogram, we can find the PDF and we see it
 Continuous Probability Distributions: (from the text)
 1. Uniform (simulation)
 2. Normal (forecasting, Inuty)
 3. Exponential (waiting line models)

 Uniform:


This is equal across the board - uniform!

It is unlikely this happens, it will be a straight, horizontal line

Not responsible for functional format

f(x) = 1 / (b-a) a< x < b

Understand that there are limits in the uniform

HOMEWORK PROBLEM: asks for mean value of x
 Mean E(x) = a + b / 2
 Variance (x) = (b - a)^2 / 12
 Normal:
 Mean and standard deviation
 Higher the standard deviation, the higher the spread and the spread is wider
 Will be tested on the exam that the lower standard deviation is better because it is
less volatile
 Exponential:
 Airlines use this method

 P(x) = 1/ u ^ e^-x/u
 U = mean
 Lambda = 1 / u
 P (x < 3) = expon.dist(3, ⅕, true)

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