Poisson Distribution

- named after French mathematician Siméon Denis Poisson.

- is a discrete tool that helps to predict the probability of certain events from
happening when you know how often the event has occurred. It gives us the
probability of a given number of events happening in a fixed interval of time.

Calculating the Poisson Distribution

The Poisson Distribution pmf is:

Where:
● The symbol “!” is a factorial.
● e: A constant equal to approximately 2.71828 (Euler's Constant)
● μ: The mean number of successes that occur in a specified region.
● x: The actual number of successes that occur in a specified region.
● P(x;μ): The Poisson probability that exactly x successes occur in a Poisson
experiment, when the mean number of successes is μ.

Poisson Distribution Examples

1. The average number of homes sold by the Acme Realty company is 2 homes per
day. What is the probability that exactly 3 homes will be sold tomorrow?

Solution:
Given:
● μ = 2; since 2 homes are sold per day, on average.
● x = 3; since we want to find the likelihood that 3 homes will be sold tomorrow.
● e = 2.71828; since e is a constant equal to approximately 2.71828.

We plug these values into the Poisson formula as follows:

𝑃(𝑥; 𝜇) = (𝑒 −2 ) (𝜇 𝑥 ) / 𝑥!
𝑃(3; 2) = (2.71828−2 ) (23 ) / 3!
𝑃(3; 2) = (0.13534) (8) / 6
𝑃(3; 2) = 0.180

Thus, the probability of selling 3 homes tomorrow is 0.180.

2. If three persons, on an average, come to ABC company for job interview, then find
the probability that less than three people have come for interview on a given day.
Solution:
Given:
● μ=3
● x = P(x<3;3) = P(0;3) + P(1;3) + P(2;3)
● e = 2.71828

𝑃(0; 3) = (𝑒 −3 )(30 ) / 0! = 0.04978706837

𝑃(1; 3) = (𝑒 −3 )(31 ) / 1! = 0.1493612051
𝑃(2; 3) = (𝑒 −3 )(32 ) / 2! = 0.22404180766

Hence,
P(x<3;3) = P(0;3)+P(1;3)+P(2;3)
= 0.04978706837+0.1493612051+0.22404180766
= 0.42319008113

The probability of less than three persons coming for interview on a certain day is
0.42319008113.
Continuous Probability DIstribution
- a probability distribution in which the random variable X can take on any value (is
continuous). Because there are infinite values that X could assume, the probability
of X taking on any one specific value is zero. Therefore we often speak in ranges
of values (p(X>0) = .50).
- Cumulative Distribution Function (CDF) is a function that gives the probability
that a random variable is less than or equal to the independent variable of the
function, F(x), represents the area under the density function to the left of x, 𝑃(𝑋 ≤
𝑥).
- The probability of X is between a and b is equal to the difference of the CDF
evaluated at these 2 points, that is:
𝑃(𝑎 ≤ 𝑋 ≤ 𝑏) = 𝑃(𝑋 ≤ 𝑏) − 𝑃(𝑋 ≤ 𝑎) = 𝐹(𝑏) − 𝐹(𝑎)

4 Types of Continuous Probability DIstribution

NORMAL DISTRIBUTION
- is a probability function that describes how the values of a variable are
distributed; the probability density function is represented graphically by the
familiar bell-shaped curve.
-
Properties of a normal distribution
● The mean, mode and median are all equal.
● The curve is symmetric at the center (i.e. around the mean, μ).
● Exactly half of the values are to the left of center and exactly half the values are to
the right.
● The total area under the curve is 1.

The general formula for the probability density function of the normal distribution is

𝑒 − (𝑥 − 𝜇)2 /(2𝜎 2 )
𝑓(𝑥) =
𝜎√2𝜋
Where:
● μ is the mean or average
● σ is the standard deviation
Standard Normal Distribution
The case where μ = 0 and σ = 1 is called the standard normal distribution. The equation
for the standard normal distribution is

𝑒 − 𝑧 2 /2
𝑓(𝑥) =
√2𝜋
The letter z is usually to represent this particular variable.
𝑥−𝜇
- Z-score formula: 𝑧=
𝜎
- Z table:
z 0.0 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09

0.0 .500 .504 .508 .512 .516 .520 .524 .528 .532 .536

0.1 .540 .544 .548 .552 .556 .560 .564 .568 .571 .575

0.2 .580 .583 .587 .591 .595 .599 .603 .606 .610 .614

0.3 .618 .622 .626 .630 .633 .637 .641 .644 .648 .652

0.4 .655 .659 .663 .666 .670 .674 .677 .681 .684 .688

0.5 .692 .695 .699 .702 .705 .709 .712 .716 .719 .722

0.6 .726 .729 .732 .736 .740 .742 .745 .749 .752 .755

0.7 .758 .761 .764 .767 .770 .773 .776 .779 .782 .785

0.8 .788 .791 .794 .797 .800 .802 .805 .808 .811 .813

0.9 .816 .819 .821 .824 .826 .829 .832 .834 .837 .839

1.0 .841 .844 .846 .849 .851 .853 .855 .858 .850 .862

1.1 .864 .867 .869 .871 .873 .875 .877 .879 .881 .883

1.2 .885 .887 .889 .891 .893 .894 .896 .898 .900 .902

1.3 .903 .905 .907 .908 .910 .912 .913 .915 .916 .918

1.4 .919 .921 .922 .924 .925 .927 .928 .929 .931 .932

1.5 .933 .935 .936 .937 .938 .939 .941 .942 .943 .944

1.6 .945 .946 .947 .948 .950 .951 .952 .953 .954 .955

1.7 .955 .956 .957 .958 .959 .960 .961 .962 .963 .963
1.8 .964 .965 .966 .966 .967 .968 .969 .969 .970 .971

1.9 .971 .972 .973 .973 .974 .974 .975 .976 .976 .977

2.0 .977 .978 .978 .979 .979 .980 .980 .981 .981 .982

2.1 .982 .983 .983 .983 .984 .984 .985 .985 .985 .986

2.2 .986 .986 .987 .987 .988 .988 .988 .988 .989 .989

2.3 .989 .990 .990 .990 .990 .991 .991 .991 .991 .992

2.4 .992 .992 .992 .993 .993 .993 .993 .993 .993 .994

2.5 .994 .994 .994 .994 .995 .995 .995 .995 .995 .995

2.6 .995 .996 .996 .996 .996 .996 .996 .996 .996 .996

2.7 .997 .997 .997 .997 .997 .997 .997 .997 .997 .997

Standard Normal Distribution

Normal Distribution Examples

1. A manufacturer of MRI scanners used for medical diagnosis has data that indicates
that the mean number of days (µ) between malfunctions is 1020 days, with a
 standard deviation of 20 days. Assuming a normal distribution, what is the
probability that the number of days between adjustments will be less than 1044
days? More than 980 days? Between 980 days to 1044 days?

Solution:
First, convert the value of x to a z-value. For x = 1044 days, we have:

𝑥−𝜇 1044−1020
𝑧= = 𝑧= = 1.2
𝜎 20
This means that 1044 days is 1.2 standard deviations above the mean of 1020 days.
Therefore, using Appendix A, 𝑃(𝑋 ≤ 1044) = 𝑃(𝑧 ≤ 1.2) = 0.885.

To find the probability that X exceeds 980 days, first find the corresponding z-value:
𝑥−𝜇 980−1020
𝑧= = 𝑧= = -2.0
𝜎 20
Note that 𝑃(𝑋 ≤ 980) = 𝑃(𝑧 ≤ −2.0) = 0.023.
Therefore, 𝑃(𝑋 ≥ 980) = 1 − 0.023 = 0.977
Finally, to find the probability that X is between 1044 and 980 days, we use formula:
𝑃(980 ≤ 𝑋 ≤ 1044) = 𝑃(𝑋 ≤ 1044) − 𝑃(𝑋 ≤ 980)
= 𝐹(1044) − 𝐹(980) = 0.885 − 0.023
= 0.862
Using the Normal Inverse Function
Suppose that the manufacturer of MRI scanners wishes to determine the number of days
for which the probability that the equipment would not malfunction is 0.80. In this case,
we know that 𝑃(𝑋 ≤ 𝑥) = 0.8. This is equivalent to 𝑃(𝑍 ≤ 𝑧 = 0.8,where z = (x - 1044)/2-
0. From Appendix A, we can determine that z approximately equal to 0.84. Therefore,
solving 0.84 = (𝑥 − 1044)/20 𝑓𝑜𝑟 𝑥 𝑦𝑖𝑒𝑙𝑑𝑠 𝑥 = 1060.8.