Question

Suppose you want to estimate the probability that a randomly selected customer at a particular grocery store will pay by credit card. Over the past 3 months, 80,500 payments were made, and 37,100 of them were by credit card. What is the estimated probability that a randomly selected customer will pay by credit card?

Short answer

The estimated probability that a randomly selected customer will pay by credit card is approximately 0.46 or 46%.

Step-by-step solution

Identify the total number of outcomes

The total number of outcomes is the total payments made at the grocery store which is 80,500.

Identify the number of favorable outcomes

The number of favorable outcomes is the number of payments made by credit card which is 37,100.

Calculate the Probability

The probability of a randomly selected customer paying by credit card is calculated by dividing the number of favorable outcomes by the total number of outcomes. Using these numbers, the calculation would be \(\frac{37100}{80500}\).

Key concepts

Random Sampling

Random sampling is a fundamental method used in the field of statistics to select a subset of individuals or observations from within a statistical population to estimate characteristics of the whole population. Understanding this concept is critical when it comes to tackling real-world problems where it's impractical or impossible to examine an entire population.

In the exercise provided, the grocery store's payments represent the population, and each payment is an individual observation. By collecting data from the entire three months, which involves 80,500 payments, the store ensures that the sample reflects the broad range of customers. The concept assumes that every payment had an equal chance of being included in the data set, which is a key principle of random sampling. It minimizes biases that can skew results and provides a reliable foundation for estimating the probability of future events, such as the likelihood of customers paying with credit cards.

Random sampling's real value lies in its ability to provide accurate estimations that can be generalized to the larger group, which is especially useful when the total population is too large to analyze fully.

Favorable Outcomes

Whether you are calculating the likelihood of rolling a six on a die or estimating the probability of an event in real life, the concept of favorable outcomes is central to probability. Favorable outcomes are those specific results that we're interested in when performing a probability experiment.

In the context of our grocery store example, a favorable outcome refers to an event where a customer pays by credit card. Out of the 80,500 total payments, 37,100 were made with a credit card. These 37,100 payments are our favorable outcomes. They are 'favorable' simply because these are the outcomes we are counting when we aim to estimate the probability of a particular occurrence.

Understanding what constitutes a favorable outcome is essential for accurate probability calculation. It affects the numerator in our probability fraction and thus directly impacts the calculated likelihood of an event occurring. Additionally, providing clarity on what exactly are the favorable outcomes can help students easily grasp the concept, specially in the context of complex, real-world problems.

Probability Calculation

The probability calculation is the mathematical process used to find the likelihood of a particular event happening. This is expressed as a number between 0 and 1, where 0 indicates an impossibility, and 1 represents certainty.

Following the steps solved in the exercise, calculating the probability involves dividing the number of favorable outcomes by the total number of possible outcomes. As seen in the grocery store scenario, the probability that a customer pays by credit card is the quotient of the favorable credit card payments (37,100) over the total payments made (80,500). Therefore, using the formula for probability, \( P(A) = \frac{\text{number of favorable outcomes}}{\text{total number of outcomes}} \) where A is the event of a customer paying by credit card, we get \( P(A) = \frac{37100}{80500} \) which simplifies to a decimal that estimates the probability of the event.

The calculation can be interpreted as the expected frequency of the event occurring in a long series of trials. Probability calculations are vital for decision making in many fields, enabling businesses and individuals to anticipate likely outcomes and plan accordingly.