Skip to ContentGo to accessibility pageKeyboard shortcuts menu
OpenStax Logo

Menu
Table of contents
  1. Preface
  2. 1 Sampling and Data
    1. Introduction
    2. 1.1 Definitions of Statistics, Probability, and Key Terms
    3. 1.2 Data, Sampling, and Variation in Data and Sampling
    4. 1.3 Levels of Measurement
    5. 1.4 Experimental Design and Ethics
    6. Key Terms
    7. Chapter Review
    8. Homework
    9. References
    10. Solutions
  3. 2 Descriptive Statistics
    1. Introduction
    2. 2.1 Display Data
    3. 2.2 Measures of the Location of the Data
    4. 2.3 Measures of the Center of the Data
    5. 2.4 Sigma Notation and Calculating the Arithmetic Mean
    6. 2.5 Geometric Mean
    7. 2.6 Skewness and the Mean, Median, and Mode
    8. 2.7 Measures of the Spread of the Data
    9. Key Terms
    10. Chapter Review
    11. Formula Review
    12. Practice
    13. Homework
    14. Bringing It Together: Homework
    15. References
    16. Solutions
  4. 3 Probability Topics
    1. Introduction
    2. 3.1 Terminology
    3. 3.2 Independent and Mutually Exclusive Events
    4. 3.3 Two Basic Rules of Probability
    5. 3.4 Contingency Tables and Probability Trees
    6. 3.5 Venn Diagrams
    7. Key Terms
    8. Chapter Review
    9. Formula Review
    10. Practice
    11. Bringing It Together: Practice
    12. Homework
    13. Bringing It Together: Homework
    14. References
    15. Solutions
  5. 4 Discrete Random Variables
    1. Introduction
    2. 4.1 Hypergeometric Distribution
    3. 4.2 Binomial Distribution
    4. 4.3 Geometric Distribution
    5. 4.4 Poisson Distribution
    6. Key Terms
    7. Chapter Review
    8. Formula Review
    9. Practice
    10. Homework
    11. References
    12. Solutions
  6. 5 Continuous Random Variables
    1. Introduction
    2. 5.1 Properties of Continuous Probability Density Functions
    3. 5.2 The Uniform Distribution
    4. 5.3 The Exponential Distribution
    5. Key Terms
    6. Chapter Review
    7. Formula Review
    8. Practice
    9. Homework
    10. References
    11. Solutions
  7. 6 The Normal Distribution
    1. Introduction
    2. 6.1 The Standard Normal Distribution
    3. 6.2 Using the Normal Distribution
    4. 6.3 Estimating the Binomial with the Normal Distribution
    5. Key Terms
    6. Chapter Review
    7. Formula Review
    8. Practice
    9. Homework
    10. References
    11. Solutions
  8. 7 The Central Limit Theorem
    1. Introduction
    2. 7.1 The Central Limit Theorem for Sample Means
    3. 7.2 Using the Central Limit Theorem
    4. 7.3 The Central Limit Theorem for Proportions
    5. 7.4 Finite Population Correction Factor
    6. Key Terms
    7. Chapter Review
    8. Formula Review
    9. Practice
    10. Homework
    11. References
    12. Solutions
  9. 8 Confidence Intervals
    1. Introduction
    2. 8.1 A Confidence Interval for a Population Standard Deviation, Known or Large Sample Size
    3. 8.2 A Confidence Interval for a Population Standard Deviation Unknown, Small Sample Case
    4. 8.3 A Confidence Interval for A Population Proportion
    5. 8.4 Calculating the Sample Size n: Continuous and Binary Random Variables
    6. Key Terms
    7. Chapter Review
    8. Formula Review
    9. Practice
    10. Homework
    11. References
    12. Solutions
  10. 9 Hypothesis Testing with One Sample
    1. Introduction
    2. 9.1 Null and Alternative Hypotheses
    3. 9.2 Outcomes and the Type I and Type II Errors
    4. 9.3 Distribution Needed for Hypothesis Testing
    5. 9.4 Full Hypothesis Test Examples
    6. Key Terms
    7. Chapter Review
    8. Formula Review
    9. Practice
    10. Homework
    11. References
    12. Solutions
  11. 10 Hypothesis Testing with Two Samples
    1. Introduction
    2. 10.1 Comparing Two Independent Population Means
    3. 10.2 Cohen's Standards for Small, Medium, and Large Effect Sizes
    4. 10.3 Test for Differences in Means: Assuming Equal Population Variances
    5. 10.4 Comparing Two Independent Population Proportions
    6. 10.5 Two Population Means with Known Standard Deviations
    7. 10.6 Matched or Paired Samples
    8. Key Terms
    9. Chapter Review
    10. Formula Review
    11. Practice
    12. Homework
    13. Bringing It Together: Homework
    14. References
    15. Solutions
  12. 11 The Chi-Square Distribution
    1. Introduction
    2. 11.1 Facts About the Chi-Square Distribution
    3. 11.2 Test of a Single Variance
    4. 11.3 Goodness-of-Fit Test
    5. 11.4 Test of Independence
    6. 11.5 Test for Homogeneity
    7. 11.6 Comparison of the Chi-Square Tests
    8. Key Terms
    9. Chapter Review
    10. Formula Review
    11. Practice
    12. Homework
    13. Bringing It Together: Homework
    14. References
    15. Solutions
  13. 12 F Distribution and One-Way ANOVA
    1. Introduction
    2. 12.1 Test of Two Variances
    3. 12.2 One-Way ANOVA
    4. 12.3 The F Distribution and the F-Ratio
    5. 12.4 Facts About the F Distribution
    6. Key Terms
    7. Chapter Review
    8. Formula Review
    9. Practice
    10. Homework
    11. References
    12. Solutions
  14. 13 Linear Regression and Correlation
    1. Introduction
    2. 13.1 The Correlation Coefficient r
    3. 13.2 Testing the Significance of the Correlation Coefficient
    4. 13.3 Linear Equations
    5. 13.4 The Regression Equation
    6. 13.5 Interpretation of Regression Coefficients: Elasticity and Logarithmic Transformation
    7. 13.6 Predicting with a Regression Equation
    8. 13.7 How to Use Microsoft Excel® for Regression Analysis
    9. Key Terms
    10. Chapter Review
    11. Practice
    12. Solutions
  15. A | Statistical Tables
  16. B | Mathematical Phrases, Symbols, and Formulas
  17. Index

Introduction

The characteristics of a probability distribution or density function (PDF) are as follows:

  1. Each probability is between zero and one, inclusive (inclusive means to include zero and one).
  2. The sum of the probabilities is one.

4.1 Hypergeometric Distribution

The combinatorial formula can provide the number of unique subsets of size x that can be created from n unique objects to help us calculate probabilities. The combinatorial formula is nx = nCx =n!x!(n-x)!nx =nCx=n!x!(n-x)!

A hypergeometric experiment is a statistical experiment with the following properties:

  1. You take samples from two groups.
  2. You are concerned with a group of interest, called the first group.
  3. You sample without replacement from the combined groups.
  4. Each pick is not independent, since sampling is without replacement.

The outcomes of a hypergeometric experiment fit a hypergeometric probability distribution. The random variable X = the number of items from the group of interest. h(x) = A x N-A n-x Nnh(x)= A x N-A n-x Nn.

4.2 Binomial Distribution

A statistical experiment can be classified as a binomial experiment if the following conditions are met:

  1. There are a fixed number of trials, n.
  2. There are only two possible outcomes, called "success" and, "failure" for each trial. The letter p denotes the probability of a success on one trial and q denotes the probability of a failure on one trial.
  3. The n trials are independent and are repeated using identical conditions.

The outcomes of a binomial experiment fit a binomial probability distribution. The random variable X = the number of successes obtained in the n independent trials. The mean of X can be calculated using the formula μ = np, and the standard deviation is given by the formula σ =   npq   npq .

The formula for the Binomial probability density function is

P(x)=n!x!(n-x)!·pxq(n-x)P(x)=n!x!(n-x)!·pxq(n-x)

4.3 Geometric Distribution

There are three characteristics of a geometric experiment:

  1. There are one or more Bernoulli trials with all failures except the last one, which is a success.
  2. In theory, the number of trials could go on forever. There must be at least one trial.
  3. The probability, p, of a success and the probability, q, of a failure are the same for each trial.

In a geometric experiment, define the discrete random variable X as the number of independent trials until the first success. We say that X has a geometric distribution and write X ~ G(p) where p is the probability of success in a single trial.

The mean of the geometric distribution X ~ G(p) is μ = 1/p1/p where x = number of trials until first success for the formula P(X=x) = (1-p) x-1 p P(X=x)= (1-p) x-1 p where the number of trials is up and including the first success.

An alternative formulation of the geometric distribution asks the question: what is the probability of x failures until the first success? In this formulation the trial that resulted in the first success is not counted. The formula for this presentation of the geometric is:

P(X=x)=p(1−p)xP(X=x)=p(1−p)x
4.4


The expected value in this form of the geometric distribution is

μ=1−ppμ=1−pp


The easiest way to keep these two forms of the geometric distribution straight is to remember that p is the probability of success and (1−p) is the probability of failure. In the formula the exponents simply count the number of successes and number of failures of the desired outcome of the experiment. Of course the sum of these two numbers must add to the number of trials in the experiment.

4.4 Poisson Distribution

A Poisson probability distribution of a discrete random variable gives the probability of a number of events occurring in a fixed interval of time or space, if these events happen at a known average rate and independently of the time since the last event. The Poisson distribution may be used to approximate the binomial, if the probability of success is "small" (less than or equal to 0.01) and the number of trials is "large" (greater than or equal to 25). Other rules of thumb are also suggested by different authors, but all recognize that the Poisson distribution is the limiting distribution of the binomial as n increases and p approaches zero.

The formula for computing probabilities that are from a Poisson process is:

P(x)=μxe-μx!P(x)=μxe-μx!

where P(X) is the probability of successes, μ (pronounced mu) is the expected number of successes, e is the natural logarithm approximately equal to 2.718, and X is the number of successes per unit, usually per unit of time.

Order a print copy

As an Amazon Associate we earn from qualifying purchases.

Citation/Attribution

Want to cite, share, or modify this book? This book uses the Creative Commons Attribution License and you must attribute OpenStax.

Attribution information
  • If you are redistributing all or part of this book in a print format, then you must include on every physical page the following attribution:
    Access for free at https://openstax.org/books/introductory-business-statistics/pages/1-introduction
  • If you are redistributing all or part of this book in a digital format, then you must include on every digital page view the following attribution:
    Access for free at https://openstax.org/books/introductory-business-statistics/pages/1-introduction
Citation information

© Jun 23, 2022 OpenStax. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution License . The OpenStax name, OpenStax logo, OpenStax book covers, OpenStax CNX name, and OpenStax CNX logo are not subject to the Creative Commons license and may not be reproduced without the prior and express written consent of Rice University.