Probability

Contents
- Probability theory
- Bayes Theorem and conditional probability
- Permutations and combinations
- Discrete probability distributions
- Continuous probability distribution
5.1 PROBABILITY
- Probability is a very popular concept in business management. This is
because it covers the risks which may be involved in certain business
situations. It is a fact that when a business investment is being arranged, the
outcome is usually uncertain. Therefore the concept of probability may be
used to describe the degree of uncertainty of a particular business
outcome
Probability may therefore be defied as the chances of a given event
occurring. Numerically, probability values range between 0 and 1. a
probability of 0 implies that the event cannot occur at all. A probability of 1
implies that the event will certainly occur.
Therefore other events have their probabilities with values lying between 0
and 1
- The formular used to determine probability is as follow
r Favourable outcomes
=
Probability (x) = n Total outcomes

Application of Probability in Business

1. Business games of chance e.g. Raffles Lotteries e.t.c.
2. Insurance firms: this is usually done when a new client or property is being
insured. The company has to be certain about the chances of the insured risks
occurring.
3. Business decision making regarding viability of projects thus the projects with a
greater probability has greater chances.

Example
A bag contains 80 balls of which 20 are red, 25 are blue and 35 are white. A ball is
picked at random what is the probability that the ball picked is:
(i) Red ball
(ii) Black ball
(iii) Red or Blue ball.

Solution
Number of red balls in the bag
=P ( R )
(i) Probability of a red ball = Total number of balls in the bag
20 1
=
= 80 4
Number of black balls in the bag
=P ( B )
(ii) Probability of black ball = Total number of balls
0
=0
= 80
20 25 20 25
or = +
(iii) P(R or B) = 80 80 80 80
 9
= 16
Note: in probability or is replaced by a plus (+) sign. See addition rule.

Common terms
Events: an event is a possible outcome of an experiment or a result of a trial or an
observation.

Mutually Exclusive Events

Definition

Two or more events are said to be mutually exclusive if they cannot occur at the same time in the same
experiment.

Mathematically:

A ∩ B=∅ and P( A ∩ B)=0

Example 1 (Everyday)

 Tossing a coin:
o Event A: Getting a Head
o Event B: Getting a Tail

You cannot get head and tail in a single toss → mutually exclusive.

Example 2 (Dice)

 Event A: Getting a 2
 Event B: Getting a 5

A single die cannot show 2 and 5 at the same time.

Probability Rule

P( A ∪ B)=P( A)+ P( B)

Mutually Inclusive (Not Mutually Exclusive) Events

Definition

Events are mutually inclusive if they can occur at the same time in the same experiment.

Mathematically:

A ∩ B≠ ∅ and P( A ∩ B)≠ 0
Example 1 (Cards)

 Event A: Drawing a red card

 Event B: Drawing a king

A card can be both red and a king (e.g. King of Hearts).

Example 2 (Students)

 Event A: Student is female

 Event B: Student studies Economics

A student can satisfy both conditions.

Probability Rule

P( A ∪ B)=P( A)+ P( B)−P( A ∩ B)

Difference Between Mutually Exclusive and Inclusive
Feature Mutually Exclusive Mutually Inclusive
Occur together No Yes
A∩B Empty Not empty
Intersection probability 0 Greater than 0
Union formula P( A)+ P(B) P( A)+ P(B)−P( A ∩ B)

Common Terminologies Used in Probability

(a) Experiment

An activity that produces a well-defined outcome.

Example: Tossing a coin.

(b) Sample Space ( S)

The set of all possible outcomes of an experiment.

Example:
For a die:

S={1 ,2 , 3 , 4 ,5 , 6 }

(c) Event

Any subset of the sample space.

Example:
Event A = getting an even number = {2,4,6}

(d) Simple (Elementary) Event

An event with only one outcome.
Example: Getting a 3 when a die is thrown.

(e) Compound Event

An event with more than one outcome.

Example: Getting an even number.

(f) Complement of an Event

The event that an outcome does not occur.

'
P( A )=1−P ( A )

(g) Independent Events

Two events are independent if the occurrence of one does not affect the other.

P( A ∩ B)=P( A) P(B)

Example: Tossing a coin and throwing a die.

(h) Dependent Events

Events where the occurrence of one affects the probability of the other.
Example: Drawing two cards without replacement.

(i) Equally Likely Events

Events that have the same probability of occurring.

Example: Each face of a fair die.

(j) Exhaustive Events

Events that cover all possible outcomes.

Example: Head or Tail in a coin toss.

Rules of Probability
(a) Additional Rule – This rule is used to calculate the probability of two or more
mutually exclusive events. In such circumstances the probability of the
separate events must be added.

Example
What is the probability of throwing a 3 or a 6 with a throw of a die?

Solution
 1 1 1
+ =
P(throwing a 3 or a 6) = 6 6 3

(b) Multiplicative rule

This is used when there is a string of independent events for which
individual probability is known and it is required to know the overall
probability.

Example
What is the probability of a 3 and a 6 with two throws of a die?

Solution
P(throwing a 3) and P(6)
1
×1
6 1
=
= P(3) and P(6) = 6 36

Note: 1) In probability ‘and’ is replaced by ‘x’ – multiplication.

2) P(x) and P(y) ≠ P(x and y) note that these two are different.
The first implies P(x) happening and P(y), but if the order of
which happened first is unimportant then we have p(x and y).
In the example above:
1
P(3) and P(6) = 36
but
P(3 and 6) = P(3 followed by 6) or P(6 followed by 3)
= [P(3) P(6)] or [P(6) P(3)]
1 1 1
+ =
= 36 36 18
(c) Conditional probability
This is the probability associated with combinations of events but given that
some prior result has already been achieved with one of them.
Its expressed in the form of
P(x|y) = Probability of x given that y has already occurred.
P ( xy )
P(x|y) = P( y) → conditional probability formula.

Example:
In a competitive examination. 30 candidates are to be selected. In all 600
candidates appear in a written test, and 100 will be called for the interview.
(i) What is the probability that a person will be called for the interview?
(ii) Determine the probability of a person getting selected if he has been called
for the interview?
(iii) Probability that person is called for the interview and is selected?

Solution:
Let event A be that the person is called for the interview and event B that he is
selected.

100 1
(i) ∴ P(A) = 600 = 6

30 3
=
(ii) P(B|A) = 100 10
(iii) P(AB) = P(A) × P(B|A)
1
×3
6 3 1
= =
= 10 60 20

Example:
From past experience a machine is known to be set up correctly on 90% of
occasions. If the machine is set up correctly then 95% of good parts are expected
but if the machine is not set up correctly then the probability of a good part is only
30%.
On a particular day the machine is set up and the first component produced and
found to be good. What is the probability that the machine is set up correctly.

Solution:
This is displayed in the form of a probability tree or diagram as follows:

CS GP
GP = CS – Correct
Setting
CS = BP =
IS – Incorrect
0.9 0.05 CS BP Setting

IS = GP = IS GP – Good
0.3 Product

BP = 0.7

IS
P(CSGP) = 0.9 × 0.95 = 0.855
P(CSBP) = 0.9 × 0.05 = 0.045
P(ISGP) = 0.1 × 0.3 = 0.03
P(ISBP) = 0.1 × 0.7 = 0.07
1.00

- Probability of getting a good part (GP) = CSGP or ISGP

= CSGP + ISGP
= 0.855 + 0.03 = 0.885

Note: Good parts may be produced when the machine is correctly set up and also
when its incorrectly setup. In 1000 trials, 855 occasions when its correctly setup
and good parts produced (CSGP) and 30 occasions when its incorrectly setup and
good parts produced (ISGP).

- Probability that the machine is correctly set up after getting a good part.
Number of favourable outcomes P(CSGP) 0.855
= = =0 . 966
= Total possible outcomes P(GP ) 0.885
Or
P (CSGP) 0. 855
= =0.966
= P(CS|GP) = P (GP) 0. 885

Example
In a class of 100 students, 36 are male are studying accounting, 9 are male but not
studying accounting, 42 are female and studying accounting, 13 are female and
are not studying accounting.
Use these data to deduce probabilities concerning a student drawn at random.

Solution:
Accounting Not accounting Total
A A
Male M 36 9 45
Female F 42 13 55
Total 78 22 100

45
=0.45
P(M) = 100
55
=0.55
P(F) = 100
 78
=0.78
P(A) = 100
22
=0.22
P( A ) = 100
36
P(M and A) = P(A and M) = 100 = 0.36
P(M and A ) = 0.09
P(F and A ) = 0.13
These probabilities can be express differently as;
P(M) = P(M and A) or P(M and A )
= 0.36 + 0.09 = 0.45

P(F) = P(F and A) or P(F and A )

= 0.42 + 0.13 = 0.55

P(A) = P(A and M) + P(A and F) = 0.36 + 0.42 = 0.78

P( A ) = P( A and M) + P( A and F) = 0.09 + 0.13 = 0.22

Now calculate the probability that a student is studying accounting given that he is
male.

This is a conditional probability given as P(A|M)

P ( A and M) 0.36
= =0.80
P(A|M) = P ( M ) 0.45
From the formula above we get that,
P(A and M) = P(M) P(A|M) ……………….. (i)
Note that P(A|M) ≠ P(M|A)
P ( A and M )
Since P(M|A) = P( A ) this is known as the Bayes’ rule.
Bayes’ rule/Theorem

This rule or theorem is given by

P ( A ) ×P ( B|A )
P(A|B) = P( B)
It’s used frequently in decision making where information is given in form of
condition probabilities and the reverse of these probabilities must be found.

Example
Analysis of questionnaire complete by holiday makers showed that 0.75 classified
their holiday as good at Malindi. The probability of hot weather in the resort is
0.6. If the probability of regarding holiday as good given hot weather is 0.9, what
is the probability that there was hot weather if a holiday maker considers his
holiday good?

Solution
P ( A ) ×P ( B|A )
P(A|B) = P( B)
Let H = hot weather
G = Good
P(G) = 0.75 P(H) = 0.6 and P(G|H) = 0.9 (Probability of regard
holiday as good given hot weather)

Now the question requires us to get

P(H|G) = Probability of (there was) hot weather given that the holiday has
been rated as good).
P ( H ) P ( G|H ) ( 0.6 )( 0.9 )
=
= P(G) 0.75
= 0.72.

Worked examples on probability

1. A machine comprises of 3 transformers A, B and C. The machine may operate if
at least 2 transformers are working. The probability of each transformer working
are given as shown below;
P(A) = 0.6, P(B) = 0.5, P(C) = 0.7
A mechanical engineer went to inspect the working conditions of those
transformers. Find the probabilities of having the following outcomes
i. Only one transformer operating
ii. Two transformers are operating
iii. All three transformers are operating
iv. None is operating
v. At least 2 are operating
vi. At most 2 are operating

Solution
P(A) =0.6 P( A ) = 0.4 P(B) = 0.5 P(~B) = 0.5
P(C) = 0.7 P(C ) = 0.3

i. P(only one transformer is operating) is given by the following possibilities

1st 2nd 3rd
P (A B C) = 0.6 x 0.5 x 0.3 = 0.09
P (A B C) = 0.4 x 0.5 x 0.3 = 0.06
P (A B C) = 0.4 x 0.5 x 0.7 = 0.14
∴ P(Only one transformer working)
= 0.09 + 0.06 + 0.14 = 0.29

ii. P(only two transformers are operating) is given by the following

possibilities.
 1st 2nd 3rd
P (A B C) = 0.6 x 0.5 x 0.3 = 0.09
P (A B C) = 0.6 x 0.5 x 0.7 = 0.21
P (A B C) = 0.4 x 0.5 x 0.7 = 0.14
∴ P(Only two transformers are operating)
= 0.09 + 0.21 + 0.14 = 0.44
iii. P(all the three transformers are operating).

= P(A) x P(B) x P(C)

= 0.6 x 0.5 x 0.7

= 0.21

iv. P(none of the transformers is operating).

= P( A ) x P( B ) x P(C )

= 0.4 x 0.5 x 0.3

= 0.06

v. P(at least 2 working).

= P(exactly 2 working) + P(all three working)

= 0.44 + 0.21

= 0.65

vi. P(at most 2 working).

= P(Zero working) + P(one working) + P(two working)
= 0.06 + 0.29 + 0.44
= 0.79

Permutations and Combinations Explained

with Worked Examples
1. Permutations
A permutation is an arrangement of items in a specific order. Order matters in permutations.
Formula:
ⁿPᵣ = n! / (n - r)!
Example 1: How many different 3-letter codes can be made from the letters A, B, C, D if order
matters and no letter is repeated?
Step 1: n = 4 (A, B, C, D), r = 3
Step 2: Apply formula: ⁴P₃ = 4! / (4 - 3)! = 24
Answer: There are 24 possible 3-letter arrangements (e.g., ABC, ACB, BAC, etc.).
Example 2: How many ways can 5 students be arranged in a line?
⁵P₅ = 5! / (5 - 5)! = 120
Answer: The 5 students can be arranged in 120 ways.

2. Combinations
A combination is a selection of items without regard to order. Order does not matter in
combinations.
Formula:
ⁿCᵣ = n! / [r!(n - r)!]
Example 3: How many ways can we choose 3 students from a group of 5 to form a committee?
⁵C₃ = 5! / [3!(5 - 3)!] = 10
Answer: There are 10 possible committees.
Example 4: From the letters A, B, C, D, how many different groups of 2 letters can be formed?
⁴C₂ = 4! / [2!(4 - 2)!] = 6
Answer: There are 6 different combinations (AB, AC, AD, BC, BD, CD).

3. Key Difference Summary

Concept Formula Order Example Result
Permutation ⁿPᵣ = n! / (n - r)! Matters 3-letter code 24
from 4 letters
Combination ⁿCᵣ = n! / [r!(n - r)!] Doesn’t 2 letters 6
matter chosen from 4

4. Combined Example
Suppose a school has 6 prefects: A, B, C, D, E, and F. The school needs to select 2 prefects to
represent them at a meeting and assign one as Chairperson and the other as Secretary.
Step 1: Choose 2 prefects (Combination) → ⁶C₂ = 15
Step 2: Arrange them into positions (Permutation of 2) → ²P₂ = 2
Step 3: Total possible outcomes = 15 × 2 = 30
Answer: There are 30 different ways to choose and assign the two prefects.

5.3 Permutations and Combination

Definition

Permutation
- This is an order arrangement of items in which the order must be strictly
observed

Example

Let x, y and z be any three items. Arrange these in all possible permutations

1st 2nd 3rd

X Y Z
X Z Y
Y X Z Six different permutations
Y Z X
Z Y X
Z X Y

NB: The above 6 permutations are the maximum one can ever obtain in a situation
where there are only 3 items but if the number of items exceeds 3 then
determining the no. of permutations by outlining as done above may be
cumbersome. Therefore we use a special formula to determine such permutations.
The formula is given below

The number of permutations of ‘r’ items taken from a sample of ‘n’ items may be
n!
provided as nPr = ( n - r ) ! ! = factorial
E.g.
3!
i. 3P3 = ( 3−3 ) !
3×2×1
= 0! NB 0! = 1
6
= 1=6

5!
ii. 5P3 = ( 5 - 3) !
5×4×3×2×1
= 1×2
= 60

7!
iii. 7P5 = ( 7 - 5) !
7×6×5×4×3×2×1
= 2×1
 5040
= 2
= 2520

Example
There are 6 contestants for the post of chairman secretary and treasurer. These
positions can be filled by any of the 6. Find the possible no. of ways in which the 3
positions may be filled.
Solution
Chairman Secretary Treasurer
6 5 4
Therefore the no of ways of filing the three positions is 6 x 5 x 4 = 120
6!
6P3 = ( 6 - 3) !
6×5×4×3×2×1
= 3×2×1
720
= 6
= 120

Combinations

Definition
A combination is a group of times in which order is not important.
For a combination to hold at any given time it must comprise of the same items but
if a new item is added to the group or removed from the group then we have a new
combination

Example
3 items x, y and z will have 6 different permutation but only one combination.
The following formular is usually used to determine the no. of combinations in a
given situation.
n!
n Cr = r (n - r) !

Example
8
i. 8Cr = 7 ( 8−7 ) !
8
= 7 !1 !
8×7 !
= 1×7 !
= 8

6
ii. 6C4 = 6 ( 6−4 ) !
 6
= 6 !2 !
6×5×4!
= 4!×2×1
= 15

8
iii. C3
8 = 3!5!
8×7×6×5 !
= 3×2×1×5 !
= 56

Example
There is a committee to be selected comprising of 5 people from a group of 5 men
and 6 women. If the selection is randomly done. Find the possibility of having the
following possibilities (combinations)
i. Three men and two women
ii. At least one man and at least one woman must be in the committee
iii. One particular man and one particular woman must not be in the
committee (one man four women)

Solution
i. The committee size = 5 people
The group size = 5m + 6w
∴ assuming no restrictions the committee can be selected in 11c5
the committee has to consist of 3m & 2w
∴ these may be selected as follows.
5c3 x 6c2
P(committee 3m and 2w
5c3×6c2
= 11c5
5! 6! 11 !
= 3 ! 2 ! × 4! 2 ! 5!6!

5×4×3×2×1 6×5×4! 6!×5!

× ×
= 3×2×1×2×1 2×14! 11!
27
= 77
ii. P(at least one man and at least one woman must be in the committee)
The no. of possible combinations of selecting the committee without any
woman = 5C5
The probability of having a committee of five men only
5C5 1
= 11C 5 = 462
the probability of having a committee of five women only

6C5 6!
= 11C 5 = 5!1 ! 11c6
6×5 ! 6!5!
×
= 5 !1 ! 11×10×9×8×7×6 !
6×5×4×3×2×1
= 11×10×9×8×7
1
= 77
∴ P(at least one man and at least one woman)
= 1 – {P(No man) + P(no woman)}

{1
+
1
= 1 – 77 462
}
( 6+1 )
=1– 462
7
= 1 – 462
455
= 465
iii. P(one particular man and one particular woman must not be in the
committee would be determined as follows
The group size = 5m + 6w
Committee size = 5 people
Actual groups size from which to
Select the committee = 4m + 5w
Committee = 1m + 4w
The committee may be selected in 9c5
The one man may be selected in 4c1 ways
The four women may be selected in 5c4 ways
∴ P(committee of 4w1man).
5c4×4c1
= 9c5

5! 6! 9!
= 4! 1 ! × 1 ! 3 ! 4!5!
 5×4 ! 4×3 ! 4!5!
× ×
= 1 ! 4 ! 1×3 ! 9×8×7×6×5 !

10
= 63

5.4 DISCRETE PROBABILITY DISTRIBUTIONS

BINOMIAL PROBABILITY DISTRIBUTION

Binomial probability distribution is a set of probabilities for discrete events.
Discrete events are those whose results or outcomes can be counted. Binomial
probabilities are commonly encountered in business situations e.g. in quality
control activities the binomial probabilities are frequently used especially when
determining the probability of having a certain no. of defective items in a given
consignment.
- The binomial probability distribution is usually characterized by the fact that
the binomial events have to fulfill the following properties
i. Each event has 2 possible outcomes only known as success or failure
ii. The probability of each outcome is independent of the previous outcomes
iii. The sample size is generally fixed
iv. The probabilities of success and failure tend to approach 0.5 if the
sample size increases
v. The probabilities are given by the following equation
P(r) = nCr Pr ( 1- P)n-r
n!
= r ! ( n - r ) ! Pr ( 1- P)n-r
Where P = Probability of success
r = no. of successes
n = sample size
q = 1 – P = Probability of failure

Example 1
A medical survey was conducted in order to establish the proportion of the
population which was infected with cancer. The results indicated that 40% of the
population were suffering from the disease.
A sample of 6 people was later taken and examined for the disease. Find the
probability that the following outcomes were observed
a) Only one person had the disease
b) Exactly two people had the disease
c) At most two people had the disease
d) At least two people had the disease
e) Three or four people had the disease

Solution
P(a persona having cancer) = 40% = 0.4 =P
P(a person not having cancer) = 60% = 0.6 =1–P=q
a) P(only one person having cancer)
= 6c1 (0.4)(0.6)5
6!
= 5!1 ! (0.4)1(0.6)5
= 0.1866
Note that from the formula
r n-r
nCrP q : n = sample size = 6
p = 0.4
r = 1 = only one person having cancer
b) P(2 pple had the disease)
= 6c2 (0.4)2 (0.6)4
6!
= 4 ! 2 ! (0.4) 2 (0.6)5
6×5×4 !
= 4 ! ×2×1 (0.4) 2 (0.6)5
= 15 x (0.4) 2 (0.6)5

= 0.311
c) P(at most 2) = P(0) + P(1) + P(2) = P(0) or P(1) or P(2)
So we calculate the probability of each and add them up.
P(0) = P(nobody having cancer)
= 6c0 (0.4) 0(0.6)6
6!
= 0 ! 6 ! (0.4) 0(0.6)6
= (0.6)6
= 0.0467
The probabilities of P(1) and P(2) have been worked out in part (a) and (b)
Therefore P(at most 2) = 0.0467 + 0.1866 + 0.311 = 0.5443
d) P(at least 2)
= P(2) + P(3) + P(4) + P(5) + P(6)
= 1 – [P(0) + P(1)] This is a shorter way of working out the solution since
(P(0) + P(1) + P(2) + P(3) + P(4) + P(5) + P(6) = 1)
= 1 – (0.0467 + 0.1866)
= 0.7667
e) P(3 or 4 people had the disease)

= P(3) +P(4)

= 6c3(0.4)3(0.6)3 + 6c4(0.4)4(0.6)2

6! 6!
= 3 ! 3 ! (0.4) 3(0.6)3 + 2 ! 4 ! (0.4) 4(0.6)2
= 6 × 5 × 4 × 3! (0.4) 3(0.6)3 + 6 × 5 × 4! (0.4) 4(0.6)2
3 × 2 × 1 × 3! 2 × 1 × 4!

= 20(0.4)3(0.6)3 + 15(0.4)4(0.6)2
= (20 × 0.013824) + (15 × 0.009216)
= 0.27648 + 0.13824
= 0.41472
Example 2
An insurance company takes a keen interest in the age at which a person is
insured. Consequently a survey conducted on prospective clients indicated that for
clients having the same age the probability that they will be alive in 30 years time
2
is 3 . This probability was established using the actuarial tables. If a sample of 5
people was insured now, find the probability of having the following possible
outcomes in 30 years
a) All are alive
b) At least 3 are alive
c) At most one is alive
d) None is alive
e) At least 1 is alive
Sample size = 5
2
P(alive) = 3
1
P(not alive) = 3
a) P(all alive) = P(5)

( 3) ( 3)
5 0
2 1
5c5
=
2 5 1
( ) ( )
0
5!
×
=5!0! 3 3

( )
5
2
= 3
32
= 243
b) P(at least 3 alive)
= P(3) + P(4) + P(5)

( 3) ( 3)
3 2
2 1
5c3
P(3) =

( ) ( 3)
3 2
5! 2 1
= 3!2! 3

( ) ( 3)
3 2
5×4×3 ! 2 1
3 !×2×1 3
( 3 ) ( 3)
3 2
2 1
10×

80
= 243
(2 3 ) (1 3 )
4 1
5c4
P(4) =

( ) ( 3)
4 1
5! 2 1
= 4!1! 3

5×4 ! 2 4 1
( )( )
1

= 4!× 1! 3 3
 80
= 243
∴ P(at least 3 people alive)
80 80 32
= 243 +243 +243

=
c) P(at most one is alive)
= P(0) + P(1)

( 3) ( 3 ) ( 3) ( 3 )
0 5 1 4
2 1 2 1
5c0 +5c1
=

( ) ( 3) ( ) ( 3)
0 5 1 4
5! 2 1 5! 2 1
+
= 0!5! 3 4!1! 3

( 3) ( 3) ( )( )
0 5
2 1 5×4! 2 1 1 4
+
= 4!× 1! 3 3

1 10
= 234 + 243

11
= 243
d) P( none is alive)

( 2 3) (1 3 )
0 5
5c0
=

( ) ( 3)
0 5
5! 2 1
= 5!0! 3

1
= 243
e) P(at least one is alive)
= 1 – P(non alive)
1
= 1 – 243
242
= 243

POISSON PROBABILITY DISTRIBUTION

- This is a set of probabilities which is obtained for discrete events which are
described as being rare. Occasions similar to binominal distribution but
have very low probabilities and large sample size.
Examples of such are events in business are as follows:
i. Telephone congestion at midnight
ii. Traffic jams at certain roads at 9 o’clock at night
iii. Sales boom
iv. Attaining an age of 100 years (Centurenean)
 - Poisson probabilities are frequently applied in business situations in order to
determine the numerical probabilities of such events occurring.
- The formular used to determine such probabilities is as follows
e− λ λ x
P(x) = X!
Where x= No. of successes
⋋ = mean no. of the successes in the sample (⋋ = np)
⋋ = lambda = np
e= 2.718

Example 1
A manufacturer assures his customers that the probability of having defective item
is 0.005. A sample of 1000 items was inspected. Find the probabilities of having
the following possible outcomes
i. Only one is defective
ii. At most 2 defective
iii. More than 3 defective
e−λ λ x
P(x) = x !
(⋋ = np = 1000 × 0.005) = 5
i. P(only one is defective) = P(1) = P(x = 1)
2. 718−5 ×51 1
5
= 1! Note that 2.718-5= 2. 718
5
= 2. 7185
5
= 148 .33
= 0.0337
ii. P(at most 2 defective) = P(x ≤ 2)
= P(0) + P(1) + P(2)
e−5 50
= P(x = 0) = 0 !
= 2.718-5
1
= 2. 718+5
1
= 148 .336
= 0.00674
= P(x = 1) = 0.0337
2. 7185 52
= P(x = 2) 2!
25
= 2×148 .336
= 0.08427
 = P(x≤2) = 0.00674 + 0.0337 + 0.08427
= 0.012471

iii. P(more than 3 defective) = P(x > 3)

= 1 – [ P ( 0 ) +P ( 1 ) +P ( 2 ) +P ( 3 ) ]

BINOMIAL MATHEMATICAL PROPERTIES

1. The mean or expected value = n × p = np
Where n = Sample Size
p = Probability of success
2. The variance = npq
Where q = probability of failure = 1 - p

3. The standard deviation = √ npq

Example
A firm manufacturing 45,000 units of nuts. The probability of having a defective
nut is 0.15
Calculate the following
i. The expected no. of defective nuts
ii. The variance and standard deviation of the defective nuts in a daily
consignment of 45,000

Solution
Sample size n = 45,000
P(defective) = 0.15 = p
P(non defective) = 0.85 = q
i. ∴ the expected no of defective nuts
= 45,000 × 0.15 = 6,750
ii. The variance = npq
= 45000 × 0.85 × 0.15
= 5737.50

The standard deviation = √ npq

√
= 5737.50
= 75.74

POISSON MATHEMATICAL PROPERTIES

1. The mean or expected value = np = λ
Where n = Sample Size
p = Probability of success
2. The variance = np = ⋋

3. Standard deviation = √ np = √ λ
Example
The probability of a rare disease striking a given population is 0.003. A sample of
10000 was examined. Find the expected no. suffering from the disease and hence
determine the variance and the standard deviation for the above problem
Solution
Sample size n = 10000
P(a person suffering from the disease) = 0.003 = p
∴ expected number of people suffering from the disease
Mean = λ = 10000 × 0.003
= 30
= np = ⋋
variance = np = 30

Standard deviation = √ np =⋋
√
= 30
= 5.477

5.5 PROBABILITY DISTRIBUTION FOR CONTINUOUS RANDOM

VARIABLES.
In a continuous distribution, the variable can take any value within a specified
range, e.g. 2.21 or 1.64 compared to the specific values taken by a discrete
variable e.g 1 or 3. The probability is represented by the area under the probability
density curve between the given values.
The uniform distribution, the normal probability distribution and the exponential
distribution are examples of a continuous distribution
- The normal distribution is a probability distribution which is used to
determine probabilities of continuous variables
Examples of continuous variables are
o Distances
o Times
o Weights
o Heights
o Capacity e.t.c
- Usually continuous variables are those, which can be measured by using the
appropriate units of measurement.
- Following are the properties of the normal distribution
1. The total area under the curve is = 1 which is equivalent to the
maximum value of probability
Line of symmetry
Normal probability
Distribution curve

Tail End Tail End

Age
(Yrs)
0 20 25 30 35 40 45 50 55 70
mean mode median
2. The line of symmetry divided the curve into two equal halves
3. The two ends of the normal distribution curve continuously approach
the horizontal axis but they never cross it
4. The values of the mean, mode and median are all equal
NB: The above distribution curve is referred to as normal probability distribution
curve because if a frequency distribution curve is plotted from measurements of a
given sample drawn from a normal population then a graph similar to the normal
curve must be obtained.
- It should be noted that 68% of any population lies within one standard
deviation, ±1σ
- 95% lies within two standard deviations ±2σ
- 99% lies within three standard deviations ±3σ

Where σ = standard deviation

O Z

STANDARDIZATION OF VARIABLES
- Before we use the normal distribution curve to determine probabilities of the
continuous variables, we need to standardize the original units of
measurement, by using the following formular.
χ −μ
Z= σ
Where χ = Value to be standardized
Z = Standardization of x
 µ = population mean
σ = Standard deviation

Example
A sample of students had a mean age of 35 years with a standard deviation of 5
years. A student was randomly picked from a group of 200 students. Find the
probability that the age of the student turned out to be as follows
i. Lying between 35 and 40
ii. Lying between 30 and 40
iii. Lying between 25 and 30
iv. Lying beyond 45 yrs
v. Lying beyond 30 yrs
vi. Lying below 25 years

Solution
i. The standardized value for 35 years
χ −μ 35 - 35
Z= σ = 5 = 0

The standardized value for 40 years

χ −μ 40 - 35
Z= σ = 5 = 1

∴ the area between Z = 0 and Z = 1 is 0.3413 (These values are checked from
the normal tables see appendix)
The value from standard normal curve tables.
When z = 0, p = 0
And when z = 1, p = 0.3413
Now the area under this curve is the area between z = 1 and z = 0
= 0.3413 – 0 = 0.3413
∴ the probability age lying between 35 and 40 yrs is 0.3413
ii. 30 and 40 years
χ −μ 30−35 −5
Z= σ = 5 = 5 = -1
χ −μ 40−35
Z= σ = 5 = 1

∴ the area between Z = -1 and Z = 1 is

= 0.3413 (lying on the positive side of zero) + 0.3413 (lying on the negative
side of zero)
P = 0.6826
∴ the probability age lying between 30 and 40 yrs is 0.6826
iii. 25 and 30 years
χ −μ 25−35 −10
Z= σ = 5 = 5 = -2
 χ −μ 30−35
Z= σ = 5 = -1

∴ the area between Z = -2 and Z = -1

Probability area corresponding to Z = -2
= 0.4772 (the z value to check from the tables is 2)
Probability area corresponding to Z = -1
= 0.3413 (the z value for this case is 1)
∴ the probability that the age lies between 25 and 30 yrs
= 0.4772 – 0.3413 (The area under this curve)
P = 0.1359

iv. P(beyond 45 years) is determined as follow = P(x > 45)

χ −μ 45−35 + 10
Z= σ = 5 = 5 =+2

Probability corresponding to Z = 2 = 0.4772 = probability of between 35 and

45
∴ P(Age > 45yrs) = 0.5000 – 0.4772
= 0.0228