Problem 17 - Basic Statistics for Business and Economics with Student

Question

A recent survey by the American Accounting Association revealed 23 percent of students graduating with a major in accounting select public accounting. Suppose we select a sample of 15 recent graduates. What is the probability two select public accounting? A telemarketer makes six phone calls per hour and is able to make a sale on 30 percent of these contacts. During the next two hours, find: a. The probability of making exactly four sales. b. The probability of making no sales. c. The probability of making exactly two sales. d. The mean number of sales in the two-hour period.

Step-by-Step Solution

Answer

Probability: 2 graduates, 4 sales, 0 sales, 2 sales - use binomial formula; mean sales = 3.6.

Step 1: Define the Problem

We are tasked with finding the probability of certain events from given data for two distinct scenarios: accounting graduates and telemarketing sales.

Step 2: Calculate Probability for Accounting Graduates

We use the binomial probability formula for this part. Given \(n = 15\) (graduates), \(p = 0.23\) (probability of selecting public accounting), and \(k = 2\) (graduates selecting public accounting), we find \(P(X=2)\):\[P(X = k) = \binom{n}{k} p^k (1-p)^{n-k}\]\[P(X = 2) = \binom{15}{2} (0.23)^2 (0.77)^{13}\]

Step 3: Calculate Sales Probability for Telemarketer

The telemarketer problem is another binomial scenario, with \(n = 12\) (calls in two hours), \(p = 0.30\) (probability of making a sale), and varying values of \(k\) (specific number of sales).

Step 4: Probability of Making Exactly Four Sales

Use the binomial formula with \(k = 4\):\[P(X=4) = \binom{12}{4} (0.30)^4 (0.70)^8\]

Step 5: Probability of Making No Sales

For zero sales, use \(k = 0\):\[P(X=0) = \binom{12}{0} (0.30)^0 (0.70)^{12}\]

Step 6: Probability of Making Exactly Two Sales

Use the binomial formula with \(k = 2\):\[P(X=2) = \binom{12}{2} (0.30)^2 (0.70)^{10}\]

Step 7: Calculate Mean Number of Sales

The mean \( \mu \) for the binomial distribution is \(np\). For \(n = 12\) and \(p = 0.30\),\[ \mu = 12 \times 0.30 = 3.6\]

Key Concepts

Binomial Distribution

The binomial distribution is a common statistical distribution used for modeling the number of successes in a fixed number of independent trials. Each trial must result in one of two outcomes: success or failure. This distribution is characterized by two parameters: the number of trials, denoted by \(n\), and the probability of success in a single trial, denoted by \(p\). For example, in the survey concerning accounting graduates, selecting public accounting is regarded as a success, while choosing any other field is a failure.

The binomial distribution formula for calculating the probability of \(k\) successes in \(n\) trials is given by:
\[P(X = k) = \binom{n}{k} p^k (1-p)^{n-k}\]
where \(\binom{n}{k}\) is the number of combinations of \(n\) items taken \(k\) at a time. This formula helps assess events such as the number of graduates picking public accounting or the telemarketer's sales count in specific hourly spans.

Probability Calculation

Probability calculation in binomial scenarios involves determining the likelihood of a certain number of successes. By using the binomial distribution formula, you identify how likely a specific outcome is compared to all possible outcomes.

Consider two examples:

• For the accounting graduates, we want the probability that 2 out of 15 select public accounting. Here, \(p = 0.23\), \(n = 15\), and \(k = 2\). Use the combinations formula and the binomial formula.
• For the telemarketer’s calls, you may calculate probabilities for various outcomes like making exactly four sales, no sales, or precisely two sales in the two-hour period using \(p = 0.30\) and \(n = 12\).

This step-by-step application of the formula reveals how likely particular results are within predefined trials.

Mean of a Distribution

The mean of a binomial distribution represents the expected number of successes over many trials. It is calculated as the product of the number of trials and the probability of success in each trial. For a binomial distribution, the mean \(\mu\) is expressed as:
\[ \mu = np \]
In the telemarketer's case, with 12 calls and a success probability of 0.30, the mean number of sales expected is \(3.6\). This tells us that, on average, you can expect about 3-4 sales in every two-hour period if similar conditions are maintained.

Understanding the mean is crucial, as it provides a central tendency around which the distribution of values hovers. It serves as a critical benchmark in comparing actual outcomes to theoretical expectations.

Statistical Analysis

Statistical analysis using binomial distribution involves evaluating data from experiments or surveys to validate assumptions about probabilities and outcomes.

Consider the telemarketing example:

• By calculating probabilities for different sales outcomes, telemarketers can adapt strategies to increase sales efficiency. They can evaluate which assumptions about their selling rate are credible, based on statistical results.
• Similarly, analyzing the choice of public accounting among graduates provides insights into trends and preferences within that professional community.

Statistical analysis doesn't just estimate values but offers an in-depth understanding of patterns. By reviewing how often certain outcomes occur, predictions about future events become more informed, allowing practical decisions to be made. Such analysis helps form a comprehensive understanding of data and supports strategic actions in real-world applications.