PART 2

Lesson 3: Random variables

• Is a variable being measured to produce numerical observations
associated with the random outcomes of a chance experiment.
 Types of Random Variables
Arandom variable is called a discrete random variable if its
set of possible outcomes is countable.

When a random variable can take on values on a continuous

scale, it is called a continuous random variable.

• Example: Classify the following random variables as discrete or

continuous.
• X: the number of automobile accidents per year in Manila
• Y: the length of time to play 18 holes of golf
 Types of Random Variables
Arandom variable is called a discrete random variable if its
set of possible outcomes is countable.

When a random variable can take on values on a continuous

scale, it is called a continuous random variable.
• M: the amount of milk produced yearly by a particular cow
• N: the number of eggs laid out each month by a hen
• P: the number of building permits issued each month in a certain
city
• Q: the weight of grain produced per acre
Types of Random Variables
• Discrete random variables
• Number of sales
• Number of calls
• Shares of stock
• People in line
• Mistakes per page • Continuous random
variables
• Length
• Depth
• Volume
• Time
• Weight
 Types of Random Variables… Example

Students No. of Number No. of Weights Heights No. of No. of

Siblings Electronic Friends (lbs) (meters) doing Hours
Gadgets assignment playing
pokemon
in a day

A 2 3 1 105 1.8 3 2
B 5 1 2 120 1.7 2 1.5
C 6 2 4 145 2.3 1 1
D 2 4 8 102 1.6 4 3
E 1 1 1 200 1.7 3 4
F 0 2 0 195 1.5 2.5 1
RANDOM VARIABLES
We use a capital letter, say X, to
denote a random variable and its POSSIBLE OUTCOMES VALUE OF THE
corresponding small letter, x in this (SAMPLE SPACE) RANDOM VARIABLE X
case, for one of its values. (NUMBER OF RED BALLS)

RR 2
Example 1: Two balls are drawn in
succession without replacement RB 1
from an urn containing 4 red balls BR 1
and 3 black balls. The possible
BB 0
outcomes and the values x of the
random variable X, where X is the
number of red balls are:
RANDOM VARIABLES
Example 2:
A coin is tossed twice. What are the possible outcomes and the
values x of the random variable X, where X is the number of head.

Example 3.
Three coins are tossed. What are the possible outcomes and the
values x of the random variable X, where X is the number of tails.
 Discrete Probability Distributions
of Random Variables
A discrete probability distribution consists of the values
a random variable can assume and the corresponding
probabilities of the values.

Example: Finding the probability corresponding to a given

random variable
Number of Tails
Suppose three coins are tossed. Let Y be the random variable
representing the number of tails that occur. Find the probability of
each of the values of the random variable Y.
Discrete Probability Distributions
of Random Variables

Step 1:
Determine the sample space. Let H represent head and T
represent tail.

The sample space for this experiment is:

S = {TTT, TTH, THT, HTT, HHT, HTH, THH, HHH}
Discrete Probability Distributions
of Random Variables

Step 2:
Count the number of tails in
each outcome in the sample
space and assign this
number to this outcome.
Discrete Probability Distributions
of Random Variables

Step 3:
There are four possible values of the random variable Y
representing the number of tails. These are 0, 1, 2, and 3.
Assign probability values P(Y) to each value of the random
variable.
 Discrete Probability Distributions
of Random Variables
Continuation Step 3

• There are 8 possible outcomes and no tail occurs once, so the probability that we
shall assign to the random variable 0 is 1/8 .
• There are 8 possible outcomes and 1 tail occurs three times, so the probability
that we shall assign to the random variable 1 is 3/8 .
• There are 8 possible outcomes and 2 tails occur three times, so the probability
that we shall assign to the random variable 2 is 3/8 .
• There are 8 possible outcomes and 3 tails occur once, so the probability that we
shall assign to the random variable 3 is 1/8 .
Discrete Probability Distributions
of Random Variables

The Probability Distribution

of Discrete Random Variable Y
 Discrete Probability Distributions
of Random Variables

Number of Blue Balls

Two balls are drawn in succession without replacement from an

urn containing 5 red balls and 6 blue balls. Let Z be the random
variable representing the number of blue balls. Construct the
probability distribution of the random variable Z.
 Discrete Probability Distributions
of Random Variables

Number of Defective Cell Phones

Suppose three cell phones are tested at random. Let D represent

the defective cell phone and let N represent the non-defective cell
phone. If we let X be the random variable for the number of
defective cell phones, construct the probability distribution of the
random variable X.
 Discrete Probability Distributions
of Random Variables
Step 1:
Determine the sample space. Let D represent the defective cell
phone and N represent the non-defective cell phone.

The sample space for this experiment is:

S = {NNN, NND, NDN, DNN, NDD, DND, DDN, DDD}
 Discrete Probability Distributions
of Random Variables

Step 2:
Count the number of
defective cell phones in each
outcome in the sample space
and assign this number to
this outcome.
Discrete Probability Distributions
of Random Variables
Step 3:
There are four possible values of the random variable
X representing the number of defective cell phones.
These are 0, 1, 2, and 3. Assign probability values
P(X), to each value of the random variable.
 Discrete Probability Distributions
of Random Variables

Continuation Step 3

• There are 8 possible outcomes and no defective cell phone occurs once, so the
probability that we shall assign to the random variable 0 is 1/8 .
• There are 8 possible outcomes and 1 defective cell phone occurs three times, so
the probability that we shall assign to the random variable 1 is 3/8 .
• There are 8 possible outcomes and 2 defective cell phones occur three times, so
the probability that we shall assign to the random variable 2 is 3/8 .
• There are 8 possible outcomes and 3 defective cell phones occur once, so the
probability that we shall assign to the random variable 3 is 1/8 .
Discrete Probability Distributions
of Random Variables

Probability Distribution
of Random Variable X
 Discrete Probability Distributions
of Random Variables

Number of Blue Balls

Two balls are drawn in succession without replacement from an

urn containing 5 red balls and 6 blue balls. Let Z be the random
variable representing the number of blue balls. Construct the
probability distribution of the random variable Z.
 Discrete Probability Distributions
of Random Variables

Basketball Point Shots

A basketball player shoots three free throws. He typically makes a basket exactly 60% of
the time. The random variable X is the number of baskets successfully made.

Value of X 0 1 2 3
What is the probability that the
player successfully makes at Probability 0.064 0.288 0.432 0.216

least* two baskets?

Answer:
P(X≥2) = P(X=2 or X=3)
= (0.432+0.216) = 0.648
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 Discrete Probability Distributions
of Random Variables

More Examples. Determine whether the distribution represents a

probability distribution.
 Discrete Probability Distributions
of Random Variables
More Examples. Construct the probability distribution for the random
variables described in each of the following situations.
1. Four coins are tossed. Let Z be the random variable
representing the number of heads that occur. Find the
values of the random variable Z.

2. A coin is biased so that a head is twice as likely to occur as a

tail. Find the probability distribution of the random variable
X representing the number of heads when the coin is tossed
three times.
•
 Discrete Probability Distributions
of Random Variables
More Examples. Construct the probability distribution for the random
variables described in each of the following situations.
3. A shipment of 7 television sets contains 2 defective sets. A hotel
makes a random purchase of 3 of the sets. If X is the number of
defective sets purchased by the hotel, find the probability
distribution of X. Express the result as a formula.

4. Determine the value c so that the function P(x) = c(x2 + 4), for x = 0,
1, 2, 3, can serve as a probability distribution of the discrete
random variable X.
Learning Activity 2.3a
1. Telephones per Household. A study was conducted to determine the number
of telephones each household has. The data are shown here.
Number of telephones 0 1 2 3 4
Frequency 2 30 48 13 7
Construct a probability distribution table.

2. Fifteen words are written on small chips of paper and places in a bowl. There
are three words with three letters, two words with five letters, four words
with sic letters, two words with seven letters and one words with ten letters.
A chip is randomly selected from the bowl. Let X denote the number of
letters in the word written on the selected chip. Construct a probability
distribution table.

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Learning Activity 2.3a
3. An experiment consists of drawing a random sample of four LED lights from a
shipment which is known to contain 5% defective items. Let Y denote the
number of defective items found in the sample. Construct a probability
distribution table.

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Mean of a Discrete Random Variable
For a discrete random variable X with
the probability distribution shown here,

The mean µ (expected value) of X is found by multiplying each

possible value of X by its probability, and then adding the
products.
Mean of a Discrete Random Variable
Example 1. A 60% shooting basketball player shoots three free throws.
The random variable X is the number of baskets successfully made.
Value of X 0 1 2 3 The mean µ of X is
µ = (0*0.064) + (1*0.288) + (2*0.432) + (3*0.216)
Probability 0.064 0.288 0.432 0.216
= 1.8

In other words, out of 3 throws, in the long run, this player

would make 1.8 baskets.
Mean of a Discrete Random Variable
Example 2. Linda is a sales associate at a large auto dealership. At her
commission rate of gross profit on each vehicle she sells, Linda expects
to earn Php 35,000 for each car sold and Php 40,000 for each truck or
SUV sold. Linda motivates herself by using probability estimates of her
sales. For a sunny Saturday in March, she estimates her car sales as
follows:
Cars Sold (X) 0 1 2 3

P(x) 0.3 0.4 0.2 0.1

Trucks Sold (Y) 0 1 2 3

P(y) 0.4 0.5 0.1 0

 What is Linda’s expected income?

 Linda is given the option of switching to a truck-only department. Should she
take that job?
Mean of a Discrete Random Variable
 What is Linda’s expected income?

μcars sold = 0*0.3 + 1*0.4 + 2+0.2 + 3*0.1 = 1.1 cars

μtrucks sold = 0*0.4 + 1*0.5 + 2*0.1 + 3*0 = 0.7 trucks

If she gets 3500 per car, and 4000 per suv/truck,

Linda would expect to make: 35000*1.1 + 40000*0.7 = __?_

Cars Sold (X) 0 1 2 3 Trucks Sold (Y) 0 1 2 3

P(x) 0.3 0.4 0.2 0.1 P(y) 0.4 0.5 0.1 0

Mean of a Discrete Random Variable
 Linda is given the option of switching to a truck-only department. Should she
take that job?
Answer: It might be tempting to compare expected value for each: 35,000*1.1 = _?_ for cars v.s.
40,000*0.7 = __? for trucks and infer that Linda should focus specifically on cars and just forget
about trucks.
However, this would be a mistake. Can you see why?
Answer: If Linda focused only on trucks, she would not be spending any of her time on cars. As a
result, she is likely to sell more than 0.7 trucks on a given day. However, we have no idea just
how many more trucks she would sell. In other words, we do not have enough information to make
a sound decision.
IMPORTANT: In fact, the expected value for income we calculated earlier is not enough. To
do a proper evaluation of Linda’s expected income and so on, we should not have neglected to also
consider the spread (e.g. the standard deviation).
Cars Sold 0 1 2 3 Trucks Sold 0 1 2 3
Prob 0.3 0.4 0.2 0.1 Prob 0.4 0.5 0.1 0
Standard Deviation of a Discrete Random Variable
For a discrete random variable X
with the probability distribution shown

and mean µX, the s of X is found by multiplying each deviation by its

probability and then adding all the products.

This formula shows variance, taking the square root would give us s:
Standard Deviation of a Discrete Random Variable
Example 1. A basketball player shoots three free throws. The random
variable X is the number of baskets successfully made.
µX = 1.8.
Value of X 0 1 2 3
Probability 0.064 0.288 0.432 0.216

The variance σ2 of X is
σ2 = 0.064*(0−1.8)2 + 0.288*(1−1.8)2 + 0.432*(2−1.8)2 + 0.216*(3−1.8)2
= 0.20736 + 0.18432 + 0.01728 + 0.31104
= 0.72  Take the square root to get SD: SD = 0.85
Standard Deviation of a Discrete Random Variable
Example 2. Linda is a sales associate at a large auto dealership. At her
commission rate of gross profit on each vehicle she sells, Linda expects
to earn Php 35,000 for each car sold and Php 40,000 for each truck or
SUV sold. Linda motivates herself by using probability estimates of her
sales. For a sunny Saturday in March, she estimates her car sales as
follows:
Cars Sold (X) 0 1 2 3

P(x) 0.3 0.4 0.2 0.1

Trucks Sold (Y) 0 1 2 3

P(y) 0.4 0.5 0.1 0

 Find the standard deviation.

Applications:
The expected value of the random variable represents the
average value of the variable when the experiment is repeated
many times. It has many applications in real life, such as in
comparing insurance policies, making financial decisions, in deciding
whether or not to participate in games of chance like lotteries or
gambling.

Let X be the random variable representing the amounts of gains or

losses.
Applications:
Example 1. Suppose that you pay 1 peso to play a game in which a die is
rolled. For each 5 that shows on a die you receive 3 pesos. What is
your expected loss/gain on each play?

Let X be the amount a player can win or lose in one round of the game.
win lose
X 3-1 -1
P(x) 1/6 5/6
XP(x) 2/6 -5/6

• Expected Loss = -3/6 = 0.50 or 50 centavos every game.

Applications:
Example 2. A raffle is held to raise money for a charity. A raffle
ticket costs Php 100 and there are 2, 500 tickets to be sold. The ticket
drawn in the raffle will win for its holder the price of 100, 000.
Compute the mean value that a person expects in 1 raffle ticket.

Let X denotes the net proceeds of the ticket holder

X 100,000-100 -100
P(x) 1/2500 2,499/2500

• On the average, a person expects to lose Php 30 every ticket.

Applications:
Example 3. A car insurance company offers to pay Php 500, 000 if car
is stolen or destroyed beyond repair. The insurance policy costs
Php24,000 and the probability that the company will need to pay the
amount of insurance is 0.002. Find the expected value of the insurance
to car owners.
Let X represents the policy owner’s net gain
X 500,000-24,000 -24,000
P(x) 0.002 0.998

The negative expected value (mean value) shows that the policy is designed to the
advantage of the insurance company but car owners still buy these insurance policies
because the security it provides in the even of the loss is worth the cost to them.
Applications:
Example 4. A company estimates that about 0.7% of their products will
fail after the 1-year warranty but within two years from the date of
purchase. If this happens, the company will pay a replacement cost
Php3,500. If the company offers its customers an extended warranty
covering a period of two years for the price of Php 480, what is the
company’s expected value for each extended warranty that it can sell?
Let X be the random variable represents the company’s net gains.
X 480-3,500 480
P(x) 0.007 0.993
This shows that on the average, the company stands to gain 455.50 pesos for each
extended warranty it sell. Whatever costs incurred from the replacement claims can be
offset by the revenue from the sales of the warranty.
Applications:
Example 4. Tony and Alex are planning to invest some of their savings
in bonds. They went to a bank to talk to their investment advisor and
they were given two investment options on bonds: (a) 6% interest but
with a 3% default rate; (b) 5% interest with a default rate of 2%. In
case of a bond default, all the money invested in bonds will be lost. They
plan to invest 200,000 pesos of their savings on bond. Find the
expected value in returns on two bonds. Based on the results which
bond should Tony and Alex invest in?
Let X be the returns on the first bond
Y be the returns on the second bond
• The proceed for the first bond is 200, 000x0.06=12,000
• The proceed for the second bond is 200,000x0.05=10,000
Applications:
Let X be the returns on the first bond
Y be the returns on the second bond
• The proceed for the first bond is 200, 000x0.06=12,000
• The proceed for the second bond is 200,000x0.05=10,000
X 12,000 -200,000
P(x) 0.97 0.03

Y 10,000 -200,000
P(y) 0.98 0.02

• The expected values are E(X)=6,640 and E(Y)=5,800.

Applications:
X 12,000 -200,000
P(x) 0.97 0.03

Y 10,000 -200,000
P(y) 0.98 0.02

• The expected values are E(X)=6,640 and E(Y)=5,800.

Since the expected value of Y is higher than the expected value of X, it would be
better for Tony and Alex to invest money on the second bond.
Learning Activity 2.3b
1. If the probability distribution for a discrete random variable is given by the formula:
𝑐𝑥, 𝑖𝑓 𝑥 = 0, 1, 4
𝑃 𝑥 =
0, 𝑖𝑓 𝑥 = 3
Find the value of c.
2. A computer store received a delivery of 12 tablets from one of its suppliers. The
delivery contains 3 defective units and the store’s technician test the four of the
units.
a. Construct the probability distribution for the number of good units that are tested.
b. Construct the probability distribution for the number of defective units that are tested.
c. The entire delivery will be returned if at least two defective units are identified from the
units that are tested. Find the probability that the delivery will be returned.
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Learning Activity 2.3b
3. At a car wash, an attendant is paid according to the number of cars that are serviced
during his shift. If X is the amount of income the attendant receives over a two-
hour period, compute the employee’s expected earnings for two hours. The
probability distribution of X is shown below:

x 50 75 100 125 150

P(x) 1/7 2/7 2/7 1/7 1/7

4. A woman can earn 50,000 pesos in one year with a probability of 0.35 or lose 15,000
over the same period with a probability of 0.65 by investing in the stocks of a
certain company. Compute her expected earnings from this investment.

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Learning Activity 2.3b
5. The program committee for the 25th anniversary celebration of a company is selling
1,000 tickets ate 250 pesos each. The sole winner will be chosen by an electronic
raffle and will win a cash prize of 100,000 pesos. Find the expected net gain of an
employee who buys:
a. one ticket
b. two tickets
c. three tickets

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