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Statistics for Decision- Making in Business - Maricopa Community ...

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This means that if samples of HFCS were to be sampled randomly and repeatedly, it would be<br />

found that 45% of all samples would conta<strong>in</strong> traces of mercury. This does not guarantee that<br />

exactly 45 samples out of 100 will conta<strong>in</strong> mercury.<br />

Example 3: In July 2011, temperatures <strong>in</strong> Gilbert, Arizona were above 100 every day<br />

(SOURCE: www.weather.com). Based on this data, a researcher concludes that the probability of<br />

above 100 temperatures <strong>in</strong> Arizona is 100%. Comment on his f<strong>in</strong>d<strong>in</strong>gs.<br />

SOLUTION: S<strong>in</strong>ce temperatures <strong>in</strong> July 2011 were above 100 31 days of the 31 days <strong>in</strong> the<br />

month, it is fair to make the experimental observation that approximately 100% of all days <strong>in</strong><br />

July 2011 have temperatures exceed<strong>in</strong>g 100 , <strong>in</strong> the long-run (there have been days <strong>in</strong> the past<br />

when temperatures were below 100 ); However, because we know that temperatures are<br />

periodic, or that they go from low to high and back to low over the course of a year, 100% is not<br />

a good estimate <strong>for</strong> temperatures <strong>in</strong> Arizona, <strong>in</strong> general (temperatures are reasonably never above<br />

100 <strong>in</strong> January!).<br />

This example truly stresses the importance of critical th<strong>in</strong>k<strong>in</strong>g when us<strong>in</strong>g probabilities. It is<br />

often that probabilities are used and abused <strong>in</strong> the media, education, and <strong>in</strong> politics, just to name<br />

a few. We want to make sure that we are as specific as possible.<br />

It will often be considerably helpful to display probabilities <strong>in</strong> a tabular <strong>for</strong>m, that is, through the<br />

use of tables. This type of table is called a cont<strong>in</strong>gency table. This not only helps to organize<br />

data, but to simultaneously see the big picture. Let‟s consider an example.<br />

Example 4: In a 1950 study that considered 1,418 hospital patients <strong>in</strong> London (half of each) with<br />

and without lung cancer and whether or not they smoked over the course of their lives, the<br />

follow<strong>in</strong>g was found:<br />

Smoker/Lung Cancer Yes No<br />

Yes 688 650<br />

No 21 59<br />

Assum<strong>in</strong>g this data can be used as a representation of the entire population of London residents,<br />

analyze the data by discuss<strong>in</strong>g the follow<strong>in</strong>g:<br />

a. What is the probability that a randomly selected participant with<strong>in</strong> this study develops<br />

lung cancer<br />

b. Provided that a person was a smoker, what is the probability that he has lung cancer<br />

c. Provided that a person was not a smoker, what is the probability that he has lung cancer<br />

d. Given that a person has lung cancer, what is the probability that he smokes<br />

SOLUTION:<br />

<strong>Statistics</strong> <strong>for</strong> <strong>Decision</strong>-<strong>Mak<strong>in</strong>g</strong> <strong>in</strong> Bus<strong>in</strong>ess © Milos Podmanik Page 85

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