BITS Pilani

Pilani Campus

Course No: BAZC413

Applied Statistical Methods

 Revision of Probability Concepts
(Lecture 1-3)
Sumanta Pasari
Assistant Professor,
BITS Pilani Department of Mathematics,
Pilani Campus BITS Pilani, Pilani Campus
 Books

T1: David R Anderson, Dennis J Sweeney, Thomas A Williams,

Jeffrey D. Camm and James J. Cochran, Statistics for
Business and Economics. Twelfth edition. Cengage
Learning. 2014

Reference Books:
R1: Deepak Chawla and Neena Sondhi, Research
Methodology. Second Edition, Vikas. 2016
R2: Richard Johnson and Dean W Wichern, Applied
Multivariate Statistical Analysis, Pearson, 2007 (free
online pdf available)
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 Evaluation Scheme

Component Type Duration Weightage

Quizzes (best 2 out of 3) Unannounced 15 min each 10%
Experiential Learning E-mail About a week 15%
Mid-Semester Test Closed Book 90 min 30%
Comprehensive Exam Closed/Open Book 180 min 45%

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 Course Objectives
1. To provide exposure to various theoretical univariate/multivariate
methods and their practical applications.
• Probability distributions
• Statistical Inference (one population and two populations)
• ANOVA (Analysis of Variance)
• Regression and correlation
• Discriminant analysis; factor and cluster analysis
• Time series analysis and forecasting
• Nonparametric methods and statistical quality control

2. To be familiar with Excel to solve Business Statistics problems

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Examples

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Examples

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 Examples
Dullus County Schools is renewing its school bus service contract for the coming year,
and must select one of the two bus companies, the Milbank company or the Gulf Park Company.
The variance of the arrival of pick-up/delivery times will be used as a measure of quality service.
Consider sample data collection: n1  26, s12  48 and n2  16, s22  20.
Formulate a hypothesis test H 0 :  12   22 against H1:  12   22 . Test at   0.10.

For a public opinion survey, a sample of 41 women and 31 men is used to study the
attitudes about current political issues. The researcher conducted this study to see whether the
sample data indicate that women show a greater variation in attitude of political issues.
Consider sample data collection: n1  41, s12  120 and n2  31, s22  80.
Formulate a hypothesis test H 0 :  women
2
  men
2
against H1:  women
2
  men
2
. Test at   0.05

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 Examples
J.D. Power and Associates use the proportion of owners likely to re-purchase
a particular automobile as an indication of customer loyality for the automobile.
(a) p1  proportion likely to repurchase Impala for the population of Chevrolet Impala
(b) p2  proportion likely to repurchase Fusion for the population of Ford Fusion
(c) p3  proportion likely to repurchase Accord for the population of Honda Accord
Ho : p1  p2  p3
Ha : Not all population proportions are equal
Automobile Owners
Likely to Impala Fusion Accord Total
repurchase YES 69 120 123 312
NO 56 80 52 188
Total 125 200 175 500

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 Examples
A beer industry association conducted a survey to determine the preferences
of beer drinkers for light, regular, and dark beers. A sample of 200 is taken. The survey
also considered the gender: male or female drinkers. A research question arises, whether
the beer preference and gender are independent.
Ho : Beer preference is independent of gender
Ha : Beer preference is not independent of gender

Gender
Beer Preferences Male Female Total
Light 51 39 90
Regular 56 21 77
Dark 25 8 33
Total 132 68 200

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Examples

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Examples

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Examples

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Examples

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 Axioms of Probability
Axiom 1 : 0  P(A)  1 for any event A of S.
Axiom 2 : P(S)  1.
Axiom 3 : If A, B are any two mutually exclusive events, then
P(A  B)  P(A)  P(B)

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 Conditional Probability
For the events A, B in a sample space S, with P(B)  0,
the conditional probability of A given B, is defined by
P(A  B)
P(A|B)  , P(B) > 0
P(B)

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Bayes’ Theorem

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 Bayes’ Theorem
HW. A desk lamp produced by The Luminar Company was found to be defective (D). There are
three factories (A, B, C) where such desk lamps are manufactured. A Quality Control Manager
(QCM) is responsible for investigating the source of found defects. This is what the QCM knows
about the company's desk lamp production and the possible source of defects:

The QCM would like to answer the following question: If a randomly selected lamp is defective,
what is the probability that the lamp was manufactured in factory A, B, or C?

Note:
The probabilities P(A), P(B) and P(C) are often referred to as prior probabilities, because they
are the probabilities of events A, B, and C that we know prior to obtaining any additional
information. The conditional probabilities P(A | D), P(B | D), and P(C | D) are often referred to
as posterior probabilities, because they are the probabilities of the events after we have
obtained additional information.

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Bayes’ Theorem

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 Random Variable

Random variable X is a numerical outcome (real value)

that results from a random experiment.

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 Bernoulli Distribution
• If the event space of a random experiment consists of only two outcomes,
success s and failure f, with probabilities p and q (=1-p) respectively, then
such experiment is called Bernoulli trial.
• A sequence of n independent and identical Bernoulli trials is called
Bernoulli sequence.
• For example, tossing of a coin, choosing an answer in a multiple-type
question test, picking a ball from an urn containing red and white balls, etc.
The pdf of X having a Bernoulli distribution with parameter p is given by

 p x 1  p 1 x ; x  0,1
f  x  P  X  x  
0 ; otherwise

Mean = p and Variance = pq

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 Binomial Distribution
• The sample space in binomial distribution consists of a sequence of n
independent and identical Bernoulli trials.

• Suppose success occurs x times among n trials. Let probability of success is

p. Then the random variable X is called binomial variate with parameters n
and p; X ~ B(n,p)

 n  x
 
n x
  p 1  p ; x  0,1, 2, , n and 0  p  1
f  x   P  X  x    x 

 0 ; otherwise

Mean     np; Variance  2   np 1  p   npq

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 Poisson Distribution
Poisson distribution can be used as a limiting case of binomial distribution.
Examples: number of confirmed ticket passengers who miss to catch a train in a day,
number of misprints in a book, number of suicides in a locality in six months, number
of patients admitted in emergency of a hospital in a day, number of mid-collision air
accidents in some unit of time, etc.
Note that the random variable in the above examples takes countably infinite values.
 e   x
 ; x  0,1, 2, and   0
f  x   P  X  x    x!

 0 ; otherwise
f  x  : the probability of x occurrences in an interval
 : expected value or mean number of occurrences in an interval
e  2.71828
   s , where  is the average number of occurrences per unit 
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Hypergeometric Distribution

  r  N  r 
   
  
x n  x 
f  x  P  X  x   N
  
 n
0 ; otherwise
f  x  : the probability of x successes in n trials
N : number of total elements in population
r : number of elements in population labeled success

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Bivariate Distributions

BAZC413: Introduction to Statistical Methods 25 BITS Pilani, Pilani Campus