DEPARTMENT OF BUSINESS ADMINISTRATION

Business Statistics
Probability Distribution -Theory & Problems

Probability Distribution
Probability is a numerical measure which indicates the chance of occurrence of an event ‘A’.
It is a number which ranges from 0 to 1. It is denoted by P (A). It is the ratio between the
favourable outcome of an event ‘A’(m) to the total outcome of the experiment (n).
P(A) = number of favourable cases /total no. of equally likely cases
P(A) = m/n.
For example:
A bag has 10 black balls and 20 white balls. A ball is drawn at random. What is the
probability that it is black?
m = 10, n = 10+20 = 30
P(A) = m/n.
P(black balls) = 10/30 = 1/3
P(white balls ) = 1 – 1/3 = 2/3
Experiment
An operation that results in a definite outcome is an experiment. Tossing a coin is an
experiment. It shows head or tail on falling.
Random experiment
When the outcome of an experiment cannot be predicted with certainty, then it is called
random experiment. It is an experiment which may not result in the same outcome when
repeated under the same conditions.
For eg: rolling of dice, drawing cards from a pack of cards
Sample space
The set of all possible outcomes of a random experiment is the sample space. The sample
space is denoted by S.
A sample space with finite number of outcomes is a finite space. A sample space with
infinite number of outcomes is an infinite sample space.
Example: S = {heads, tails}
When a coin is tossed once, the sample space is S = {H,T}
When a coin is tossed twice, the sample space is S = {(HH), (TT), (HT), (TH)}
 DEPARTMENT OF BUSINESS ADMINISTRATION
Business Statistics
Probability Distribution -Theory & Problems

Event
Event is the subset of the sample space. It is denoted by A, B, C, etc.
An event which does not contain any outcome is a null event or impossible event.
Equiprobable or equally likely event
Two or more events are equally likely if they have equal chance of occurrence. While tossing
a coin, the outcomes ‘Head’ and ‘Tail’ are equally likely.
Mutually exclusive or disjoint events
Two or more events are mutually exclusive, if only one of them can occur at a time. That is,
the occurrence of any of these events totally excludes the occurrence of the other events.
Mutually exclusive events cannot occur together.
Exhaustive set of events
A set of events are exhaustive if one or the other of the events in the set occurs whenever the
experiment is conducted. i.e., the set of events exhausts all the outcomes of the experiment.
The union of exhaustive events is equal to sample space.
Events are said to be exhaustive when their totality includes all the possible outcomes of a
random experiment.
Complement of an event
Let A be an event. Then, complement of A is the event of non-occurrence of A. It is the event
constituted by the outcomes which are not favourable to A. The complement of A is denoted
by A’.
Independent events
Two events are said to be independent of each other if the occurrence of one is not affected of
other or the occurrence of one does affect the occurrence of the other.
Union of events
Union of two or more events is the event of occurrence of at least one of these events.
Thus, union of two events A and B is the event of occurrence of at least one of them.
It is denoted by A U B, A+B, A or B.
Intersection of events
Intersection of two or more events is the event of simultaneous occurrence of all these events.
The intersection of two events A and B is the occurrence of both of them. It is denoted by A
intersection B , AB, A and B.
 DEPARTMENT OF BUSINESS ADMINISTRATION
Business Statistics
Probability Distribution -Theory & Problems

Random variable
A variable whose value is determined by the outcome of a random experiment is called
random variable. A random variable may be discrete or continuous. If a random variable
takes integer values such as 0,1,2 etc, then it is a discrete random variable.
Ex: The no. of printing mistakes in each page of a book, no of telephone calls received by a
telephone operator
If the random variable takes on all values, within a certain interval, then the random variable
is called continuous variable. For eg: Amount of rainfall on a rainy day, temperature in a
week.

THEORETICAL DISTRIBUTION
Methods of theoretical distribution
1) Binomial distribution
2) Poisson distribution
3) Normal distribution
Binomial Distribution
A binomial distribution is a probability distribution expressing the probability of one set of
dichotomous alternatives i.e., ‘success’ or ‘failure’.
Conditions of Binomial Distribution
Binomial distribution can be used under the following conditions:
 Experiment is conducted under the same conditions for a fixed number of trails, ‘n’.
 Each trial is independent
 Each trial results in two mutually exclusive and exhaustive outcomes, termed as
success and failure
 Probability of success is denoted by ‘P’ and probability of failure is denoted by ‘Q’.

Probability function of binomial distribution

r n−r
p ( x )=nC p q
r

Where,
N = number of trials in a binomial experiment
nC =¿ number of combinations of n to r at a time
r

r = number of successes in a trial

 DEPARTMENT OF BUSINESS ADMINISTRATION
Business Statistics
Probability Distribution -Theory & Problems

Parameters of binomial distribution

Mean = np
Variance = npq
Standard deviation = √ npq

Questions:
1) In a binomial distribution, p = 0.25, n=10 find mean.
2) In a binomial distribution, p = ½, n=6. Write the probability function
3) In a binomial distribution, mean = 4 and S.D = √3, n =6. Find the values of p and q.
4) The probability that a bomb dropped on a bridge & hits it is 0.4. Eight bombs are
dropped on the bridge, 2 bombs hits are enough to destroy the bridge. Find the
probability that all the bombs hit the bridge. 2 bombs hit the bridge; the bridge is
destroyed.
5) 7 unbiased coins are thrown 128 times. In how many throws would you find at least 3
heads?
6) An unbiased coin is tossed 6 times, find the probability that the tosses result in
i) Heads only
ii) 3 heads & 3 tails
iii) )5 or more heads
7) Team A has probability 2/3 of winning a game. If it plays 4 games, find the
probability that it wins-
i) 2 games
ii) At least one game
iii) At the most 2 games

8) The incidence of an occupational disease in an industry is such that the worker has
25% chance of suffering from it. What is the probability that out of 5 workers at the
most 2 contract the disease?
9) In a binomial distribution, the mean is 6 & variance is 1.5. Find the probability –
i) i)P(x=2)
ii) ii)p (x≤ 2)

10) 5 coins are tossed 3200 times. Find the frequency of the distribution of number of
heads and tabulate the results.
 DEPARTMENT OF BUSINESS ADMINISTRATION
Business Statistics
Probability Distribution -Theory & Problems

11) 7 coins are tossed and number of heads obtained is noted. The experiment is repeated
128 times and the following distribution is obtained.

No of 0 1 2 3 4 5 6 7
heads
Frequenc 7 6 19 35 30 23 7 1
y

Fit the binomial distribution and calculate expected frequencies when the nature of the
coin is not known.

Poisson Distribution
1) Suppose two houses in a thousand catch fire in a year and there are 2000 houses in a
village, what is the probability that:
i) None of the houses catch fire
ii) At least one house catches fire
iii) Not more than two houses catch fire

2) One percent of the bulbs manufactured by a firm are expected to be defective. A

carton contains 200 bulbs. Find the probability that the carton contains 3 or more
defective bulbs.

3) On an average there are three mistakes in a page of book. The book contains 200
pages. What is the probability that a randomly selected page has exactly one mistake?

How many pages would you expect to be free from mistakes?

4) 2 percent of fuses manufactured by a firm are expected to be defective. Find the

probability that a box containing 200 fuses contains
1) Defective fuses 2) 3 or more defective fuses
 DEPARTMENT OF BUSINESS ADMINISTRATION
Business Statistics
Probability Distribution -Theory & Problems

5) Fit a Poisson distribution to the following data and calculate theoretical frequencies:

X 0 1 2 3 4
F 123 59 14 3 1

6) When the first proof of 200 pages of an encyclopaedia of 5,000 pages was read, the
distribution of printing mistakes was found to be shown below. Fit a poisson
distribution to the frequency distribution of printing mistakes. Estimate the total cost
of correcting the whole encyclopaedia.
No of misprints on a Frequency Cost of detection and
page correction per page (₹)
0 113 1.00
1 62 1.50
2 20 2.50
3 3 3.00
4 1 3.50
5 1 4.00

Miscellaneous Illustrations:
1. A manufacturer who produces medicine bottles, finds that 0.1% of the bottles are
defective. The bottles are packed in boxes containing 500 bottles. A drug
manufacturer buys 100 boxes from the producer of bottles. Using poisson distribution,
find how many boxes will contain:
i) No defective
ii) At least two defectives

2. In a town 10 accidents took place in a span of 50 days. Assuming that the number of
accidents per day follows the poisson distribution, find the probability that there will
be three or more accidents in a day.

NORMAL DISTRIBUTION
1. The hourly wages of 1000 workmen are normally distributed around a mean of ₹70
and with the standard deviation of ₹5. Estimate the no of workers whose hourly
wages will be:
i) More than 75
ii) Less than 63
iii) Between 70 and 72
iv) Between 69 and 72
v) Estimate the lowest hourly wages of 100 highest paid workers
 DEPARTMENT OF BUSINESS ADMINISTRATION
Business Statistics
Probability Distribution -Theory & Problems

2. Mean life of electric bulbs manufactured by a firm is 1200 hours. The standard
deviation id 200 hours.
i) In a lot of 10,000 bulbs, how many bulbs are expected to have life 1050 hours
or more?
ii) What is the percentage of bulbs which are expected to fail before 1050 hours
or more?
3. The income distribution of officers of a certain company was found to follow normal
distribution. The average income of an officer was ₹15,000. The standard deviation
of income of officers was ₹5,000. If there are 242 officers drawing a salary above
₹18,500 how many officers were there in the company?
4. The mean and standard deviation of marks scored by a group of students in an
examination are 47 and 10 respectively. If only 20% of the students have to be
promoted, what should be the mark limit for promotion?
5. Assume the mean height of soldiers to be 68.22 inches with variance of 10.8 inches.
How many soldiers in a regiment of 1,000 would you expect to be over 6 feet tall?
6. In a normal distribution 31% of the items are under 45 and 8% are over 64. Find the
mean and standard deviation of the distribution.
7. 1000 light bulbs with a mean life of 120 days are installed in a new factory. Their
length of life is normally distributed with a standard deviation of 20 days.
i) How many bulbs will expire in less than 90 days?
ii) If it is decided to replace all the bulbs together what intervals should be
allowed between replacements if not more than 10% should expire before
replacement?