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Term 1: Business Statistics: Session 3: Discrete Probability Distributions

The document discusses discrete probability distributions, specifically the binomial and Poisson distributions. It provides the definitions and formulas for these distributions, including the probability mass functions. Examples are given to illustrate how to calculate probabilities for different outcomes using the binomial and Poisson distributions.

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Tanuj Lalchandani
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70 views13 pages

Term 1: Business Statistics: Session 3: Discrete Probability Distributions

The document discusses discrete probability distributions, specifically the binomial and Poisson distributions. It provides the definitions and formulas for these distributions, including the probability mass functions. Examples are given to illustrate how to calculate probabilities for different outcomes using the binomial and Poisson distributions.

Uploaded by

Tanuj Lalchandani
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Term 1: Business Statistics

Session 3: Discrete Probability Distributions

Rohit Gupta
Operations & SCM Area
Office: Faculty wing 5, Room No. 23
Email: [email protected]
[email protected]
Binomial Distribution

• Consider n independent trials of a random experiment.


• Each trial has two outcomes:

 success with probability: p


 failure with probability: q = 1 − p

• Let X: number of Successes in n trials.


• Probability of getting x successes in n trials is
• P(X=x) or p(x) = nCx pxqn-x , x=0,1,2,…,n.
• A discrete random variable X is said to have a Binomial
Distribution with parameters n and p if its pmf is given by

 nC x p x q n  x , if x  0,1,2,..., n
P( X  x)  p( x)  
 0, otherwise

• Where 0 ≤ p ≤ 1, q = 1 – p,
• We write X ~ B(n, p).
• E(X)= np
• Var(X)= np(1-p)
Example:
• The production process of a company produces 5% defective items.
• If a random sample of 20 items is taken from the day’s production,
• what is the probability that
 there are no defective items in the sample;
 there is only one defective item in the sample.

Example: The latest nationwide political poll indicates that for Americans who are
randomly selected, the probability that they are conservative is 0.55, the probability that
they are liberal is 0.30, and the probability that they are middle-of-the-road is 0.15.
Assuming that these probabilities are accurate, answer the following questions pertaining
to a randomly chosen group of 10 Americans.

a) What is the probability that four are liberal?


b) What is the probability that none are conservative?
c) What is the probability that two are middle-of-the-road?
d) What is the probability that at least eight are liberal?
Poisson Distribution

• Suppose X has a Binomial distribution with parameters n and p.

p( x) nCx p x (1  p) n x , x  0,1,2,..., n.

• If p is very small and n is very large


• And we can write, np=  (> 0)
• i.e., p→0 and n→∞, but lim np = , then

lim p( x)  lim n
C x p x (1  p) n  x , x  0,1,2,..., n.
n  , p 0 , n  , p 0 ,
or np or np

e   x
 , x  0,1,2,...
x!
• A discrete random variable X is said to have a Poisson Distribution with
parameter  (> 0) if its probability mass function is given by

e  x
P( X  x)  p ( x)  , x  0,1,2,...
x!

• and we write X~Poisson ()


• E(X)= .
• Var(X)= .
• In practice, we approximate Binomial Distribution by Poisson Distribution
when n>20 and p < 0.05.
• Thus, Poisson Distribution is a limiting case of Binomial as n   and
p  0 lim np = .
• There are 100000 vehicles on the streets of Ghaziabad
• On a given day, probability of a vehicle meeting with an accident is
0.00005.
• np =  = 5 accidents per day (accident rate)
• A Bank has 10000 customers. The probability of customer arriving on a
given day is 0.005.
•  = 50. Customer arrive at a rate of 50 per day (arrival rate).
• A machine produces 50000 parts per day, with 0.001 probability of a
part being defective.
•  = 50 (average number of defective parts produced in a day)
• The Poisson distribution and Binomial Distribution have some
similarities, but also several differences.
 Binomial Distribution describes a distribution of two possible
outcomes – Success and Failure

 Poisson Distribution focuses only on the number of discrete


occurrences over some interval.

 A Poisson experiment does not have a given number of trials (n) as a


binomial experiment does.

 The Poisson describes the occurrence of rare events.


 E.g., no. of serious accidents at a chemical plant per month.
 If the occurrences are too frequent, the time interval can be reduced
enough so that the occurrences are rare.
Other Applications:
• No. of deaths from a disease (not in the form of an epidemic);
• No. of suicides reported in a particular city;
• No. of defective items in a packing manufactured by a good concern;
• No. of air accidents in some duration of time.
• No. of printing mistakes at each page of a book.
Example:
• In a book of 520 pages, 390 typographical errors occur.
• Assuming Poisson probability law for the number of errors per page,
find the probability that a random sample of 5 pages will contain no
error.
• Ans: e-3.75
Example:
• A toll free phone number is available from 9:00 AM to 9:00 PM for the
customers to register complaints about a product purchased from a
company.
• Past history indicates that an average of 0.4 calls are received per minute.
• What is the probability that during a 1-minute period
 Zero phone calls will be received?
 3 or more phone calls will be received?
Additive Property of Poisson Distribution:

• If X and Y are independent random variables.


• X ~ Poisson (λ)
• Y ~ Poisson (μ)
• Then Z = X+Y ~ Poisson (λ+μ)

e  (    ) (   ) z
P( Z  z )  P( X  Y  z )  p ( z )  , z  0,1,2,...
z!
Example:
• Suppose that the number of telephone calls coming into a telephone
exchange between 10:00 AM and 11:00 AM is a random variable X.
• X~ Poisson (2).
• Similarly the calls arriving between 11:00 AM and 12:00 Noon is Y
• Y ~ Poisson (6).
• X and Y are independent
• What is the probability that more than 5 calls come between 10:00
AM and 12:00 Noon?
• Ans: 0.8088

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