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Introduction to Statistics Concepts

The document introduces statistics as the science of collecting, organizing, analyzing, and interpreting data, emphasizing its importance in making informed decisions. It differentiates between descriptive and inferential statistics, outlines types of variables, and explains levels of measurement. Additionally, it highlights the ethical practice of statistics and the role of business analytics in data analysis.

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0% found this document useful (0 votes)

8 views414 pages

Introduction to Statistics Concepts

Uploaded by

nonioalojan

We take content rights seriously. If you suspect this is your content, claim it here.

Available Formats

Download as PDF, TXT or read online on Scribd

Because learning changes everything.

Chapter 1

What is Statistics?

© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
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‫ﻗﻨﺎة ﺑﻄﻪ ﻟﻠﺘﺤﻀﻴﺮي ﻣﻬﻢ ﺗﺪﺧﻠﻮﻧﻬﺎ ﺑﻌﺪ‬

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‫ﺻﻤﻢ ﺑﻮاﺳﻄﺔ‬
‫ُ‬
Learning Objectives

L O1-1 Explain why knowledge of statistics is important.

L O1-2 Define statistics and provide an example of how
statistics is applied.
L O1-3 Differentiate between descriptive and inferential
statistics.
L O1-4 Classify variables as qualitative or quantitative, and
discrete or continuous.
L O1-5 Distinguish between nominal, ordinal, interval, and
ratio levels of measurement.
L O1-6 List the values associated with the practice of
statistics.

Data are collected everywhere

and require statistical
knowledge to make the
information useful.
Statistics is used to make
valid comparisons and to
predict the outcomes of
decisions.
Statistical knowledge is useful
in any career.

Access the text alternative for slide images.

© McGraw Hill 3
What is Meant by Statistics
Statistics The science of collecting, organizing,
presenting, analyzing, and interpreting data to assist in
making more effective decisions.

Example: The inflation rate for the calendar year was 5.4%.

We could compare this year’s inflation rate to past

observations of inflation.
Is it higher, lower, or about the same?
Is there a trend of increasing or decreasing inflation?
Is there a relationship between interest rates and
government bonds?

There are two types of statistics: descriptive and inferential.

Descriptive statistics can be used to organize data into a meaningful
form.
You can summarize data and provide information that is easy to
understand.

Descriptive Statistics Methods of organizing, summarizing, and

presenting data in an informative way.
Example: There are a total of 46,837 miles of interstate highways in the
U.S.
The interstate system represents 1% of the nation’s roads but carries
more than 20% of the traffic.
Texas has the most interstate highways and Alaska doesn’t have any.

Inferential statistics can be used to estimate properties of a

population.
You can make decisions based on a limited set of data.

Inferential Statistics The methods used to estimate a property of

a population on the basis of a sample.
Example: In 2021, a vaccination for COVID-19 was freely available.
To determine who did not get the vaccine, random samples of
people were selected and surveyed.
What is the proportion of people that did not get the vaccine?

Population The entire set of individuals or objects of interest

or the measurements obtained from all individuals or objects
of interest.
Sample A portion or part of the population of interest.

Access the text alternative for slide images.

There are two basic types of variables.

Qualitative Variable An object or individual is observed and
recorded as a non-numeric characteristic or attribute.
Examples: Gender, state of birth, eye color.

Quantitative Variable A variable that is reported

numerically.
Examples: Balance in your checking account, the life of a car
battery, the number of people employed by a company.

Access the text alternative for slide images.

Quantitative variables can be discrete or continuous.

Discrete variables are typically the result of counting.
Values have “gaps” between the values.
Examples: The number of bedrooms in a house (1, 2, 3, 4,
etcetera), the number of students in a statistics course (326,
421, etcetera).

Continuous variables are usually the result of measuring

something.
Can assume any value within a specific range.
Examples: Duration of flights from Orlando to San Diego (5.25
hours), grade point average (3.258).

There are four levels of measurement.

The level of measurement determines the type of

statistical analysis that can be performed.
Access the text alternative for slide images.
© McGraw Hill 11
Levels of Measurement 2

Nominal is the lowest level of measurement.

Nominal Level Of Measurement Data recorded at the
nominal level of measurement is represented as labels or
names. They have no order. They can only be classified and
counted.

Examples: Classifying M&M candies by color, identifying

students at a football game by gender.

The next higher level of measurement is the ordinal level.

Ordinal Level Of Measurement Data recorded at the
ordinal level of measurement is based on a relative ranking
or rating of items based on a defined attribute or qualitative
variable. Variables based on this level of measurement are
only ranked and counted.

Examples: The list of top ten states for best business

climate, student ratings of professors.

The next higher level of measurement is the interval level.

This data has all the characteristics of ordinal level data.
Plus the differences between the values are meaningful.
There is no natural 0 point.

Interval Level of Measurement For data recorded at the

interval level of measurement, the interval or the distance
between values is meaningful. The interval level of
measurement is based on a scale with a known unit of
measurement.

Examples: The Fahrenheit temperature scale, dress sizes.

The highest level of measurement is the ratio level.

The data has all the characteristics of the interval scale
and ratios between numbers are meaningful.
The 0 point represents the absence of the characteristic.

Ratio Level of Measurement Data recorded at the ratio

level of measurement are based on a scale with a known
unit of measurement and a meaningful interpretation of
zero on the scale.

Examples: Wages, changes in stock prices, and height.

Practice statistics with integrity and honesty when

collecting, organizing, summarizing, analyzing, and
interpreting numerical information.
Maintain an independent and principled point of view when
analyzing and reporting findings and results.
Question reports that are based on data that:
Do not fairly represent the population.
Do not include all relevant statistics.
Introduces bias in an attempt to mislead or misrepresent.

Business Analytics is used to process and analyze data and

information to support a story or narrative of a company.
Use computer software to summarize, organize, analyze, and present
the findings of statistical analysis is essential.

Access the text alternative for slide images.

© McGraw Hill 18
Question 1 L O1-
5
What is the level of measurement for each of the following
variables?
a. Student I Q ratings.
b. Distance students travel to class.
c. The jersey numbers of a sorority soccer team.
d. A student’s state of birth.
e. A student’s academic class – that is, freshman,
sophomore, junior, or senior.
f. Number of hours students study per week.

© McGraw Hill 19
Question 13 L O1-
4,5
For each of the following, determine whether the variable is
continuous or discrete, quantitative or qualitative, and level of
measurement.
a. Salary.
b. Gender.
c. Sales volume of MP3 players.
d. Soft drink preference.
e. Temperature.
f. S A T scores.
g. Student rank in class.
h. Rating of a finance professor.
I. Number of home video screens.

Because learning changes

everything.®

[Link]

© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Accessibility Content: Text Alternatives for Images

A graphical display is titled DOMO Data Never Sleeps 9.0. A

passage is shown under the question How much data is
generated every minute? Segments around a circle labeled,
Every 1 minute of the day, read as follows: Google, 5.7
million. Discord, 668 k. Message, 12 million. Clubhouse, 208.
Snapchat, 2 million. Amazon, 283 k dollars. Online, 6 million.
Strava, 1.5 k. Instacart, 67 k dollars. Venmo, 304 k dollars.
Slack, 148 k. Zoom, 856. Teams, 100 k. Netflix, 452 k.
YouTube, 694 k. Facebook, 44 million. Facebook, 240 k.
Instagram, 65 k. Twitter, 575 k. Tiktok, 167 million. Below the
graphical display, global Internet population growth is shown
for the years 2016, 2018, 2020, and 2021.

Return to parent-slide containing images.

The graphic shows a population that consists of many

images of S U V’s. Off to the side is a smaller image that
contains a selection of 6 S U V’s selected from the
population. Those selected S U V’s constitute the
sample.

Return to parent-slide containing images.

The heading of this diagram is Types of variables. Two lines

extending from this heading show that there are two types of
variables: Qualitative variables and quantitative variables.
Examples of qualitative variables are brand of PC, marital
status, and hair color. Quantitative variables can be broken
down into discrete variables or continuous variables.
Examples of discrete quantitative variables are number of
children in a family, strokes on a golf hole, TV sets owned.
Examples of continuous quantitative variables are amount of
income tax paid, weight of a student, and yearly rainfall in
Tampa, Florida.

Return to parent-slide containing images.

Heading is levels of measurement. The 4 levels of

measurement are shown below as nominal, ordinal,
interval, and ratio. Nominal data may only be classified
such as jersey numbers of football players or make of
car. Ordinal data are ranked such as your rank in class
or team standings in the southeastern conference.
Interval data has a meaningful difference between
values such as temperature or dress size. Ratio data
has a meaningful zero point and ratio between values
such as profit, fuel efficiency, or distance to class.

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Age, profit, location, vehicle type, and previous are the column heads in columns
A through E of row 1. The row entries are as follows from rows 2 to 15: Row 2:
51, 2,236 dollars, Tionesta, sedan, and 2. Row 3: 40, 1,144 dollars, Tionesta,
Truck, and 0. Row 4: 48, 1,295 dollars, Sheffield, sedan, and 1. Row 5: 39, 996
dollars, Kane, Compact, and 2. Row 6: 31, 2,415 dollars, Kane, S U V, and 0.
Row 7: 50, 842 dollars, Kane, sedan, and 0. Row 8: 48, 2,070 dollars, Kane,
sedan, and 1. Row 9: 47, 3,292 dollars, Olean, S U V, and 2. Row 10: 40, 1,961
dollars, Sheffield, S U V, and 1. Row 11: 46, 1,818 dollars, Kane, sedan, and 0.
Row 12: 38, 1,766 dollars, Sheffield, sedan, and 0. Row 13: 72, 1,821 dollars,
Tionesta, sedan, and 1. Row 14: 40, 352 dollars, Sheffield, Compact, and 0. Row
15: 62, 1,538 dollars, Olean, Truck, and 1. Under the head Profit, the following
values are shown in column H from rows 3 through 15: Mean, 1,843.17. Standard
error, 47.97. Median, 1,882.50. Mode, 1,761.00. Standard deviation, 643.63.
Sample variance, 414,256.60. Kurtosis, negative 0.22. Skewness, negative 0.24.
Range, 2998. Minimum, 294. Maximum, 3292. Sum, 331770. Count, 180.

Return to parent-slide containing images.

Chapter 2
Describing Data: Frequency Tables,
Frequency Distributions, and Graphic
Presentation

© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Learning Objectives

L O2-1 Summarize qualitative variables with frequency and

relative frequency tables.
L O2-2 Display a frequency table using a bar or pie chart.
L O2-3 Summarize quantitative variables with frequency and
relative frequency distributions.
L O2-4 Display a frequency distribution using a histogram or
frequency polygon.

Frequency Table A grouping of qualitative data into mutually

exclusive and collectively exhaustive classes showing the
number of observations in each class.

Mutually exclusive: Each observation in only one class.

Collectively exhaustive: There is a class for each value.

1. Sort the data into classes.

2. Count the number in each class.
3. Report as the class frequency.

Example: Car sales by location.

Location Number of Cars
Kane 52
Olean 40
Sheffield 45
Tionesta 43
Total 180

Convert each frequency to a relative frequency.

Shows the fraction of the total number observations in each class.
Each of the class frequencies is divided by the total number of
observations.
Captures the relationship between a class frequency and the total
number of observations.
Example: Car sales by location.

Location Number of Cars Relative Frequency Found by

Kane 52 .289 52/180
Olean 40 .222 40/180
Sheffield 45 .250 45/180
Tionesta 43 .239 43/180
Total 180 1.000

Bar Chart A graph that shows the qualitative classes on the

horizontal axis and the class frequencies on the vertical axis.
The class frequencies are proportional to the heights of the
bars.

A bar chart is the most common graphic to present a

qualitative variable.
Describes a frequency table using a series of uniformly
wide rectangles.
The height of each rectangle is the class frequency.
Mode: The class with the highest frequency.

For a nominal variable, the order of the classes does not

matter.
You can order the classes by decreasing or increasing
order.
Example: Car sales by location.

Access the text alternative for slide images.

Pie Chart A chart that shows the proportion or percentage

that each class represents of the total number of
frequencies.
Example: Car sales by location.

Vehicle Type Number Sold Percent Sold

SUV 72 40
Sedan 54 30
Compact 27 15
Truck 18 10
Hybrid 9 5
Total 180 100

Frequency Distribution A grouping of quantitative data into

mutually exclusive and collectively exhaustive classes
showing the number of observations in each class.

Step 1: Decide on the number of classes.

Step 2: Determine the class interval (same for all classes).
Step 3: Set the individual class limits.
Step 4: Tally the data into classes and determine the
number of the observations in each class.

Example: Profit on vehicles sold last month.

Table 2-4 Profit on Vehicles Sold Last Month by the Applewood Auto Group.

Maximum

$1,387 $2,148 $2,201 $ 963 $ 820 $2,230 $3,043 $2,584 $2,370

1,754 2,207 996 1,298 1,266 2,341 1,059 2,666 2,637

1,817 2,252 2,813 1,410 1,741 3,292 1,674 2,991 1,426

1,040 1,428 323 1,553 1,772 1,108 1,807 934 2,944
1,273 1,889 352 1,648 1,932 1,295 2,056 2,063 2,147

1,529 1,166 482 2,071 2,350 1,344 2,236 2,083 1,973

3,082 1,320 1,144 2,116 2,422 1,906 2,928 2,856 2,502

1,951 2,265 1,485 1,500 2,446 1,952 1,269 2,989 783

2,692 1,323 1,509 1,549 369 2,070 1,717 910 1,538

1,206 1,760 1,638 2,348 978 2,454 1,797 1,536 2,339

1,342 1,919 1,961 2,498 1,238 1,606 1,955 1,957 2,700

443 2,357 2,127 294 1,818 1,680 2,199 2,240 2,222

754 2,866 2,430 1,115 1,824 1,827 2,482 2,695 2,597

1,621 732 1,704 1,124 1,907 1,915 2,701 1,325 2,742
870 1,464 1,876 1,532 1,938 2,084 3,210 2,250 1,837

1,174 1,626 2,010 1,688 1,940 2,639 377 2,279 2,842

1,412 1,762 2,165 1,822 2,197 842 1,220 2,626 2,434

1,809 1,915 2,231 1,897 2,646 1,963 1,401 1,501 1,640

2,415 2,119 2,389 2,445 1,461 2,059 2,175 1,752 1,821

1,546 1,766 335 2,886 1,731 2,338 1,118 2,058 2,487

Minimum

Step 1: Decide on the number of classes.

Use the rule, where n = 180.
k is the number of classes.
n is the number of values in the data set.

let k = 8.
So use 8 classes.

Step 2: Determine the class interval.

The classes all taken together must cover the distance
from the minimum to the maximum.

The class interval:

round up to $400.

Use this class interval width for all intervals.

Step 3: Set the individual class limits.

Classes
$ 200 up to $ 600
600 up to 1,000
1,000 up to 1,400
1,400 up to 1,800
1,800 up to 2,200
2,200 up to 2,600
2,600 up to 3,000
3,000 up to 3,400

Step 4: Tally the data into classes and determine the number
of the observations in each class.

Profit Frequency
$ 200 up to $ 600 8
600 up to 1,000 11
1,000 up to 1,400 23
1,400 up to 1,800 38
1,800 up to 2,200 45
2,200 up to 2,600 32
2,600 up to 3,000 19
3,000 up to 3,400 4
Total 180

To find the relative frequencies, take the class frequency

and divide by the total number of observations.
Example: Profit on vehicles sold last month.

Profit Frequency Relative Frequency Found by

$ 200 up to $ 600 8 .044 8/180
600 up to 1,000 11 .061 11/180
1,000 up to 1,400 23 .128 23/180
1,400 up to 1,800 38 .211 38/180
1,800 up to 2,200 45 .250 45/180
2,200 up to 2,600 32 .178 32/180
2,600 up to 3,000 19 .106 19/180
3,000 up to 3,400 4 .022 4/180
Total 180 1.000

© McGraw Hill 16
Graphic Presentation of a Frequency
Distribution 1
Histogram A graph in which the classes are marked on the
horizontal axis and the class frequencies on the vertical axis.
The class frequencies are represented by the heights of the
bars, and the bars are drawn adjacent to each other.

A histogram shows the shape of a distribution.

Each class is depicted as a rectangle.
The height of the bar representing the number in each
class.

© McGraw Hill 17
Graphic Presentation of a Frequency
Distribution 2
Example: Profit on vehicles sold last month.
Profit Frequency
$ 200 up to $ 600 8
600 up to 1,000 11
1,000 up to 1,400 23
1,400 up to 1,800 38
1,800 up to 2,200 45
2,200 up to 2,600 32
2,600 up to 3,000 19
3,000 up to 3,400 4
Total 180

Access the text alternative for slide images.

© McGraw Hill 18
Graphical Presentation of a Frequency
Distribution 1
A frequency polygon also shows the shape of a
distribution.
Consists of line segments connecting the points formed
by connecting the class midpoints.
Gives a quick picture of the main characteristics of the
data.
Good to use when comparing two or more distributions.

© McGraw Hill 19
Graphical Presentation of a Frequency
Distribution 2
Example: Profit on vehicles sold last month.
Profit Midpoint Frequency
$ 200 up to $ 600 $ 400 8
600 up to 1,000 800 11
1,000 up to 1,400 1,200 23
1,400 up to 1,800 1,600 38
1,800 up to 2,200 2,000 45
2,200 up to 2,600 2,400 32
2,600 up to 3,000 2,800 19
3,000 up to 3,400 3,200 4
Total 180

Access the text alternative for slide images.

© McGraw Hill 21
Cumulative Frequency and Relative
Frequency Distributions 1
Cumulative frequency distribution: Add each frequency
to the frequencies before it.
Cumulative relative frequency distribution: Divide the
cumulative frequencies by the total number of
observations.
This shows how many values have accumulated as you
move from one class down to the next class.

© McGraw Hill 22
Cumulative Frequency and Relative
Frequency Distributions 2
Example: Profit on vehicles sold last month.
Cumulative
Profit Frequency Profit Found by
Frequency
$ 200 up to $ 600 8 Less than $ 600 8 8

600 up to 1,000 11 Less than 1,000 19 8+11

1,000 up to 1,400 23 Less than 1,400 42 8+11+23

1,400 up to 1,800 38 Less than 1,800 80 8+11+23+38

1,800 up to 2,200 45 Less than 2,200 125 8+11+23+38+45

2,200 up to 2,600 32 Less than 2,600 157 8+11+23+38+45+32

2,600 up to 3,000 19 Less than 3,000 176 8+11+23+38+45+32+19

8+11+23+38+45+32+19+
3,000 up to 3,400 4 Less than 3,400 180
4
Total 180

© McGraw Hill 23
Cumulative Frequency and Relative
Frequency Distributions 3
Example continued.
Profit Cumulative Frequency Cumulative Relative Frequency
Less than $ 600 8 8/180 = 0.044 = 4.4%
Less than 1,000 19 19/180 = 0.106 = 10.6%
Less than 1,400 42 42/180 = 0.233 = 23.3%
Less than 1,800 80 80/180 = 0.444 = 44.4%
Less than 2,200 125 125/180 = 0.694 = 69.4%
Less than 2,600 157 157/180 = 0.872 = 87.2%
Less than 3,000 176 176/180 = 0.978 = 97.8%
Less than 3,400 180 180/180 = 1.000 = 100%

© McGraw Hill 24
Cumulative Frequency and Relative
Frequency Distributions 4
Example: Profit on vehicles sold last month.

Access the text alternative for slide images.

© McGraw Hill 26
Question 5 L O2-
2
Wellstone Inc. produces and markets replacement covers for cell phones
in five different colors: bright white, metallic black, magnetic lime,
tangerine orange, and fusion red. To estimate the demand for each color,
the company set up a kiosk for several hours in the Mall of America and
asked randomly selected people which cover color was their favorite.

a. What is the table called? Bright white 130

b. Draw a bar chart for the table. Metallic black 104
c. Draw a pie chart.
Magnetic lime 325
d. If Wellstone Inc. plans to produce
one million cell phone covers, how Tangerine orange 455

many of each color should it produce? Fusion red 286

© McGraw Hill 27
Question 11 L O2-
3
Wachesaw Manufacturing Inc. produced the following number of units in
the last 16 days.

27 27 27 28 27 25 25 28
26 28 26 28 31 30 26 26

The information is to be organized into a frequency distribution.

a. How many classes would you recommend?
b. What class interval would you suggest?
c. What lower limit would you recommend for the first class?
d. Organize the information into a frequency distribution and determine
the relative frequency distribution.
e. Comment on the shape of the distribution.

© McGraw Hill 28
Question 17 L O2-
4
The following frequency distribution reports the number of frequent flier miles,
reported in thousands, for employees of Brumley Statistical Consulting Inc. during
the most recent quarter.
Frequent Filer Miles (000) Number of Employees
0 up to 3 5
3 up to 6 12
6 up to 9 23
9 up to 12 8
12 up to 15 2
Total 50

a. How many employees were studied?

b. What is the midpoint of the first class? What lower limit would you
recommend for the first class?
c. Construct a histogram.
d. A frequency polygon is to be drawn. What are the coordinates of the plot for
the first class?
e. Construct a frequency polygon.
f. Interpret the frequent flier miles accumulated using the two charts.

Because learning changes

everything.®

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© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Accessibility Content: Text Alternatives for Images

A vertical bar graph shows car sales by location. The

horizontal axis represents location and the vertical axis
represents number of vehicles sold ranging from 0 to 50 in
increments of 10. The data of the graph are shown as
follows: Kane, 52. Sheffield, 45. Tionesta, 43. Olean, 40. All
data are approximate.

Return to parent-slide containing images.

© McGraw Hill 32
Graphic Presentation of a Frequency Distribution 2
– Text Alternative
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A histogram shows the frequency of different profit ranges.

The horizontal axis represents profit in dollars. The vertical
axis represents frequency ranging from 0 to 50 in increments
of 10. The data are shown as follows: 200 to 600 dollars, 8.
600 to 1,000 dollars, 11. 1,000 to 1,400 dollars, 23. 1,400 to
1,800 dollars, 38. 1,800 to 2,200 dollars, 45. 2,200 to 2,600
dollars, 32. 2,600 to 3,000 dollars, 19. 3,000 to 3,400 dollars,
4.

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© McGraw Hill 33
Graphical Presentation of a Frequency
Distribution 2 – Text Alternative
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A line graph shows the frequency of different profits. The

horizontal axis represents profit in dollars ranging from 0
to 3,600 dollars in increments of 400 dollars. The vertical
axis represents frequency ranging from 0 to 48 in
increments of 8. The line passes through the following
coordinates: (0, 0), (400, 8), (800, 11), (1,200, 23),
(1,600, 38), (2,000, 45), (2,400, 32), (2,800, 19), (3,200,
4), and (3,600, 0).

Return to parent-slide containing images.

© McGraw Hill 34
Graphical Presentation of a Frequency
Distribution 3 – Text Alternative
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A line graph shows the frequency of different profits. The horizontal

axis represents profit in dollars ranging from 0 to 3,600 dollars in
increments of 400 dollars. The vertical axis represents frequency
ranging from 0 to 56 in increments of 8. The line representing
Applewood passes through the following coordinates: (0, 0), (400,
8), (800, 11), (1,200, 23), (1,600, 38), (2,000, 45), (2,400, 32),
(2,800, 19), (3,200, 4), and (3,600, 0). Another line representing
Fowler Motors passes through the following coordinates: (800, 0),
(1,200, 8), (1,600, 32), (2,000, 38), (2,400, 50), (2,800, 32), (3,200,
16), and (3,600, 0). All data are approximate.

Return to parent-slide containing images.

© McGraw Hill 35
Cumulative Frequency and Relative Frequency
Distributions 4 – Text Alternative
Return to parent-slide containing images.

The horizontal axis represents profit in dollars ranging from 200 to

3,400 in increments of 400 dollars. The left vertical axis represents
number of vehicles sold ranging from 0 to 180 in increments of 20.
The right vertical axis represents percent of vehicles sold ranging
from 0 to 100 in increments of 25. The cumulative frequency
polygon begins at the point (200, 0) and connect the following
points: (600, 8), (1,000, 19), (1,400, 42), (1,800, 80), (2,200, 125),
(2,600, 157), (3,000, 176), and (3,400, 180). There are three
directional lines in the graph showing that 60 vehicles were sold at
a profit of 1,600 dollars or less. Also a profit of 2,000 dollars or less
was made in about 52 percent of the vehicles sold. The 70 fifth
percentile was also 2,300 dollars. All data are approximate.

Return to parent-slide containing images.

Chapter 3

Describing Data: Numerical Measures

© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Learning Objectives

L O3-1 Compute and interpret the mean, the median, and the
mode.
L O3-2 Compute a weighted mean.
L O3-3 Compute and interpret the geometric mean.
L O3-4 Compute and interpret the range, variance, and
standard deviation.
L O3-5 Explain and apply Chebyshev’s theorem and the
Empirical Rule.

© McGraw Hill LLC 2

Measures of Location

A measure of location is a value used to describe the central

tendency of a set of data.
Common measures of location.
Mean.
Median.
Mode.

The arithmetic mean is the most widely reported measure of

location.
The mean is both a population parameter and sample
statistic.

© McGraw Hill LLC 3

Population Mean 1

Many studies involve all the individuals in a population.

When the values are not summarized in a frequency distribution,

is the mean.
N is the number of values in the population.
x is any particular value.

is “sigma” and indicates the operation is adding.

is the sum of the values.

Parameter A characteristic of a population.

The mean, of a population is a parameter.

© McGraw Hill LLC 4

Population Mean 2

Example: There are 46 exits on I-75 through the state of

Kentucky, here are the distances between exits (in miles).
11 4 10 4 9 3 8 10 3 14 1 6
4 3 5 2 2 5 4 2 3 2 5 5
1 1 2 7 8 10 2 3 7 5 4 3
2 1 1 2 1 1 2 1 2 1

Why is this information a population?

What is the mean number of miles between exits?

© McGraw Hill LLC 5

Population Mean 3

Example continued
11 4 10 4 9 3 8 10 3 14 1 6
4 3 5 2 2 5 4 2 3 2 5 5
1 1 2 7 8 10 2 3 7 5 4 3
2 1 1 2 1 1 2 1 2 1

This is a population because we are considering all the

exits on I-75 and the distances between them

© McGraw Hill LLC 6

Sample Mean 1

We select a sample from the population to estimate a specific

characteristic.

The sample mean is

is read
n is the number of values in the sample.
x is any particular value.

is “sigma” and indicates the operation is adding.

is the sum of the values.

Statistic A characteristic of a sample.

The sample mean is a statistic.

© McGraw Hill LLC 7

Sample Mean 2

Example: The number of hours per day that Verizon

customer use their mobile phones.

4.1 3.7 4.3 4.2 5.5 51

4.2 5.1 4.2 4.6 5.2 3.8

What is the arithmetic mean number of hours per day used?

© McGraw Hill LLC 8

The Mean

Interval or ratio scale of measurement is required.

All the data values are used in the calculation.
The mean is unique.
The sum of the deviations from the mean equals zero.
A weakness of the mean is that it is affected by extreme
values (large or small).

Access the text alternative for slide images.

© McGraw Hill LLC 9

The Median 1

For data containing extreme values, the mean may not

fairly represent the central location.
Median The midpoint of the values after they have been
ordered from the minimum to the maximum values.
Example: The median price of housing units.

Price Ordered from Price Ordered from

Minimum to Maximum Maximum to Minimum
$60,000 $275,000
65,000 80,000
70,000 ← Median → 70,000
80,000 65,000
275,000 60,000

© McGraw Hill LLC 10

The Median 2

The median is the value in the middle of a set of ordered

data.
At least the ordinal scale of measurement is required.
It is not influenced by extreme values.
Fifty percent of the observations are larger than the
median.
Fifty percent of the observations are smaller than the
median.
It is unique to a set of data.

© McGraw Hill LLC 11

The Median 3

Odd numbered data: The median is the middle value

Even numbered data: The median is the average of the two
middle values.
Example: The number of hours a sample of 10 adults used
Facebook last month.
Unsorted data: 3 5 7 5 9 1 3 9 17 10
Sorted data: 1 3 3 5 5 7 9 9 10 17
The median is 6

© McGraw Hill LLC 12

The Mode

MODE The value of the observation that occurs most

frequently.
The mode can be found for nominal level data.
A set of data can have more than one mode.
A set of data could have no mode.
Example: The number of respondents that favor bath oils.

Access the text alternative for slide images.

© McGraw Hill LLC 14

The Weighted Mean 1

The weighted mean is found by multiplying each observation by its

corresponding weight.
A convenient way to compute the mean when there are several
observations with the same value.

The denominator is always the sum of the weights.

© McGraw Hill LLC 15

The Weighted Mean 2

Example: The Carter Construction Company pays its

hourly employees $16.50, $19.00, or $25.00 per hour.
There are 26 hourly employees: 14 are paid at the $16.50
rate, 10 at the $19.00 rate, and 2 at the $25.00 rate.
What is the mean hourly rate paid for the 26 employees?

© McGraw Hill LLC 16

The Geometric Mean 1

The geometric mean is useful in finding average rates of

change over time.
The rates can be expressed as percentages (or ratios).

A percentage change is always 1.0 + change

Wide applications in business and economics (example
G D P).
The geometric mean will always be no more than the
arithmetic mean.
The data values must be positive.

© McGraw Hill LLC 17

The Geometric Mean 2

Example: The R I O earned by a company for four

consecutive years: 30%, 20%, −40% and 200%.

The R I O is 29.4%.
Note if you compute the arithmetic mean it would be
52.5%.
This would overstate the true rate of return.

© McGraw Hill LLC 18

The Geometric Mean 3

A second application of the geometric mean is based on

the beginning and ending values over a specified time
period.

Example: You earned $45,000 in 2010 and $100,000 in

2022.

© McGraw Hill LLC 19

Why Study Dispersion? 1

Measures of location only describe the center.

Do not describe the spread or variation.
The dispersion is the variation or spread in a set of data.
Study dispersion to compare the spread in two or more
distributions.
Measures of dispersion include.
Range.
Variance.
Standard Deviation.

© McGraw Hill LLC 20

Why Study Dispersion? 2

Example: Hourly production at two computer monitor

plants.

Access the text alternative for slide images.

© McGraw Hill LLC 21

Range

The simplest measure of dispersion is range.

Range = Maximum value − Minimum value.
Only two values are used in its calculation.
It is influenced by extreme values.
It is easy to compute and to understand.

Example: Hourly production at two

computer monitor plants.
Baton Rouge: 52 − 48 = 4.
Tucson: 60 − 40 = 20.

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© McGraw Hill LLC 22

Population Variance 1

The range is based on only two numbers.

The variance measures how much the values vary from their mean.
The mean squared deviation from the mean.
Units are the units of measurement squared.

is lower case Greek “sigma squared”.

X is the value of a particular observation.
is the population mean.

N is number of observations in the population.

© McGraw Hill LLC 23

Population Variance 2

The process for computing the mean is implied by the

formula.
1. Begin by finding the mean.
2. Find the difference between each observation and the
mean, square that difference.
3. Sum all the squared differences.
4. Divide the sum of the squared differences by the number
of items in the population.

© McGraw Hill LLC 24

Population Variance 3

Example: The number of traffic citations.

Citations by Month
January February March April May June July August September October November December
19 17 22 18 28 34 45 39 38 44 34 10

© McGraw Hill LLC 25

Population Variance 4
Citations

Month (x) (x−μ) (x−μ)²

January 19 −10 100

February 17 −12 144

Units are citations squared!
March 22 −7 49

April 18 −11 121

May In the following

28 table,
−1 1
read ‘(x − μ)’ as x minus
mu and (x − μ)2 as open
June paren x34 5
minus mu close 25
paren squared.
August 39 10 100

September 38 9 81

October 44 15 225

November 34 5 25

December 10 −19 361

Total 348 0 1,488

© McGraw Hill LLC 26

Standard Deviation

The units of the variance is the units of measure squared.

The variance is difficult to interpret.
The standard deviation is the square root of the variance.

Example: The number of traffic citations.

The variance is 124
The standard deviation is 11.14 citations.

© McGraw Hill LLC 27

Sample Variance and Standard Deviation
1
The sample variance and standard deviation uses the sample.

mean,

Using n in the denominator tends to underestimate the

population variance.
Using n − 1 provides an appropriate correction.

The units of the variance is the units of measurement

squared.

© McGraw Hill LLC 28

Sample Variance and Standard Deviation
2
Example: The hourly wages for part-time employees are $12, $20, $16,
$18 and $19.

Hourly Wage (x) x−X (x − X)²

$12 −$5 25
20
16
18
19
$85 3
−1
1
2
0 9
1
4
40
In the following table, read ‘x − x¯’ as x
minus x bar and (x − x¯)2 as open paren x
minus x bar close paren squared.

dollars squared

𝑠 = 3.16 dollars.

© McGraw Hill LLC 29

Interpretations and Uses of the Standard
Deviation 1
The standard deviation is to compare the spread of two or more sets of
observations.
Small: The values are close to the mean.
Large: The values are widely scattered about the mean.

Chebyshev’s theorem defines the dispersion of data around the mean.

For any set of observations, the proportion of values within 𝑘 standard deviations

is at least

k = 2 then at least 75% of the observation are within 2 standard

deviation of the mean.

k = 3 then at least 88.9% of the observation are within 3 standard

deviation of the mean.

© McGraw Hill LLC 30

Interpretations and Uses of the Standard
Deviation 2
Example: Employees at a company contribute a mean of $51.54 to the
company profit-sharing plan every 2 weeks.
The standard deviation is $7.51.
At least what proportion of employees make a contribution within 3.5
standard deviations of the mean?
3.5 standard deviations of the mean is a range of values.
51.54 − 3.5×7.51 = $25.26
51.54 + 3.5×7.51 = $77.83

k = 3.5 then

At least 92% of the employees contribute between $25.26 and $77.83.

© McGraw Hill LLC 31

Interpretations and Uses of the Standard
Deviation 3
Chebyshev’s theorem is for any set of values regardless of
the shape of the distribution.
If the data have a symmetrical and bell-shaped distribution,
we can be more precise without the “at least”.
The Empirical Rule or Normal Rule provides an
approximation.
1 standard deviation of the mean: about 68% of values.
2 standard deviations of the mean: about 95% of values.
3 standard deviations of the mean: about 99% of values.

© McGraw Hill LLC 32

Interpretations and Uses of the Standard
Deviation 4
Example: A mean of 100 and a standard deviation of 10.

Access the text alternative for slide images.

© McGraw Hill LLC 33

Interpretations and Uses of the Standard
Deviation 5
Example: Rental rates are approximately symmetric and
bell shaped. The mean is $500 and the standard deviation
is $20.
About 68%: 500 ± 1×20 = $480 to $520.
About 95%: 500 ± 2×20 = $460 to $540.
About 99%: 500 ± 3×20 = $440 to $560.

© McGraw Hill LLC 34

Ethics and Reporting Results

Useful to know the advantages and disadvantages of

mean, median, and mode as we report statistics and as we
use statistics to make decisions.
Similarly for measures of dispersion.
Important to maintain an independent and principled point
of view.
Statistical reporting requires objective and honest
communication of any results.

© McGraw Hill LLC 35

Chapter 3 Practice Problems

© McGraw Hill LLC 36

Question 19 L O3-
1
The accounting firm of Rowatti and Koppel specializes in
income tax returns for self-employed professionals, such as
physicians, dentists, architects, and lawyers. The firm
employs 11 accountants who prepare the returns. For last
year, the number of returns prepared by each accountant
was:
58 75 31 58 46 65 60 71 45 58 80

Find the mean, median, and mode for the number of returns
prepared by each accountant. If you could report only one,
which measure of location would you recommend reporting?

© McGraw Hill LLC 37

Question 25 L O3-
2
The Loris Healthcare System employs 200 persons on the
nursing staff. Fifty are nurse’s aides, 50 are practical nurses,
and 100 are registered nurses. Nurse’s aides receive $12 an
hour, practical nurses $20 an hour, and registered nurses
$29 an hour. What is the weighted mean hourly wage?

© McGraw Hill LLC 38

Question 27 L O3-
3
Compute the geometric mean of the following monthly
percent increases: 8, 12, 14, 26, and 5.

© McGraw Hill LLC 39

Question 35 L O3-
3
In 2010 there were 232.2 million cell phone subscribers in the
United States. By 2020 the number of subscribers increased
to 276.7 million.
a. What is the geometric mean annual percent increase for
the period?
b. Further, the number of subscribers is forecast to increase
to 276.7 million by 2020.
c. What is the rate of increase from 2010 to 2020?
d. Is the rate of increase expected to slow?

© McGraw Hill LLC 40

Question 39 L O3-
1,4
Dave’s Automatic Door installs automatic garage door
openers. The following list indicates the number of minutes
needed to install 10 door openers: 28, 32, 24, 46, 44, 40, 54,
38, 32, and 42.
Calculate the following:
a. Range
b. Mean
c. Variance

© McGraw Hill LLC 41

Question 47 L O3-
1,4
Plywood Inc. reported these returns on stockholder equity for
the past 5 years: 4.3, 4.9, 7.2, 6.7, and 11.6. Consider these
as population values.
Compute the following:
a. Range.
b. Arithmetic mean.
c. Variance.
d. Standard deviation.

© McGraw Hill LLC 42

Question 51 L O3-
4
Dave’s Automatic Door installs automatic garage door
openers. Based on a sample, following are the times, in
minutes, required to install 10 door openers: 28, 32, 24, 46,
44, 40, 54, 38, 32, and 42.
a. Compute the sample variance.
b. Determine the sample standard deviation.

© McGraw Hill LLC 43

Question 55 L O3-
5
According to Chebyshev’s theorem, at least what percent of
any set of observations will be within 1.8 standard deviations
of the mean?

© McGraw Hill LLC 44

Question 57 L O3-
5
The distribution of the weights of a sample of 1,400 cargo
containers is symmetric and bell-shaped. According to the
Empirical Rule, what percent of the weights will lie:

Between
Between

© McGraw Hill LLC 45

End of Main Content

Because learning changes

everything.®

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Accessibility Content: Text Alternatives for Images

© McGraw Hill LLC 47

Sample Mean 3 – Text Alternative
Return to parent-slide containing images.

This graphic has a base that is an isosceles triangle, labeled x-bar. The
triangle is balancing a number line that looks like a ruler. The vertex of
the x-bar triangle is at the value 4. There are blocks on top of the number
line at the values of 1, 3 and 8. There are also lines indicating how far
each block is away from the mean. The block located at 1 is three units to
the left of the mean, so an arrow is labeled with the value negative 3. The
block at 3 is one unit to the left of the mean, so an arrow is labeled with
the value negative 1. The block at 8 is 4 units to the right of the mean, so
an arrow is labeled with the value positive 4.

Return to parent-slide containing images.

The horizontal axis is labeled “bath oil” and the vertical axis is
labeled number of responses and ranges from 0 to 400. It
has bars for five type of oils. The Lamoure oil is the most
popular among the number of respondents and is the mode,
and ranges about 360 responses, the soothing oil ranges
about 193 responses, the amor oil ranges about 120
responses, the lavender oil ranges about 90 responses, and
the rose oil is the least popular and ranges about 40
responses. All values are estimated.

Return to parent-slide containing images.

© McGraw Hill LLC 49
Relative Positions of Mean, Median, and
Mode – Text Alternative
Return to parent-slide containing images.

Three distribution curves are plotted for frequency versus x.

Graph 1 shows the mean median and mode is located at the
peak of the curve.
Graph 2 shows The median is located to the left of mode,
and the mean is located far towards the left tail.
Graph 3 curve shows the mode is located at the peak of the
curve. The median is located to the right of the mode, and
the mean is located far towards the right tail.

Return to parent-slide containing images.

The figure consists of two graphs, one number line for the Baton Rouge
plant which is vertically positioned over the number line for the Tucson
plant. The number lines are aligned so that the distribution of hourly
production can easily be compared. The average hourly production for
the Baton Rouge plant ranges from 48 to 52 computer monitors per hour
and is a perfectly symmetrical distribution that has a mean and median of
50 monitors per hour. The Tucson plant is also perfectly symmetric with a
mean and median of 50 monitors per hour, but hourly production ranges
from 40 to 60 monitors per hour showing much greater variability in
production at this plant.

Return to parent-slide containing images.

© McGraw Hill LLC 52
Interpretations and Uses of the Standard
Deviation 4 – Text Alternative
Return to parent-slide containing images.

This bell shaped curve has a mean, or center, of 100. So the value of 100 is
labeled in the center of the curve and a vertical dashed line is drawn at this value
to the peak of the curve. The other values labeled are 1, 2, and 3 standard
deviations to the right of the mean and 1, 2, and 3 standard deviations to the left
of the mean. So the values labeled and the vertical lines are drawn at the values
70, 80, 90, 100 (which is the mean), 110, 120, and 130.
A line is drawn from one standard deviation below to the mean to one standard
deviation above the mean (from the value of 90 to 110). This line is labeled with
68% indicating that 68% of values will fall within 1 standard deviation of the mean.
A line is drawn from two standard deviations below to the mean to two standard
deviation above the mean (from the value of 80 to 120). This line is labeled with
95% indicating that 95% of values will fall within 2 standard deviations of the
mean.
A line is drawn from three standard deviations below to the mean to three
standard deviation above the mean (from the value of 70 to 130). This line is
labeled with 99.7% indicating that 99.7% of values will fall within 3 standard
deviations of the mean.

Return to parent-slide containing images.

Chapter 5

A Survey of Probability Concepts

© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Learning Objectives

L O5-1 Define the terms probability, experiment, event, and

outcome.
L O5-2 Apply the classical approach to assign probabilities.
L O5-3 Determine the number of outcomes using principles of
counting.
L O5-4 Apply the empirical approach to assign probabilities.
L O5-5 Apply the subjective approach to assign probabilities.
L O5-6 Calculate probabilities using the rules of addition.
L O5-7 Calculate probabilities using the rules of multiplication.
L O5-8 Compute probabilities using a contingency table.
L O5-9 Calculate probabilities using Bayes’ theorem.

Probability A value between 0 and 1 inclusive that

represents the likelihood a particular event happens.

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Experiment A process that leads to the occurrence of one and

only one of several possible results.
Outcome A particular result of an experiment.
Event A collection of one or more outcomes of an experiment.

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Classical probability is based on the assumption that the

outcomes of an experiment are equally likely.

Example: Roll a six-sided die once. What is the probability

of obtaining even number?

A challenge is determine the values in the numerator and

denominator.
A small number of outcomes is easy to count.
If the experiment is complex, there are many possible
outcomes.
There are three formulas to help determine the number of
outcomes.
Multiplication formula.
Permutation formula.
Combination formula.

© McGraw Hill 6
Approaches to Assigning Probabilities 3
Suppose there are m possible outcomes of an event.
Suppose there are n possible outcomes for another event.
The total number of arrangements of the two outcomes is (n)
(m).
This can be extended to any number of events.
Example: Imagine a game called "Spin to Win" where you
have three dials, each labeled with the digits 0 to 9. You spin
each dial once, and the outcome is determined by the three
digits that land facing up. What is the number of possible
outcomes?

Suppose there is a single group.

We can determine the number of all possible
arrangements of an outcomes from the group.

Permutation Any arrangement of r objects selected from a

single group of n possible objects.

This formula is determined by the multiplication formula!

Example: A media company is producing a 1-minute ad

video.
In the production process, eight different video segments
were made.
They can only select three segments.
How many different ways can the eight video segments be
arranged?
n = 8, r = 3.

If the order of the selected objects is not important, any

arrangement is called a combination.
A B C is the same combination as B A C

The number of combinations is less than the number of

permutations.
Combination An event of outcomes when the order of the
outcomes does not matter.
The permutation formula overcounts the r ! permutations,
divide out the overcounting.

Example: The Grand 16 movie theater uses teams of

three employees to work the concession stand each
evening.
There are seven employees available to work.
How many different teams can be scheduled?

Empirical probability is the second type of probability.

It is based on observation, counting and recording
experimental outcomes.

Empirical Probability The probability of an event based on

a collection of observations or data.

An empirical probability is based on relative frequencies.

The empirical approach is based on the law of large numbers.

Law of Large Numbers Over a large number of trials, the
empirical probability of an event will approach its true probability.
The key is that more observations provide an accurate estimate
of the probability.

Number of Trials Number of Heads Relative Frequency of Heads

1 0 .00
10 3 .30
50 26 .52
100 52 .52
500 236 .472
1,000 494 .494
10,000 5,027 .5027

Example: The Standard & Poor’s (S&P) 500 stock index

was down four time over the course of the previous 20
years.
What is the probability that the index will be down next
year?
Let A represent the even of a negative yearly return.

If there is little or no experience on which to base a

probability, it is estimated subjectively.
An individual evaluates the available opinions and
information then assigns a probability.

Subjective Concept of Probability The likelihood

(probability) of a particular event happening that is
assigned by an individual based on whatever information
is available.

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Mutually Exclusive The occurrence of one event means that

none of the other events can occur at the same time.

Collectively Exhaustive At least one of the events must

occur when an experiment is conducted.

If events are mutually exclusive, the special rule of

addition is:
This works for any number of mutually exclusive events.

Example: A machine fills plastic bags with a mixture of beans,

broccoli, and other vegetables.
Most of the bags contain the correct weight.
Because of the variation in the size of the beans and other
vegetables, a package might be underweight or overweight.

Number of Probability of
Weight Event
Packages Occurrence
Underweight A 100 .025
Satisfactory B 3,600 .900
Overweight C 300 .075
4,000 1.000

What is the probability that a particular package will be either

underweight or overweight?
P (A or C ) = 0.025 +0.075 = 0.10

The complement rule is used to determine the probability

of an event happening by subtracting the probability of an
event not happening from 1.

Access the text alternative for slide images.

Example: Refer to the previous example.

Number of Probability of
Weight Event
Packages Occurrence
Underweight A 100 .025
Satisfactory B 3,600 .900
Overweight C 300 .075
4,000 1.000

The general rule of addition is used when the events are

not mutually exclusive.

Joint Probability A probability that measures the likelihood

two or more events will happen concurrently.

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General Addition Rule.

The use of “or” is inclusive: A or B or both.

Account for the joint probability that is in both A and B.
Subtract it out so it is not double counted.
Note means events are mutually exclusive.

© McGraw Hill 23
Rules of Addition 8
Example: What is the probability that a card chosen at random from
a standard deck of cards will be either a King (K) or a heart ?
Card Probability Explanation
King P (A) = 4/52 4 kings in a deck of 52 cards
Heart P (B) = 13/52 3 hearts in a deck of 52 cards
King of Hearts P (A and B ) = 1/52 1 kings of hearts in a deck of 52 cards

Independence The occurrence of one event has no effect on

the probability of the occurrence of another event.
A and B occur at different times, do not occur together.
For two independent events: P ( A and B ) = P ( A ) * P ( B )
This is the special multiplication rule.
Works for more than two independent events.

Example: A survey by the American Automobile Association (A

A A) revealed 60% of its members made airline reservations last
year.
Two members are selected at random.
What is the probability both made airline reservations last year?

If two events are not independent, they are dependent.

Conditional Probability The probability of a particular event
occurring, given that another event has occurred.
The conditional probability is represented a
Read the “probability of B given A”.
General multiplication rule:

Example: A golfer has 12 golf shirts in his closet.

Suppose 9 of these shirts are white and the others are
blue.
He gets dressed in the dark, so he just grabs a shirt and
puts in on.
He plays golf two days in a row and does not return the
shirts to the closet.
What is the probability both shirts are white?

0.55

Often we tally the results of a survey in a two-way table.

Contingency Table A table used to classify sample observations
according to two or more identifiable categories or classes.
A cross-tabulation that simultaneously summarizes two variables
of interest and their relationship.
Use the results to find probabilities.

A visual that is helpful in

organizing and
calculating probabilities
for problems with
several stages.
Each stage of the
problem is represented
by a branch of the tree.
Label the branches with
the probabilities.

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Bayes’ Theorem is a method of revising a probability, given

that additional information is obtained.
Prior Probability The initial probability based on the present
level of information.
Posterior Probability A revised probability based on
additional information.

© McGraw Hill 31
Bayes’ Theorem 2
Example: In a statistics class it was found that 60% of students
attend class on Sunday. From past data it was found that 98% of
those who went to class on Sunday pass the course, while 20%
of those who did not go to class on Sunday passed the course.
Given a student pass the course, What is the probability that he
attend class on Sunday?

Let student attend class Let pass the course

Let student did Not attend class

© McGraw Hill 33
Question 5 L O5-
3
An overnight express company must include five cities on
its route. How many different routes are possible,
assuming that it does not matter in which order the cities
are included in the routing?

© McGraw Hill 34
Question 11 L O5-
4
A survey of 34 students at the Wall College of Business
showed the following majors:
Accounting 10
Finance 5
Economics 3
Management 6
Marketing 10

From the 34 students, suppose you randomly select a

student.
What is the probability he or she is a management major?
Which concept of probability did you use to make this
estimate?

In each of the following cases, indicate whether classical,

empirical, or subjective probability is used.

1. A baseball player gets a hit in 30 out of 100 times at bat. The

probability is .3 that he gets a hit in his next at bat.
2. A seven-member committee of students is formed to study
environmental issues. What is the likelihood that any one of
the seven is randomly chosen as the spokesperson?
3. You purchase a ticket for the Lotto Canada lottery. Over five
million tickets were sold. What is the likelihood you will win the
$1 million jackpot?
4. The probability of an earthquake in northern California in the
next 10 years above 5.0 on the Richter Scale is .80.

Income after Taxes Number of Firms

Under $1 million 102

$1 million to $20 million 61

$20 million or more 37

1. What is the probability an advertising firm selected at random

has under $1 million in income after taxes?
2. What is the probability an advertising firm selected at random
has either an income between $1 million and $20 million, or an
income of $20 million or more? What rule of probability was
applied?

© McGraw Hill 37
Question 29 L O5-
6
The aquarium at Sea Critters Depot contains 140 fish. Eighty
of these fish are green swordtails (44 female and 36 male)
and 60 are orange swordtails (36 female and 24 males). A
fish is randomly captured from the aquarium:

1. What is the probability the selected fish is a green

swordtail?
2. What is the probability the selected fish is male?
3. What is the probability the selected fish is a male green
swordtail?
4. What is the probability the selected fish is either a male
or a green swordtail?

© McGraw Hill 38
Question 33 L O5-
7
A local bank reports that 80% of its customers maintain a
checking account, 60% have a savings account, and 50%
have both. If a customer is chosen at random:

1. What is the probability the customer has either a checking

or a savings account?
2. What is the probability the customer does not have either a
checking or a savings account?

© McGraw Hill 39
Question 37 L O5-
8
Each salesperson at Puchett, Sheets, and Hogan Insurance Agency is rated
either below average, average, or above average with respect to sales ability.
Each salesperson also is rated with respect to his or her potential for
advancement—either fair, good, or excellent. These traits for the 500
salespeople were cross-classified into the following table.

Potential for Potential for Potential for

Sales Ability
Advancement Fair Advancement Good Advancement Excellent
Below average 16 12 22
Average 45 60 45
Above average 93 72 135

1. What is this table called?

2. What is the probability a salesperson selected at random will have above
average sales ability and excellent potential for advancement?
3. Construct a tree diagram showing all the probabilities, conditional probabilities,
and joint probabilities.

© McGraw Hill 40
Question 43 L O5-
9
The Ludlow Wildcats baseball team, a minor league
team in the Cleveland Indians organization, plays 70%
of their games at night and 30% during the day. T he
team wins 50% of their night games and 90% of their
day games. According to today’s newspaper, they won
yesterday. What is the probability the game was played
at night?

Because learning changes

everything.®

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Accessibility Content: Text Alternatives for Images

Number line that is scaled from 0 to 1 in increments of

0.10. The probability of zero cannot happen. The
example provided is the probability our sun will
disappear this year. The example given for a probability
of 0.2 is the chance Slo Poke will win the Kentucky
Derby. The example given for a probability of 0.5 is the
chance of a head in a single toss of a coin. The example
given for a probability of 0.7 is the chance of an increase
in federal taxes. The value of 1 is sure to happen. The
example provided is the chance of rain in Florida this
year.

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This table has 3 columns. The first column contains the titles
experiment, all possible outcomes and some possible events. The
middle column displays the picture of a die. The experiment is to
roll a die. All possible outcomes are to observe a 1 or 2 or 3 or 4 or
5 or 6. Some possible events are observing an even number,
observe a number greater than 4, and observe a number 3 or less.
The last column shows an image of some people. The experiment
is to count the number of members of the board of directors for
Fortune 500 companies who are over 60 years of age. The
possible outcomes are none is over 60, one is over 60, two are
over 60, 29 are over 60, 48 are over 60, and so on until the
possibility that all of them are over 60. Some possible events are
more than 13 are over 60 or fewer than 20 are over 60.

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This diagram begins with the heading approaches to

probability. Two branches from this heading are labeled
objective and subjective. Subjective probability is based
on information available. Objective probability is further
broken down into two branches: Classical probability
and empirical probability. Classical probability is based
on equally likely outcomes. Empirical probability is
based on relative frequencies.

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Venn diagram showing event A as a circle inside of a

rectangle. The rectangle represents the entire sample
space. Everything inside the rectangle, but outside of
event A is shaded green and labeled not A.

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The two circles represent the probabilities that a tourist

visits Disney or Busch Gardens or both. The overlapping
region, indicating the tourist visits both Disney and
Busch Gardens has the probability 0.30. The portion of
the left circle that is NOT part of the overlap is labeled
probability of visiting Disney and has the probability
0.60. The portion of the circle on the right that is NOT
part of the overlap is labeled probability of visiting Busch
gardens and has the probability 0.50.

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© McGraw Hill 48
Tree Diagrams – Text Alternative
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The first branches of this tree diagram stem from the question about the movie goers age. A rectangle labeled age has 3 branches coming from it: 30 years old or
younger, 20%, 30 up to 60 years old, 45%, and 60 years old or older 35%. Each of those 3 age categories has 4 options as to the number of movies the person
saw: 0 movies, 1 or 2 movies, 3, 4, or 5 movies, or 6 or more movies.
For those that were 30 years old or younger 15% saw 0 movies. Multiplying the probability of being 30 years old or younger which is 20% with the probability of
being this age and seeing zero movies which is 15% indicates that overall 3% of the people surveyed were 30 years old or younger and saw 0 movies.
25% of those who are 30 years old or younger saw 1 or 2 movies. So overall 20% times 25% equals 5% of people who were 30 years old or younger and saw 1 or
2 movies.
55% of those who are 30 years old or younger have seen 3, 4, or 5 movies, so overall 20% times 55% equals 11% of people who were 30 years old or younger and
saw 3, 4, or 5 movies.
5% of those who are 30 years old or younger have seen 6 or more movies, so overall 20% times 5% equals 1% of people who were 30 years old or younger and
saw 6 or more movies.
For those that were 30 to 60 years old 22% saw 0 movies. Multiplying the probability of being 30 to 60 years old, which is 45%, with the probability of being this age
and seeing zero movies, which is 22%, indicates that overall 10% of the people surveyed were 30 to 60 years old and saw 0 movies.
44% of those who are 30 to 60 years old saw 1 or 2 movies. So overall 45% times 44% equals 20% of people who were 30 to 60 years old and saw 1 or 2 movies.
27% of those who are 30 to 60 years old have seen 3, 4, or 5 movies, so overall 45% times 27% equals 12% of people who were 30 to 60 years old and saw 3, 4,
or 5 movies.
7% of those who are 30 to 60 years old have seen 6 or more movies, so overall 45% times 7% equals 3% of people who were 30 to 60 years old and saw 6 or more
movies.
For those that were 60 years old or older 6% saw 0 movies. Multiplying the probability of being 60 years old or older, which is 35%, with the probability of being this
age and seeing zero movies, which is 6%, indicates that overall 2% of the people surveyed were 60 years old or older and saw 0 movies.
43% of those who are 60 years old or older saw 1 or 2 movies. So overall 35% times 43% equals 15% of people who were 60 years old or older and saw 1 or 2
movies.
34% of those who are 60 years old or older have seen 3, 4, or 5 movies, so overall 35% times 34% equals 12% of people who were 60 years old or older and saw
3, 4, or 5 movies.
17% of those who are 30 to 60 years old have seen 6 or more movies, so overall 35% times 17% equals 6% of people who were 60 years old or older and saw 6 or
more movies.

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Chapter 6

Discrete Probability Distributions

© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Learning Objectives

L O6-1 Identify the characteristics of a probability distribution.

L O6-2 Distinguish between discrete and continuous random
variables.
L O6-3 Compute the mean, variance, and standard deviation
of a discrete probability distribution.
L O6-4 Explain the assumptions of the binomial distribution
and apply it to calculate probabilities.
L O6-5 Explain the assumptions of the hypergeometric
distribution and apply it to calculate probabilities.
L O6-6 Explain the assumptions of the Poisson distribution
and apply it to calculate probabilities.

Probability Distribution A listing of all the outcomes of an

experiment and the probability associated with each
outcome.

Characteristics of a Probability Distribution

1. The probability of a particular outcome is between 0 and
1 inclusive.
2. The outcomes are mutually exclusive.
3. The list of outcomes is exhaustive. So the sum of the
probabilities of the outcomes is equal to 1.

Example: Suppose we are interested in the number of

heads showing face up with 3 tosses of a coin.
The possible outcomes are 0 heads, 1 head, 2 heads and
3 heads.

Possible Result First Coin Toss Second Third Number of Heads

1 T T T 0
2 T T H 1
3 T H T 1
4 T H H 2
5 H T T 1
6 H T H 2
7 H H T 2
8 H H H 3

Example continued.

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In any experiment of chance, the outcomes occur

randomly and are called random variables.

Random Variable A variable measured or observed as the

result of an experiment. By chance, the variable can have
different values.

Example: The grade level (Freshman, Sophomore, Junior,

or Senior) of the members of the St. James High School
Varsity girls’ basketball team. Grade level is the random
variable (and notice that it is a qualitative variable).

Discrete variables are usually the result of counting.

The data are summarized with a relative frequency table.

Discrete Random Variable A random variable that can

assume only certain clearly separated values.

Examples.
Tossing a coin three times and counting the number of
heads.
A department store offers coupons with discounts of 10%,
15% and 25%.

Example: The Bank of the Carolinas counts the number of

credit cards carried by a group of customers.
The number of cards carried is the discrete random
variable.

Number of Credit Cards Relative Frequency

0 .03
1 .10
2 .18
3 .21
4 or more .48
Total 1.00

Continuous Random Variable A random variable that may

assume an infinite number of values within a given range.

Continuous variables are usually the result of measuring.

Summarized with a probability distribution.
Examples.
The time between flights between Atlanta and L A are 4.67
hours, 5.13 hours, and so on
The annual snowfall in Minneapolis, M N measured in
inches

© McGraw Hill 9
Mean, Variance, and Standard Deviation of a
Discrete Probability Distribution 1
The mean is a typical value used to represent the central
location of the data.
The long-run average.
Also referred to as the expected value.

x is a particular value.
P(x) is the probability of a particular value.

This is a weighted average.

© McGraw Hill 10
Mean, Variance, and Standard Deviation of a
Discrete Probability Distribution 2
The variance describes the amount of spread (or variation) in
the data

The computational steps are:

Subtract the mean from each value, square the difference.

Multiply each squared difference by its probability.
Sum the resulting products.

The standard deviation is the positive square root of the

variance.

© McGraw Hill 11
Mean, Variance, and Standard Deviation of a
Discrete Probability Distribution 3
Example: The number of new cars sold on Saturday has
the below probability distribution.
Number of Cars Sold, x Probability, P(x)
0 .1
1 .2
2 .3
3 .3
4 .1
1.0

1. What type of distribution is this?

2. How many cars do you expect to sell?
3. What is the variance?

© McGraw Hill 12
Mean, Variance, and Standard Deviation of a
Discrete Probability Distribution 4
Example continued.
This is a discrete probability distribution.
The mean is 2.1.

The variance is 1.290 so the standard deviation is 1.136.

There are four requirements of a binomial probability distribution.

1. There are only two outcomes (success or a failure) that are
mutually exclusive.
2. The number of trials is fixed and known.
3. The probability of a success is the same for each trial.
4. Each trial is independent of any other trial.

Example: A young family has two children, both boys.

The probability of the third birth being a boy is still .50.

The gender of the third child is independent of the gender
of the other two.

To construct a binomial probability, use the number of trials and

probability of success

C is the combination of the successes.

n is the number of trials.
x is the number of successes.

is the probability of success.

For
Do not confuse with 3.1416 . . .

Mean:

Variance:

Example: Recently, [Link] reported that 28%

of purchases at coffee shops were made with a debit card.
For 10 randomly selected purchases at the Starbucks on the
corner of 12th Street and Main, what is the probability that
exactly one of the purchases was made with a debit card?
What is the probability distribution for the number of
purchases made with a debit card?
What is the probability that six or more purchase out of 10 are
made with a debit card?
What is the mean and standard deviation of the number of
purchases made with a credit card?

Example continued.

Number of Debit Card

P(x)
Purchases (x)
0 0.037
1 0.146
2 0.255
3 0.264
4 0.180
5 0.084
6 0.027
7 0.006
8 0.001
9 0.000
10 0.000

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Example continued.
Mean:
Variance:
so the standard deviation is 1.42
Could find the mean and variance by definition.

Tables are available for

various
n = 6 Probability

For the binomial distribution, the probability of success must stay the
same for each trial.
Large population.
Sampling with replacement.

Most sampling is done without replacement.

If the population is small, the probability of success will change for each
observation.
Example: The population has 20 items.
First sample: 1/20.
Second sample: 1/19.
Third sample: 1/18.

Hypergeometric criteria.
1. There are only two outcomes (success or a failure) that are mutually
exclusive.
2. Fixed number of independent trials.
3. Sample from a finite population without replacement.

n/N > 0.05.

The probability of success changes for each trial.

N is the size of the population, is size of the sample.

S is the number of successes in the population.

Example: Play Time Toys Inc. employs 50 people in the Assembly Dept.
Forty of the employees belong to a union and 10 do not.
Five employees are selected at random to form a committee.
What is the probability that four of the five belong to a union?

Example continued.

Poisson describes the number of times some event occurs

during a specified interval.
The interval can be time, distance, area or volume.
Assumptions.
The probability is proportional to the length of the interval.
The intervals are independent and do not overlap.

Examples.
The distribution of errors in data entry.
The number of accidents on I-75 during a three-month
period.

is the mean number of occurrences.

e is the constant 2.71828.
For
Mean:
Variance:
n is the total number of trials.
is the probability of success.

Example: Budget Airlines is a seasonal airline that

operates flights from Myrtle Beach, South Carolina, to
various cities in the northeast.
Recently Budget has been concerned about the number of
lost bags.
Ann Poston from the Analytics Department was asked to
study the issue.
She randomly selected a sample of 500 flights and found
that a total of twenty bags were lost on the sampled flights.
What is the mean number of bags lost per flight?
What is the likelihood that no bags are lost on a flight.

Example continued.
The mean is
The probability of no lost bags is given by.

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Like with Binomial, there are tables.

x 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9

0 0.9048 0.8187 0.7408 0.6703 0.6065 0.5488 0.4966 0.4493 0.4066
1 0.0905 0.1637 0.2222 0.2681 0.3033 0.3293 0.3476 0.3593 0.3659
2 0.0045 0.0164 0.0333 0.0536 0.0758 0.0988 0.1217 0.1438 0.1647
3 0.0002 0.0011 0.0033 0.0072 0.0126 0.0198 0.0284 0.0383 0.0494
4 0.0000 0.0001 0.0003 0.0007 0.0016 0.0030 0.0050 0.0077 0.0111
5 0.0000 0.0000 0.0000 0.0001 0.0002 0.0004 0.0007 0.0012 0.0020
6 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0001 0.0002 0.0003
7 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

© McGraw Hill 29
Question 5 L O6-
2,3
The information below is the number of daily emergency service calls made by
the volunteer ambulance service of Walterboro, South Carolina, for the last 50
days. To explain, there were 22 days when there were two emergency calls, and
9 days when there were three emergency calls.
Number of
Frequency
Calls0
0 8
1 10
2 22
3 9
4 1
Total 50

a. Convert this information on the number of calls to a probability distribution.

b. Is this an example of a discrete or continuous probability distribution?
c. What is the probability that 3 or more calls are made in a day?
d. What is the mean number of emergency calls per day?
e. What is the standard deviation of the number of calls made daily?

© McGraw Hill 30
Question 13 L O6-
4
An American Society of Investors survey found 30% of
individual investors have used a discount broker. In a
random sample of nine individuals, what is the probability:

a. Exactly two of the sampled individuals have used a

discount broker?
b. Exactly four of them have used a discount broker?
c. None of them has used a discount broker?

© McGraw Hill 31
Question 21 L O6-
4
In a recent study, 90% of the homes in the United States
were found to have large-screen T Vs. In a sample of nine
homes, what is the probability that:

a. All nine have large-screen T Vs?

b. Less than five have large-screen T Vs?
c. More than five have large-screen T Vs?
d. At least seven homes have large-screen T Vs?

© McGraw Hill 32
Question 25 L O6-
5
A youth basketball team has 12 players on their roster.
Seven of the team members are boys and five are girls.
The coach writes each player’s name on a sheet of paper
and places the names in a hat. The team captain shuffles
the names and the coach selects five slips of paper from
the hat to determine the starting lineup.

a. What is the probability the starting lineup consists of three

boys and two girls?
b. What is the probability the starting lineup is all boys?
c. What is the probability there is at least one girl in the
starting lineup?

© McGraw Hill 33
Question 33 L O6-
6
Ms. Bergen is a loan officer at Coast Bank and Trust. From
her years of experience, she estimates that the probability
is .025 that an applicant will not be able to repay his or her
installment loan. Last month she made 40 loans.

a. What is the probability that three loans will be defaulted?

b. What is the probability that at least three loans will be
defaulted?

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everything.®

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The x-axis represents number of heads labeled 0, 1, 2, and 3 from

left to right. The y-axis represents probability, P of x, labeled 0, 1
by 8, 1 by 4, 3 by 8, and 1 by 2 from bottom to top. The information
shown in the bar graph is as follows: When flipping a coin 3 times
you may get 0 heads. The probability of this happening is one-
eighth. When flipping a coin 3 times you may get 1 head. The
probability of this happening is three-eighths. When flipping a coin
3 times you may get 2 heads. The probability of this happening is
three-eighths. When flipping a coin 3 times you may get 3 heads.
The probability of this happening is one-eighth.

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The x-axis represents Number of Purchases with a Debit Card

ranging from 0 to 10 in increments of 1. The y-axis represents
Probability ranging from 0.0000 to 0.3000 in increments of 0.0500.
In the binomial probability distribution, n equals 10 and pi equals
point 28. Since n equals 10, the number of purchases ranges from
0 to 10. Purchases with probabilities are given as follows: 0
purchase: 0.037, 1 purchase: 0.146, 2 purchases: 0.255, 3
purchases: 0.264, 4 purchases: 0.180, 5 purchases: 0.084, 6
purchases: 0.027, 7 purchases: 0.006, 8 purchases: 0.001, 9
purchases: 0.000, and 10 purchases: 0.000.

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Success and probability are the column heads in columns A

and B, respectively, of row 1. The row entries are shown from
rows 2 through 9, as follows: 0, 0.9608. 1, 0.0384. 2, 0.0008.
3, 0.0000. 4, 0.0000. 5, 0.0000. 6, 0.0000. 7, 0.0000.

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Chapter 2
Describing Data: Frequency Tables,
Frequency Distributions, and Graphic
Presentation

© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Learning Objectives

L O2-1 Summarize qualitative variables with frequency and

Frequency Table A grouping of qualitative data into mutually

exclusive and collectively exhaustive classes showing the
number of observations in each class.

Mutually exclusive: Each observation in only one class.

Collectively exhaustive: There is a class for each value.

1. Sort the data into classes.

2. Count the number in each class.
3. Report as the class frequency.

Example: Car sales by location.

Location Number of Cars
Kane 52
Olean 40
Sheffield 45
Tionesta 43
Total 180

Convert each frequency to a relative frequency.

Location Number of Cars Relative Frequency Found by

Kane 52 .289 52/180
Olean 40 .222 40/180
Sheffield 45 .250 45/180
Tionesta 43 .239 43/180
Total 180 1.000

Bar Chart A graph that shows the qualitative classes on the

horizontal axis and the class frequencies on the vertical axis.
The class frequencies are proportional to the heights of the
bars.

A bar chart is the most common graphic to present a

qualitative variable.
Describes a frequency table using a series of uniformly
wide rectangles.
The height of each rectangle is the class frequency.
Mode: The class with the highest frequency.

For a nominal variable, the order of the classes does not

matter.
You can order the classes by decreasing or increasing
order.
Example: Car sales by location.

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Pie Chart A chart that shows the proportion or percentage

that each class represents of the total number of
frequencies.
Example: Car sales by location.

Vehicle Type Number Sold Percent Sold

SUV 72 40
Sedan 54 30
Compact 27 15
Truck 18 10
Hybrid 9 5
Total 180 100

Frequency Distribution A grouping of quantitative data into

mutually exclusive and collectively exhaustive classes
showing the number of observations in each class.

Step 1: Decide on the number of classes.

Step 2: Determine the class interval (same for all classes).
Step 3: Set the individual class limits.
Step 4: Tally the data into classes and determine the
number of the observations in each class.

Example: Profit on vehicles sold last month.

Table 2-4 Profit on Vehicles Sold Last Month by the Applewood Auto Group.

Maximum

$1,387 $2,148 $2,201 $ 963 $ 820 $2,230 $3,043 $2,584 $2,370

1,754 2,207 996 1,298 1,266 2,341 1,059 2,666 2,637

1,817 2,252 2,813 1,410 1,741 3,292 1,674 2,991 1,426

1,040 1,428 323 1,553 1,772 1,108 1,807 934 2,944
1,273 1,889 352 1,648 1,932 1,295 2,056 2,063 2,147

1,529 1,166 482 2,071 2,350 1,344 2,236 2,083 1,973

3,082 1,320 1,144 2,116 2,422 1,906 2,928 2,856 2,502

1,951 2,265 1,485 1,500 2,446 1,952 1,269 2,989 783

2,692 1,323 1,509 1,549 369 2,070 1,717 910 1,538

1,206 1,760 1,638 2,348 978 2,454 1,797 1,536 2,339

1,342 1,919 1,961 2,498 1,238 1,606 1,955 1,957 2,700

443 2,357 2,127 294 1,818 1,680 2,199 2,240 2,222

754 2,866 2,430 1,115 1,824 1,827 2,482 2,695 2,597

1,621 732 1,704 1,124 1,907 1,915 2,701 1,325 2,742
870 1,464 1,876 1,532 1,938 2,084 3,210 2,250 1,837

1,174 1,626 2,010 1,688 1,940 2,639 377 2,279 2,842

1,412 1,762 2,165 1,822 2,197 842 1,220 2,626 2,434

1,809 1,915 2,231 1,897 2,646 1,963 1,401 1,501 1,640

2,415 2,119 2,389 2,445 1,461 2,059 2,175 1,752 1,821

1,546 1,766 335 2,886 1,731 2,338 1,118 2,058 2,487

Minimum

Step 1: Decide on the number of classes.

Use the rule, where n = 180.
k is the number of classes.
n is the number of values in the data set.

let k = 8.
So use 8 classes.

Step 2: Determine the class interval.

The classes all taken together must cover the distance
from the minimum to the maximum.

The class interval:

round up to $400.

Use this class interval width for all intervals.

Step 3: Set the individual class limits.

Classes
$ 200 up to $ 600
600 up to 1,000
1,000 up to 1,400
1,400 up to 1,800
1,800 up to 2,200
2,200 up to 2,600
2,600 up to 3,000
3,000 up to 3,400

Step 4: Tally the data into classes and determine the number
of the observations in each class.

Profit Frequency
$ 200 up to $ 600 8
600 up to 1,000 11
1,000 up to 1,400 23
1,400 up to 1,800 38
1,800 up to 2,200 45
2,200 up to 2,600 32
2,600 up to 3,000 19
3,000 up to 3,400 4
Total 180

To find the relative frequencies, take the class frequency

and divide by the total number of observations.
Example: Profit on vehicles sold last month.

Profit Frequency Relative Frequency Found by

A histogram shows the shape of a distribution.

Each class is depicted as a rectangle.
The height of the bar representing the number in each
class.

Access the text alternative for slide images.

600 up to 1,000 11 Less than 1,000 19 8+11

1,000 up to 1,400 23 Less than 1,400 42 8+11+23

1,400 up to 1,800 38 Less than 1,800 80 8+11+23+38

1,800 up to 2,200 45 Less than 2,200 125 8+11+23+38+45

2,200 up to 2,600 32 Less than 2,600 157 8+11+23+38+45+32

2,600 up to 3,000 19 Less than 3,000 176 8+11+23+38+45+32+19

8+11+23+38+45+32+19+
3,000 up to 3,400 4 Less than 3,400 180
4
Total 180

© McGraw Hill 24
Cumulative Frequency and Relative
Frequency Distributions 4
Example: Profit on vehicles sold last month.

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a. What is the table called? Bright white 130

b. Draw a bar chart for the table. Metallic black 104
c. Draw a pie chart.
Magnetic lime 325
d. If Wellstone Inc. plans to produce
one million cell phone covers, how Tangerine orange 455

many of each color should it produce? Fusion red 286

© McGraw Hill 27
Question 11 L O2-
3
Wachesaw Manufacturing Inc. produced the following number of units in
the last 16 days.

27 27 27 28 27 25 25 28
26 28 26 28 31 30 26 26

The information is to be organized into a frequency distribution.

a. How many employees were studied?

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everything.®

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A vertical bar graph shows car sales by location. The

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© McGraw Hill 32
Graphic Presentation of a Frequency Distribution 2
– Text Alternative
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A histogram shows the frequency of different profit ranges.

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© McGraw Hill 33
Graphical Presentation of a Frequency
Distribution 2 – Text Alternative
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A line graph shows the frequency of different profits. The

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© McGraw Hill 34
Graphical Presentation of a Frequency
Distribution 3 – Text Alternative
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A line graph shows the frequency of different profits. The horizontal

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© McGraw Hill 35
Cumulative Frequency and Relative Frequency
Distributions 4 – Text Alternative
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The horizontal axis represents profit in dollars ranging from 200 to

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Chapter 3

Describing Data: Numerical Measures

© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Learning Objectives

© McGraw Hill LLC 2

Measures of Location

A measure of location is a value used to describe the central

tendency of a set of data.
Common measures of location.
Mean.
Median.
Mode.

The arithmetic mean is the most widely reported measure of

location.
The mean is both a population parameter and sample
statistic.

© McGraw Hill LLC 3

Population Mean 1

Many studies involve all the individuals in a population.

When the values are not summarized in a frequency distribution,

is the mean.
N is the number of values in the population.
x is any particular value.

is “sigma” and indicates the operation is adding.

is the sum of the values.

Parameter A characteristic of a population.

The mean, of a population is a parameter.

© McGraw Hill LLC 4

Population Mean 2

Example: There are 46 exits on I-75 through the state of

Kentucky, here are the distances between exits (in miles).
11 4 10 4 9 3 8 10 3 14 1 6
4 3 5 2 2 5 4 2 3 2 5 5
1 1 2 7 8 10 2 3 7 5 4 3
2 1 1 2 1 1 2 1 2 1

Why is this information a population?

What is the mean number of miles between exits?

© McGraw Hill LLC 5

Population Mean 3

Example continued
11 4 10 4 9 3 8 10 3 14 1 6
4 3 5 2 2 5 4 2 3 2 5 5
1 1 2 7 8 10 2 3 7 5 4 3
2 1 1 2 1 1 2 1 2 1

This is a population because we are considering all the

exits on I-75 and the distances between them

© McGraw Hill LLC 6

Sample Mean 1

We select a sample from the population to estimate a specific

characteristic.

The sample mean is

is read
n is the number of values in the sample.
x is any particular value.

is “sigma” and indicates the operation is adding.

is the sum of the values.

Statistic A characteristic of a sample.

The sample mean is a statistic.

© McGraw Hill LLC 7

Sample Mean 2

Example: The number of hours per day that Verizon

customer use their mobile phones.

4.1 3.7 4.3 4.2 5.5 51

4.2 5.1 4.2 4.6 5.2 3.8

What is the arithmetic mean number of hours per day used?

© McGraw Hill LLC 8

The Mean

Interval or ratio scale of measurement is required.

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The Median 1

For data containing extreme values, the mean may not

fairly represent the central location.
Median The midpoint of the values after they have been
ordered from the minimum to the maximum values.
Example: The median price of housing units.

Price Ordered from Price Ordered from

Minimum to Maximum Maximum to Minimum
$60,000 $275,000
65,000 80,000
70,000 ← Median → 70,000
80,000 65,000
275,000 60,000

© McGraw Hill LLC 10

The Median 2

The median is the value in the middle of a set of ordered

© McGraw Hill LLC 11

The Median 3

Odd numbered data: The median is the middle value

© McGraw Hill LLC 12

The Mode

MODE The value of the observation that occurs most

frequently.
The mode can be found for nominal level data.
A set of data can have more than one mode.
A set of data could have no mode.
Example: The number of respondents that favor bath oils.

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© McGraw Hill LLC 14

The Weighted Mean 1

The weighted mean is found by multiplying each observation by its

corresponding weight.
A convenient way to compute the mean when there are several
observations with the same value.

The denominator is always the sum of the weights.

© McGraw Hill LLC 15

The Weighted Mean 2

Example: The Carter Construction Company pays its

© McGraw Hill LLC 16

The Geometric Mean 1

The geometric mean is useful in finding average rates of

change over time.
The rates can be expressed as percentages (or ratios).

A percentage change is always 1.0 + change

Wide applications in business and economics (example
G D P).
The geometric mean will always be no more than the
arithmetic mean.
The data values must be positive.

© McGraw Hill LLC 17

The Geometric Mean 2

Example: The R I O earned by a company for four

consecutive years: 30%, 20%, −40% and 200%.

The R I O is 29.4%.
Note if you compute the arithmetic mean it would be
52.5%.
This would overstate the true rate of return.

© McGraw Hill LLC 18

The Geometric Mean 3

A second application of the geometric mean is based on

the beginning and ending values over a specified time
period.

Example: You earned $45,000 in 2010 and $100,000 in

2022.

© McGraw Hill LLC 19

Why Study Dispersion? 1

Measures of location only describe the center.

© McGraw Hill LLC 20

Why Study Dispersion? 2

Example: Hourly production at two computer monitor

plants.

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© McGraw Hill LLC 21

Range

The simplest measure of dispersion is range.

Range = Maximum value − Minimum value.
Only two values are used in its calculation.
It is influenced by extreme values.
It is easy to compute and to understand.

Example: Hourly production at two

computer monitor plants.
Baton Rouge: 52 − 48 = 4.
Tucson: 60 − 40 = 20.

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© McGraw Hill LLC 22

Population Variance 1

The range is based on only two numbers.

The variance measures how much the values vary from their mean.
The mean squared deviation from the mean.
Units are the units of measurement squared.

is lower case Greek “sigma squared”.

X is the value of a particular observation.
is the population mean.

N is number of observations in the population.

© McGraw Hill LLC 23

Population Variance 2

The process for computing the mean is implied by the

© McGraw Hill LLC 24

Population Variance 3

Example: The number of traffic citations.

Citations by Month
January February March April May June July August September October November December
19 17 22 18 28 34 45 39 38 44 34 10

© McGraw Hill LLC 25

Population Variance 4
Citations

Month (x) (x−μ) (x−μ)²

January 19 −10 100

February 17 −12 144

Units are citations squared!
March 22 −7 49

April 18 −11 121

May In the following

28 table,
−1 1
read ‘(x − μ)’ as x minus
mu and (x − μ)2 as open
June paren x34 5
minus mu close 25
paren squared.
August 39 10 100

September 38 9 81

October 44 15 225

November 34 5 25

December 10 −19 361

Total 348 0 1,488

Standard Deviation

The units of the variance is the units of measure squared.

The variance is difficult to interpret.
The standard deviation is the square root of the variance.

Example: The number of traffic citations.

The variance is 124
The standard deviation is 11.14 citations.

Sample Variance and Standard Deviation
1
The sample variance and standard deviation uses the sample.

mean,

Using n in the denominator tends to underestimate the

population variance.
Using n − 1 provides an appropriate correction.

The units of the variance is the units of measurement

squared.

Sample Variance and Standard Deviation
2
Example: The hourly wages for part-time employees are $12, $20, $16,
$18 and $19.

Hourly Wage (x) x−X (x − X)²

$12 −$5 25
20
16
18
19
$85 3
−1
1
2
0 9
1
4
40
In the following table, read ‘x − x¯’ as x
minus x bar and (x − x¯)2 as open paren x
minus x bar close paren squared.

dollars squared

𝑠 = 3.16 dollars.

Chebyshev’s theorem defines the dispersion of data around the mean.

For any set of observations, the proportion of values within 𝑘 standard deviations

is at least

k = 2 then at least 75% of the observation are within 2 standard

deviation of the mean.

k = 3 then at least 88.9% of the observation are within 3 standard

deviation of the mean.

k = 3.5 then

At least 92% of the employees contribute between $25.26 and $77.83.

Interpretations and Uses of the Standard
Deviation 4
Example: A mean of 100 and a standard deviation of 10.

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Ethics and Reporting Results

Useful to know the advantages and disadvantages of

Chapter 3 Practice Problems

Find the mean, median, and mode for the number of returns
prepared by each accountant. If you could report only one,
which measure of location would you recommend reporting?

Question 27 L O3-
3
Compute the geometric mean of the following monthly
percent increases: 8, 12, 14, 26, and 5.

Question 55 L O3-
5
According to Chebyshev’s theorem, at least what percent of
any set of observations will be within 1.8 standard deviations
of the mean?

Question 57 L O3-
5
The distribution of the weights of a sample of 1,400 cargo
containers is symmetric and bell-shaped. According to the
Empirical Rule, what percent of the weights will lie:

Between
Between

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everything.®

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Sample Mean 3 – Text Alternative
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© McGraw Hill LLC 49
Relative Positions of Mean, Median, and
Mode – Text Alternative
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Three distribution curves are plotted for frequency versus x.

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© McGraw Hill LLC 52
Interpretations and Uses of the Standard
Deviation 4 – Text Alternative
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Chapter 4
Describing Data: Displaying and Exploring Data

L O4-2 Identify and compute measures of position.

L O4-3 Construct and analyze a box plot.
L O4-4 Compute and interpret the coefficient of skewness.
L O4-5 Create and interpret a scatter diagram.
L O4-6 Compute and interpret the correlation coefficient.
L O4-7 Develop and explain a contingency table.

Dot Plots 1
Dot Plot Summarizes the distribution of one variable by
stacking dots as points on a number line that shows all the
values.
Display a dot for each observation.
If there are identica
each other.
‫ي‬a ‫ج‬ts‫ر‬do re…
‫ي‬th “piled”
e‫ل‬, ‫ا‬s‫ت‬uon
• See the shape of distribution.
• Values where the data cluster.
• Good for smaller data sets.

Dot Plots 2
• Example: The number of vehicles served at two dealers.

Tionesta Ford Lincoln

Monday Tuesday Wednesday Thursday Friday Saturday

23 33 27 28 39 26
30 32 28 33 35 32
29 25 36 31 32 27
35 32 35 37 36 30

Sheffield Motors, Inc.

Monday Tuesday Wednesday Thursday Friday Saturday
31 35 44 36 34 37
30 37 43 31 40 31
32 44 36 34 43 36
26 38 37 30 42 33

Dot Plots 3
• Example continued

‫…ﻳﺠﺮي اﻟﺘﺤﻤﻴﻞ‬

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Measures of Position 1
The standard deviation is the most widely used measure of
dispersion.
We can also determine the location of values that divide a set
of observations into parts.

Quartiles: Divide a set of observations into four equal parts.

• Q1:Value below which 25% of the observations occur.
• Q2:Value below which 50% of the observations occur
(median).

• Q3:Value below which 70% of the observations occur.

Measures of Position 2
• Deciles: Divide a set of observations into 10 equal parts.
• Percentiles: Divide a set of observations into 100 equal
parts.
• Let Lprefer to the location of a desired interval.

p
L p = (n +1)
100
• Example: The 92nd percentile would be L92

Measures of Position 3
• Example: The commissions earned last month by a sample
of 15 brokers.
$2,038 $1,758 $1,721 $1,637 $2,097 42,047 $2,205 $1,787 $2,287
1,940 2,311 2,054 2,406 1,471 1,460

• Locate the median, the first quartile and the third quartile of
the commissions.
• First, sort the data from smallest to largest.

$1,460 $1,471 $1,637 $1,721 $1,758 $1,787 $1,940 $2,038 $2,047

2,054 2,097 2,205 2,287 2,311 2,406

Measures of Position 4
• Example continued
25
• Q1 : L25= (16+1) =4
100
• Median: L50 = (16 +1) =
508
100
75
• = (n +1) =12
Q3 : L75
100
$1,460 $1,471 $1,637 $1,721 $1,758 $1,758 $1,940 $2,038 $2,047
2,054 2,097 2,205 2,287 2,311 2,406

• Q1=$1,721, Median= $2,038 andQ3= $2, 205

Box Plots 1
Box Plot A graphic display that shows the general shape of
a variable’s distribution. It is based on five descriptive
statistics: the maximum and minimum values, the first and
third quartiles, and the median.

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Box Plots 2
• The interquartile range is Q3−Q1
• Range of values between the first and third quartiles.
• 50% of a distribution’s values.

‫…ﻳﺠﺮي اﻟﺘﺤﻤﻴﻞ‬
Outlier A data point that is unusually far from the
other.
• Greater than upper boundary:Q3+1.5(Q3−Q1)
• Lower than lower boundary:Q3−1.5(Q3−Q1)
• Marked as asterisks beyond last value less than the
boundary.
• Nor outliers: minimum or maximum should be the end
lines.
© McGraw Hill LLC 11
Box Plots 3
• Example: The Applewood Auto Group data and the buyer
age variable.

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Skewness 1
• There are four common shapes.

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Skewness 2
Pearson: Median)
3(x−
sk =
s
• Between −3 and 3.
• Near −3: considerable negative skewness.
• Near 0: symmetric.
• Near 3: considerable positive skewness.
3
n
x − x ⎞⎤
Software skewness:sk=(n1)(n2)
⎡
∑⎛⎝ ⎟⎥
− − ⎢
⎢ s ⎠ ⎥⎦
⎣
• Focus on the brackets with the mean and standard deviation.
• Called standardizing (discussed later).
• Values are larger than the mean: positive and skewed right.
• Values are less than the mean: negative and skewed left.
© McGraw Hill LLC 14
Skewness 3
• Example: The earnings per share for software companies.

$0.0 $0.1 $0.4 $0.5 $1.1 $1.2 $1.4 $3.1

9 3 1 1 2 0 9 8
3.50 6.36 7.83 8.92
10.1 12.9 16.4
• 3
Compute the mean, median, 9
and 0
standard deviation.
• Find the coefficient of skewness using Pearson’s estimate
and the software methods.
• What is your conclusion regarding the shape of the
distribution?

Skewness 5

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Describing the Relationship Between
Two Variables 1
Scatter Diagram Graphical technique used to show the
relationship between two variables measured with interval or
ratio scales.

• Study the relationship between two variables (bivariate).

• Usually one variable on the other.

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Describing the Relationship Between
Two Variables 2
Compute a statistic called the correlation coefficient.
Measures the direction and strength of the relationship.

r= ∑ ( x − x)(y− y )
( −1)ss
n y
x

• Ranges from −1.0 to +1.0.

• The closer the coefficient is to −1.0 or +1.0, the stronger
the relationship.
• If r is close to 0.0, we can say that there is no relationship
between the variables.
• Positive indicates a positive relationship.
• Negative indicates a negative relationship.
© McGraw Hill LLC 19
Describing the Relationship Between Two
Variables 3

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21
© McGraw Hill LLC
Describing the Relationship Between
Two Variables 5
• Example: The relationship between vehicle profit and age.
• The correlation is 0.26.

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Contingency Tables 1
Contingency Table A table used to classify observations
according to two identifiable characteristics.

• It is a cross-tabulation that simultaneously summarizes two

variables of interest.
• Both variables need only be nominal or ordinal.

Contingency Tables 2
• Example: The profit for four dealerships.

Contingency Table Showing the Relationship between Profit and Dealership

Above/Below
Median Profit Kane Olean Sheffield Tionesta Total
Above 25 20 19 26 90
Below 27 20 26 17 30
Total 52 40 45 43 180

Chapter 4 Practice Problems

Question 3 L O4-1
Consider the following chart.

a. What is this chart called?

b. How many observations are in the study?
c. What are the maximum and the minimum values?
d. Around what values do the observations tend to cluster?

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Question 7 L O4-2

The Thomas Supply Company Inc. is a distributor of gas-

powered generators. As with any business, the length of time
customers take to pay their invoices is important. Listed
below, arranged from smallest to largest, is the time, in days,
for a sample of the Thomas Supply Company Inc. invoices.

13 13 1 20 26 27 31 34 34 34 35 35 36 37 38
3
41 41 4 45 47 47 47 50 51 53 54 56 62 67 82
a. Determine
1 the first and third quartiles.

b. Determine the second decile and the eighth decile.

c. Determine the 67th percentile.

Question 9 L O4-3

The box plot below shows the amount spent for books and supplies
per year by students at four-year public colleges.

a. Estimate the median amount spent.

b. Estimate the first and third quartiles for the amount spent.
c. Estimate the interquartile range for the amount spent.
d. Beyond what point is a value considered an outlier?
e. Identify any outliers and estimate their values.
f. Is the distribution symmetrical or positively or negatively skewed?

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Question 15 L O4-4

Listed below are the commissions earned ($000) last year by

the 15 sales representatives at Furniture Patch Inc.

$3.9 $5.7 $7.3 $10.6 $13.0 $13.6 $15.1 $15.8 $17.1

17.4 17.6 22.3 38.6 43.2 87.7

‫اﻟﺘﺤﻤﻴﻞ‬
a. Determine the‫ﻳﺠﺮي‬
mean, median,
b. Determine the coefficient of skewness using Pearson’s
method.
c. Determine the coefficient of skewness using the software
method.

Question 17 L O4-5,6
Create a scatter diagram and compute a correlation
coefficient. How would you describe the relationship between
the values?

x-Value y-Value x-Value y-Value

10 6 11 6
8 2 10 5
9 6 7 2
11 5 7 3
13 7 11 7

Question 19 L O4-7

The Director of Planning for Devine Dining Inc. wishes to study the relationship
between the time of day a customer dined and whether the guest orders dessert.
To investigate the relationship, the manager collected the following information on
200 recent customers.
Time of Day

Dessert Ordered Lunch Dinner Total

Yes 32 85 117

a. What is the level of measurement of No 68 15 83

the two variables? Total 100 100 200

b. What is the above table called?

c. Does the data suggest that customer are more likely to order dessert? Explain
why.
d. Does the data suggest that customers at lunch time are more likely to order
dessert? Explain why.
e. Does the data suggest that customers at dinner time are more likely to order
dessert? Explain why.
© McGraw Hill LLC 31
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Chapter 5

A Survey of Probability Concepts

L O5-1 Define the terms probability, experiment, event, and

Probability A value between 0 and 1 inclusive that

represents the likelihood a particular event happens.

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Experiment A process that leads to the occurrence of one and

only one of several possible results.
Outcome A particular result of an experiment.
Event A collection of one or more outcomes of an experiment.

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Classical probability is based on the assumption that the

outcomes of an experiment are equally likely.

Example: Roll a six-sided die once. What is the probability

of obtaining even number?

A challenge is determine the values in the numerator and

Suppose there is a single group.

We can determine the number of all possible
arrangements of an outcomes from the group.

Permutation Any arrangement of r objects selected from a

single group of n possible objects.

This formula is determined by the multiplication formula!

Example: A media company is producing a 1-minute ad

video.
In the production process, eight different video segments
were made.
They can only select three segments.
How many different ways can the eight video segments be
arranged?
n = 8, r = 3.

If the order of the selected objects is not important, any

arrangement is called a combination.
A B C is the same combination as B A C

The number of combinations is less than the number of

permutations.
Combination An event of outcomes when the order of the
outcomes does not matter.
The permutation formula overcounts the r ! permutations,
divide out the overcounting.

Example: The Grand 16 movie theater uses teams of

three employees to work the concession stand each
evening.
There are seven employees available to work.
How many different teams can be scheduled?

Empirical probability is the second type of probability.

It is based on observation, counting and recording
experimental outcomes.

Empirical Probability The probability of an event based on

a collection of observations or data.

An empirical probability is based on relative frequencies.

The empirical approach is based on the law of large numbers.

Number of Trials Number of Heads Relative Frequency of Heads

1 0 .00
10 3 .30
50 26 .52
100 52 .52
500 236 .472
1,000 494 .494
10,000 5,027 .5027

Example: The Standard & Poor’s (S&P) 500 stock index

was down four time over the course of the previous 20
years.
What is the probability that the index will be down next
year?
Let A represent the even of a negative yearly return.

If there is little or no experience on which to base a

probability, it is estimated subjectively.
An individual evaluates the available opinions and
information then assigns a probability.

Subjective Concept of Probability The likelihood

(probability) of a particular event happening that is
assigned by an individual based on whatever information
is available.

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Mutually Exclusive The occurrence of one event means that

none of the other events can occur at the same time.

Collectively Exhaustive At least one of the events must

occur when an experiment is conducted.

If events are mutually exclusive, the special rule of

addition is:
This works for any number of mutually exclusive events.

Example: A machine fills plastic bags with a mixture of beans,

broccoli, and other vegetables.
Most of the bags contain the correct weight.
Because of the variation in the size of the beans and other
vegetables, a package might be underweight or overweight.

Number of Probability of
Weight Event
Packages Occurrence
Underweight A 100 .025
Satisfactory B 3,600 .900
Overweight C 300 .075
4,000 1.000

What is the probability that a particular package will be either

underweight or overweight?
P (A or C ) = 0.025 +0.075 = 0.10

The complement rule is used to determine the probability

of an event happening by subtracting the probability of an
event not happening from 1.

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Example: Refer to the previous example.

Number of Probability of
Weight Event
Packages Occurrence
Underweight A 100 .025
Satisfactory B 3,600 .900
Overweight C 300 .075
4,000 1.000

The general rule of addition is used when the events are

not mutually exclusive.

Joint Probability A probability that measures the likelihood

two or more events will happen concurrently.

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General Addition Rule.

The use of “or” is inclusive: A or B or both.

Account for the joint probability that is in both A and B.
Subtract it out so it is not double counted.
Note means events are mutually exclusive.

Independence The occurrence of one event has no effect on

Example: A survey by the American Automobile Association (A

A A) revealed 60% of its members made airline reservations last
year.
Two members are selected at random.
What is the probability both made airline reservations last year?

If two events are not independent, they are dependent.

Example: A golfer has 12 golf shirts in his closet.

0.55

Often we tally the results of a survey in a two-way table.

A visual that is helpful in

organizing and
calculating probabilities
for problems with
several stages.
Each stage of the
problem is represented
by a branch of the tree.
Label the branches with
the probabilities.

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Bayes’ Theorem is a method of revising a probability, given

Let student attend class Let pass the course

Let student did Not attend class

© McGraw Hill 34
Question 11 L O5-
4
A survey of 34 students at the Wall College of Business
showed the following majors:
Accounting 10
Finance 5
Economics 3
Management 6
Marketing 10

From the 34 students, suppose you randomly select a

student.
What is the probability he or she is a management major?
Which concept of probability did you use to make this
estimate?

In each of the following cases, indicate whether classical,

empirical, or subjective probability is used.

1. A baseball player gets a hit in 30 out of 100 times at bat. The

Income after Taxes Number of Firms

Under $1 million 102

$1 million to $20 million 61

$20 million or more 37

1. What is the probability an advertising firm selected at random

1. What is the probability the selected fish is a green

© McGraw Hill 38
Question 33 L O5-
7
A local bank reports that 80% of its customers maintain a
checking account, 60% have a savings account, and 50%
have both. If a customer is chosen at random:

1. What is the probability the customer has either a checking

or a savings account?
2. What is the probability the customer does not have either a
checking or a savings account?

Potential for Potential for Potential for

Sales Ability
Advancement Fair Advancement Good Advancement Excellent
Below average 16 12 22
Average 45 60 45
Above average 93 72 135

1. What is this table called?

Because learning changes

everything.®

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Number line that is scaled from 0 to 1 in increments of

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This diagram begins with the heading approaches to

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Venn diagram showing event A as a circle inside of a

rectangle. The rectangle represents the entire sample
space. Everything inside the rectangle, but outside of
event A is shaded green and labeled not A.

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The two circles represent the probabilities that a tourist

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Chapter 6

Discrete Probability Distributions

L O6-1 Identify the characteristics of a probability distribution.

Probability Distribution A listing of all the outcomes of an

experiment and the probability associated with each
outcome.

Characteristics of a Probability Distribution

Example: Suppose we are interested in the number of

heads showing face up with 3 tosses of a coin.
The possible outcomes are 0 heads, 1 head, 2 heads and
3 heads.

Possible Result First Coin Toss Second Third Number of Heads

1 T T T 0
2 T T H 1
3 T H T 1
4 T H H 2
5 H T T 1
6 H T H 2
7 H H T 2
8 H H H 3

Example continued.

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In any experiment of chance, the outcomes occur

randomly and are called random variables.

Random Variable A variable measured or observed as the

result of an experiment. By chance, the variable can have
different values.

Example: The grade level (Freshman, Sophomore, Junior,

or Senior) of the members of the St. James High School
Varsity girls’ basketball team. Grade level is the random
variable (and notice that it is a qualitative variable).

Discrete variables are usually the result of counting.

The data are summarized with a relative frequency table.

Discrete Random Variable A random variable that can

assume only certain clearly separated values.

Examples.
Tossing a coin three times and counting the number of
heads.
A department store offers coupons with discounts of 10%,
15% and 25%.

Example: The Bank of the Carolinas counts the number of

credit cards carried by a group of customers.
The number of cards carried is the discrete random
variable.

Number of Credit Cards Relative Frequency

0 .03
1 .10
2 .18
3 .21
4 or more .48
Total 1.00

Continuous Random Variable A random variable that may

assume an infinite number of values within a given range.

Continuous variables are usually the result of measuring.

Summarized with a probability distribution.
Examples.
The time between flights between Atlanta and L A are 4.67
hours, 5.13 hours, and so on
The annual snowfall in Minneapolis, M N measured in
inches

x is a particular value.
P(x) is the probability of a particular value.

This is a weighted average.

© McGraw Hill 10
Mean, Variance, and Standard Deviation of a
Discrete Probability Distribution 2
The variance describes the amount of spread (or variation) in
the data

The computational steps are:

Subtract the mean from each value, square the difference.

Multiply each squared difference by its probability.
Sum the resulting products.

The standard deviation is the positive square root of the

variance.

1. What type of distribution is this?

2. How many cars do you expect to sell?
3. What is the variance?

© McGraw Hill 12
Mean, Variance, and Standard Deviation of a
Discrete Probability Distribution 4
Example continued.
This is a discrete probability distribution.
The mean is 2.1.

The variance is 1.290 so the standard deviation is 1.136.

There are four requirements of a binomial probability distribution.

Example: A young family has two children, both boys.

The probability of the third birth being a boy is still .50.

The gender of the third child is independent of the gender
of the other two.

To construct a binomial probability, use the number of trials and

probability of success

C is the combination of the successes.

n is the number of trials.
x is the number of successes.

is the probability of success.

For
Do not confuse with 3.1416 . . .

Mean:

Variance:

Example: Recently, [Link] reported that 28%

Example continued.

Number of Debit Card

P(x)
Purchases (x)
0 0.037
1 0.146
2 0.255
3 0.264
4 0.180
5 0.084
6 0.027
7 0.006
8 0.001
9 0.000
10 0.000

Access the text alternative for slide images.

Example continued.
Mean:
Variance:
so the standard deviation is 1.42
Could find the mean and variance by definition.

Tables are available for

various
n = 6 Probability

For the binomial distribution, the probability of success must stay the
same for each trial.
Large population.
Sampling with replacement.

Most sampling is done without replacement.

If the population is small, the probability of success will change for each
observation.
Example: The population has 20 items.
First sample: 1/20.
Second sample: 1/19.
Third sample: 1/18.

n/N > 0.05.

The probability of success changes for each trial.

N is the size of the population, is size of the sample.

S is the number of successes in the population.

Example continued.

Poisson describes the number of times some event occurs

Examples.
The distribution of errors in data entry.
The number of accidents on I-75 during a three-month
period.

is the mean number of occurrences.

e is the constant 2.71828.
For
Mean:
Variance:
n is the total number of trials.
is the probability of success.

Example: Budget Airlines is a seasonal airline that

Example continued.
The mean is
The probability of no lost bags is given by.

Access the text alternative for slide images.

Like with Binomial, there are tables.

x 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9

a. Convert this information on the number of calls to a probability distribution.

a. Exactly two of the sampled individuals have used a

discount broker?
b. Exactly four of them have used a discount broker?
c. None of them has used a discount broker?

© McGraw Hill 31
Question 21 L O6-
4
In a recent study, 90% of the homes in the United States
were found to have large-screen T Vs. In a sample of nine
homes, what is the probability that:

a. All nine have large-screen T Vs?

b. Less than five have large-screen T Vs?
c. More than five have large-screen T Vs?
d. At least seven homes have large-screen T Vs?

a. What is the probability the starting lineup consists of three

boys and two girls?
b. What is the probability the starting lineup is all boys?
c. What is the probability there is at least one girl in the
starting lineup?

a. What is the probability that three loans will be defaulted?

b. What is the probability that at least three loans will be
defaulted?

Because learning changes

everything.®

[Link]

Return to parent-slide containing images.

The x-axis represents number of heads labeled 0, 1, 2, and 3 from

Return to parent-slide containing images.

The x-axis represents Number of Purchases with a Debit Card

Return to parent-slide containing images.

Success and probability are the column heads in columns A

and B, respectively, of row 1. The row entries are shown from
rows 2 through 9, as follows: 0, 0.9608. 1, 0.0384. 2, 0.0008.
3, 0.0000. 4, 0.0000. 5, 0.0000. 6, 0.0000. 7, 0.0000.

Return to parent-slide containing images.

Chapter 7
Continuous Probability Distributions

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