FOUNDATION TO DATA SCIENCE

Business Analytics

Unit1: BASIC STATISTICS

Probability Distribututions-8

Prof. Dr. George Mathew

B.Sc., B.Tech, PGDCA, PGDM, MBA, PhD 1
 Probability Distributions
The distributions describe the shape of a batch
of numbers that is the meaning of distribution.
If the different set of numbers show bell
shaped, we can call it is a normal distribution. If
it is forming a rectangular shape, we can call it
as a uniform distribution like this that describes
the shape of a batch of numbers.
Why distribution? It can serve as a basis for
standardized comparison. it will help you to
estimate the confidence intervals for inferential
statistics.
 Binomial Distribution
The binomial distribution is a probability distribution
based on binomial theorem.
According to the theorem, it is possible to expand
any nonnegative integer power of x + y into a sum of
the form:
 Binomial Distribution
The binomial distribution is the result of a binomial
experiment, which has the following properties.
Binomial Distribution
 Binomial Distribution
Features of Binomial Experiment
1.The experiment consists of a sequence of n
identical trials.
2.Two outcomes are possible on each trial. we refer
to one outcome as a success
3.and the other outcome was a failure.
4.The probability of a success, denoted by p, does
not change from trial to trial.
5.Consequently, the probability of a failure, denoted
by 1 − p, does not change
6.from trial to trial.
7.The trials are independent
 Example-1
If 10 coins are tossed 100 times, how man
times would you expect 7 coins to fall head
upwards

Ans:11.7

(Ref: Statistics for management-Arora page-

56)
• Solution:
Probability of getting head, p=1/2
q=1-1/2 =1/2
n=10
N=100
r=7
Probability of getting
7 head=10C7(1/2)^7(1/2)^3
=0.117
Expected no of time in 100 experiment is
=100x0.117=11.7 or 12
 Example-2
The overall percentage of failure in a certain
examination is 30. What is the probability that
out of a group of 6 candidates at least 4
passed the examination.

Ans:0.74431

(Ref: Statistics for management-Arora page-

57)
Excel Practice:08 Basic statistics Data Day- 3
Sheet: Binomial Distribution
 Binomial Distribution

If 10 coins are tossed 100 times ,How many times you expect 7 heads

What is the prbability of getting 7

head in thorughing 10 coins Example1

Numbe of Trials N 100(a) (b1) (b2) (b)

Number of Independent trials n 10 5 5 5

Number of expected success

in trials r 7 2 4 5

Probabilit of success p 0.5 0.5 0.5 0.5

Probability getting 7 head 0.1171875 0.3125 0.156 0.03125 0.1875

Exptected no of times 11.71875

'=BINOM.DIST(D6,D5,D7,FALSE)

False' means not Cumulative

 POISSON DISTRIBUTION
What is the Poisson random variable?
The Poisson random variable is a discrete random variable that is useful for
describing probabilities for situations in which events (such as customer arrivals at a
bank or orders placed for a product) have a small probability of occurring during a
short time interval. More specifically, during a short time interval, denoted as t, either
zero or one event will occur, and the probability of one event occurring
during a short interval of length t is (for some λ) given by λt. Here, λ (lambda) is the
mean number of occurrences per time unit.
Situations in which the Poisson random variable can be applied include the following:
■ Number of units of a product demanded during a month.
■ Number of deaths per year by horse kick in the Prussian army.
■ Number of car accidents you have during a year.
■ Number of copies of The Seat of the Soul ordered today at Amazon.com.
■ Number of workers’ compensation claims filed at a company this month.
■ Number of defects in 100 yards of string. (Here, 1 yard of string plays the role of
time.)
 POISSON DISTRIBUTION
Poisson distribution is a discrete distribution. It is a limiting form
of binomial distribution in which n, the number of trials is very
large and p, the probability of success of the event is very small
such that np is a finite quantity.
Properties of Poisson Experiment
1. The probability of an occurrence is the same for any two
intervals of equal length.
2. The occurrence or nonoccurrence in any interval is
independent of the occurrence or nonoccurrence in any other
interval.
 POISSON DISTRIBUTION
Generally Poisson distribution is for rare events, it is an
discrete distribution. X can have only few discrete values. Yes,
it describes the rare events, each occurrence is independent of
any other occurrences. The number of occurrences in each
interval can vary from 0 to infinity. The expected number of
occurrences must hold constant throughout the experiment.
These are the assumption of Poisson distribution.
The defects in manufacturing goods can be considered an
example of Poisson distribution. For example, number of
defects per 1000 feet of extruded copper wire see that the n is
very large. The probability of success is very low. Another
example of Poisson distribution is number of blemishes per
square foot of painted surface blemishes kind of a defect in
paint number of errors per typed page, these are the example
of your Poisson distributions.
 What is the Poisson random variable?
The Poisson random variable is a discrete
random variable that is useful for describing
probabilities for situations in which events
(such as customer arrivals at a bank or orders
placed for a product) have a small probability
of occurring during a short time interval. More
specifically, during a short time interval,
denoted as t, either zero or one event will
occur, and the probability of one event
occurring during a short interval of length t is
(for some λ) given by λt. Here, λ is the mean
number of occurrences per time unit.
 What is the Poisson random variable?
Situations in which the Poisson random variable can be applied
include the following:
➢ Number of units of a product demanded during a month.
➢ Number of deaths per year by horse kick in the Prussian
army.
➢ Number of car accidents you have during a year.
➢ Number of copies of The Seat of the Soul ordered today at
Amazon.com.
➢ Number of worker’s compensation claims filed at a company
this month.
➢ Number of defects in 100 yards of string. (Here, 1 yard of
string plays the role of time.)
 Poisson Distribution
And another caution while using Poisson
distribution is the unit of this lambda and X
should be same, for example, lambda equal to
3.2 customers for 4 minutes probability of
around 10 customers in 8 minutes. So, you
have to adjust the lambda, how will you adjust,
you multiply by 2, so it will be 6.4 into 8. Now,
the unit of X and lambda is same, then you
can use your probability function, P (X) = (λX e
-λ )/X! and substitute X = 10.
 Mean and Variance of Poisson Distribution

The mean and the variance of the Poisson distribution are the same, which is
equal to the average number of successes that occur in the given interval of
time (np).
Poisson Distribution problems
Poisson Distribution problems
 Mean and Standard Deviation of
a Poisson Distribution

The mean of this distribution is λ

and the standard deviation is √λ.
Mean and Standard Deviation of
a Poisson Distribution
 Using MS Excel:
How can I compute probabilities for the Poisson
random variable?
You can use the Microsoft Excel POISSON.DIST
function to compute probabilities involving the
Poisson random variable. Use length of time t, the
mean of a Poisson random variable is t. The syntax of
the POISSON function is as follows:
POISSON.DIST(x,Lambda,True_or_1) calculates the
probability that a Poisson random variable with a
mean equal to Lambda is less than or equal to x.
POISSON.DIST(x,Lambda,False_or_0) calculates the
probability that a Poisson random variable with a
mean equal to Lambda is equal to x.
 Poisson Distribution Using MS Excel:
Suppose that my consulting business receives an average of 30 phone calls
per hour. During a two-hour period, I want to determine the following:
1. The probability that exactly 60 calls will be received in the next two
hours
2. The probability that the number of calls received in the next two hours
will be fewer than or equal to 60
3. The probability that from 50 through 100 calls will be received in the
next two hours

During a two-hour period, the mean number of calls is 60. In cell C4, I find
the probability (0.05) that exactly 60 calls will be received in the next two
hours by using the POISSON.DIST(60,C2,False) formula. In cell C5, I find the
probability (0.534) that at most 60 calls will be received in two hours with
the POISSON.DIST(60,C2,True) formula. In cell C6, I find the probability
(0.916) that from 50 through 100 calls will be received in two hours with
the POISSON.DIST(100,C2,True)–POISSON.DIST(49,C2,True) formula.
 Poisson Distribution Using MS Excel:
Suppose that my consulting business receives an average of 30 phone calls
per hour. During a two-hour period, I want to determine the following:
1. The probability that exactly 60 calls will be received in the next two
hours
2. The probability that the number of calls received in the next two hours
will be fewer than or equal to 60
3. The probability that from 50 through 100 calls will be received in the
next two hours

.
 Multinomial Distribution
The multinomial distribution is similar to the binomial
distribution except that there are more than two possible results
from each trial. For example, mechanical components coming
off a production line might be classified on the basis of a
particular dimension as undersize, acceptable, or oversize
(three possible outcomes).
If the outcome of any one trial is determined completely
by chance, all trials are independent and have the same set of
probabilities for the various possible outcomes, and the number
of trials is fixed, the multinomial distribution would apply.
Notice that if we consider separately just one result and lump
together all other results from each trial, the multinomial
distribution becomes a binomial distribution.
Thus, in the example of mechanical components just cited, if
undersized and oversized are lumped together as
unacceptable, the distribution becomes binomial.
 Exponential Distribution
The exponential probability distribution is useful
in describing the time it takes to complete a task. The
exponential random variable can be used to describe
the time between vehicle arrivals at a toll booth, time
required to complete a questionnaire, the distance
between major defects in a highway.
For example, whenever the time between arrival and
time required to complete the questionnaire,
whenever the word the between comes. Then that is
the then it is appropriate to use exponential
distribution. The density function for a exponential
probability distribution is f (x) = (1/ μ). e (-x/μ).
Here, μ is the mean.
 Exponential distribution
So, what is the meaning of this exponential distribution is
supposed, if the loading time, the probability of loading
time less than 6 is this area. The probability of loading time
between 6 and 18 is this one this time, this is a probability,
this shadowed portion represents the probability of that
loading time is between 6 and 18.
Because in many application of exponential distribution will
use the cumulative probability density function. So, for an
exponential distribution, the formula for finding the
cumulative probability density function = 1 - e (- x 0 / μ)
where x0 is some specific value of x. it is nothing but if you
integrate that to distribution, if you integrate the distribution
between the intervals when you simplify it, you will get this
answer
 Exponential distribution
We will see one example of this exponential
probability distribution. The time between arrivals of
cars at a petrol pump follows an exponential
probability distribution with the mean time between
arrivals of 3 minutes. See that it is mean time
between arrivals. So, the mean is 3 here. The petrol
pump owner would like to know, the probability that
time between 2 successive arrivals will be 2 minutes
or less. So x value is less than or equal to 2.
 Exponential distribution
We will see one example of this exponential
probability distribution. The time between arrivals of
cars at a petrol pump follows an exponential
probability distribution with the mean time between
arrivals of 3 minutes. See that it is mean time
between arrivals. So, the mean is 3 here. The petrol
pump owner would like to know, the probability that
time between 2 successive arrivals will be 2 minutes
or less. So x value is less than or equal to 2.
 Relationship between poisson and
Exponential distribution
Now, there is a very important relationship between
poisson and exponential distribution. See, the
Poisson distribution provides an appropriate
description of number of occurrences per interval. So,
one interval is there. In that interval, how many
occurrences happened, is the Poisson distribution. In
the exponential distribution provides an appropriate
description of length of the interval between the
occurrences. Suppose the same interval between this
occurrence to this occurrences, so this phenomena is
explained with the help of between 2 occurrences,
this phenomena is explained with the help of
exponential distribution.
 If the number of customers arriving at a bank is governed by a Poisson random
variable, what random variable governs the time between arrivals?

The time between arrivals can be any value, which means that
the time between arrivals is a continuous random variable. If
an average of arrivals occurs per time unit, the time between
arrivals follows an exponential random variable having the
probability density function (pdf) of f(t) = λ–λt. This random
variable has a mean, or average, value equal to 1/λ. For λ = 30,
a graph of the exponential pdf is shown in Figure.
Continuous Distributions