Lecture 7 & 8

Brief lecture notes on probability distributions: Binomial, Poisson and

Normal distribution

Bernoulli distribution
Our approach begins by first developing the Bernoulli model, which is a
building block for the Binomial. We consider a random experiment that can give
rise to just two possible mutually exclusive and collectively outcomes, which
for convenience we will label “success” and “failure”.
Let p denote the probability of success, so that the probability of failure is (1 –
p). Now define the random variable X so that X takes the value 1 if the outcome
of the experiment is success and 0 otherwise. The probability function of this
random variable is then
P(X=0) = (1 – p) and P(X=1) = p
This distribution is known as Bernoulli distribution.

Mean and variance of a Bernoulli random variable

The mean is
  E ( X )   xP ( x)  (0)(1  p )  (1)( p )  p
x

and the variance is

 2  E[( X   ) 2 ]   ( x   ) 2 P( x)

 (0  p ) 2 (1  p)  (1  p ) 2 p  p (1  p )

The Binomial distribution

Suppose that a random experiment can result in two possible mutually exclusive
and collectively exhaustive outcomes, “success” and “failure” and that P is the
probability of a success in a single trial. If n independent trials are carried out,
the distribution of the number of resulting success, x, is called the binomial

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distribution. Its probability distribution function for the binomial random
variable X = x is
P(x Success in n Independent Trials) = P(x)
n!
 P x (1  P ) ( n  x ) for x = 0, 1, …….,n
x!(n  x)!

Mean and variance

Let X be the number of successes in n independent trials, each with probability
of success P. Then X follows a binomial distribution with mean
  E ( X )  np

and variance
 2  E[( X   ) 2 ]  nP(1  P )

Example: An insurance broker believes that for a particular contract the

probability of making a sale is 0.4. Suppose that the broker has five contracts.
a. Find the probability that she makes at most one sale.
b. Find the probability that she makes between two and four sales (inclusive).
c. Graph the probability distribution function.

Solution:
a. P(At most 1 sale) = P ( X  1)  P ( X  0)  P ( X  1).

5!
P(X=0) = (0.4) 0 (0.6) 5  0.078
0!5!
5!
P ( X  1)  (0.4)1 (0.6) 4  5(0.4)(0.6) 4  0.259
1!4!

Hence P ( X  1)  0.078  0.259  0.337

b. P( 2  X  4)  P ( X  2)  P( X  3)  P( X  4)

5!
P ( X  2)  (0.4) 2 (0.6) 3  10(0.4) 2 (0.6) 3  0.346
2!3!
5!
P ( X  3)  (0.4) 3 (0.6) 2  10(0.4) 3 (0.6) 2  0.230
3!2!

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 5!
P ( X  4)  (0.4) 4 (0.6)1  5(0.4) 4 (0.6)1  0.077
4!1!

Hence P( 2  X  4)  0.346  0.230  0.077  0.653

c. The probability distribution function is given by:

X P(X=x)
0 0.078
1 0.259
2 0.346
3 0.230
4 0.077
5 0.010

Comments:
 This shape is typical for binomial probability when P is neither very large
nor very small.
 At least extremes (0 or 5 sales), the probabilities are quite small.

Example: Early in August an undergraduate college discovers that it can

accommodate a few extra students, Enrolling those additional students would
provide a substantial increase in revenue without increasing the operating costs
of the college; that is, no new classes would have to be added. From past
experience the college knows that 40% of those students admitted will actually
enroll.

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a. What is the probability that at most 6 students will enroll if the college offers
admission to 10 more students?
b. What is the probability that more than 12 will actually enroll if admission
offered to 20 students?
c. If 70% of those students admitted actually enroll, what is the probability that
at least 12 out of 15 students will actually enroll?

Solution:
a. This probability can be obtained using the cumulative binomial probability
distribution from Table 3 in the Appendix. The probability of at most 6
students enrolling if n = 10 and P = 0.40 is
P ( X  6 / n  10, P  0.40)  0.945

b. P ( X  12 / n  20, P  0.40)  1  P ( X  12)  1  0.979  0.021.

c. The probability that at least 12 out of 15 students enroll is the same as the
probability that at most 3 out of 15 students do not enroll (the probability of a
student not enrolling is 1 – 0.70 = 0.30).
P ( X  12 / n  15, P  0.70)  P ( X  3 / n  15, P  0.30)  0.297

Example: Suppose in a bundle of 100 T-shirts, 10 T-shirts are defective. Five T-

shirts are drawn from the bundle with replacement. Find the probability that (i)
there will be no defective T-shirts, (ii) 1 T-shirt will be defective, (iii) 2 T-shirts
will be defective and (iv) at least 3 T-shirts will be defective.
Solution:
Let X be a random variable, which indicates the number of defective T-shirts.
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The probability p of a defective T-shirt, is given by p
100
 0.10 and

q  1  p  .90 .

(i) The probability that there will be no defective T-shirt is given by

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 5!
P(X=0; 5, 0.10) = (0.10) 0 (0.90) 5 0  0.5905
0! 5!

(ii) The probability that there will be one defective T-shirt is given by
5!
P(X=1; 5, 0.10) = (0.10)1 (0.90) 51  0..3281
1! 4!

(iii) The probability that there will be 2 defective T-shirts is given by

5!
P(X=2; 5, 0.10) = (0.10) 2 (0.90) 5 2  0.0729
2! 3!

(iv) The probability that there will be at least 3 defective T-shirts is given by
P X  3  1   P X  0  P X  1  P X  2 

1   P X  0  P X  1  P X  2 

1   0.5905  0.3281  0.0729

= 0.0085

Assignment on lecture 7 & 8

1. Suppose in a bundle of 25 T-shirts, there are 10 large sizes, 10 medium sizes, and 5 small
sizes T-shirts. Three shirts are drawn at random with replacement from the bundle for
inspection. Find the probability that there will be
(i) no small T-shirts, (ii) 2 small sizes T-shirts, and (iii) at least 2 small sizes T-shirts.
2. It is found that 20% industries do not pay their tax properly in a country A. 10 industries
are selected at random from the country, find the probability that
(i) 5 industries do not pay their tax properly, and (ii) at least 3 industries do not pay their tax
properly.

The Poisson probability distribution

The Poisson probability distribution is an important discrete probability
distribution for a number of applications, including:
1. The number of failures in a large computer system during a given day.

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 2. The number of replacement orders for a part received by a firm in a given
month.
3. The number of dents, scratches, or other defects in a large roll of sheet
metal used to manufacture filters.

Assumptions of the Poisson probability distribution

Assume that an interval is divided into a very large number of subintervals so
that the probability of the occurrence of an event in any subinterval is very
small. The assumptions of a Poisson probability distribution are as follows:
1. The probability of the occurrence of an event is constant for all subintervals.
2. There can be no more than one occurrence in each subinterval.
3. Occurrences are independent; that is, the occurrences in non-overlapping
intervals are independent of one another.

We can derive the equation for computing Poisson probabilities directly from
the binomial probability distribution by taking the mathematical limits as
P  0 and n . With these limits the parameter   nP is a constant that
specifies the average number of occurrences (success) for a particular time
and/or space.

Applications of the Poisson process

The different situations where the Poisson process is widely applicable are:
(i) Number of deaths from a disease such as heart attack, cancer, HIV, AIDS,
Swine Flu, Bird Flu etc.
(ii) Number of deaths due to car accidents reported in any city
(iii) Number of suicides reported in any particular city
(iv) Number of car accidents reported in a particular city
(v) Number of defective items in packing manufactured by a good concern
(vi) Number of printing mistakes per page in a book

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(vii) Number of missing luggage of a particular Airlines
(viii) Number of telephone calls received by a particular telephone exchange in
some units of time
(ix) Number of days that the universities remain closed due to political crises
(x) Number of customers arriving in a particular shop in some units of time
(xi) Number of crimes that are happening in any particular city in a day

The Poisson probability distribution function, mean and variance

The random variable X is said to follow the Poisson probability distribution if it
has the probability function
e   x
P( x)  for x = 0, 1, 2, ..............
x!

Where,
P(x) = the probability of x successes over a given time or space, given 
 = the expected number of successes per time or space unit:  > 0

e = 2.71828 (the base natural logarithms)

The mean and variance of the Poisson probability distribution are
  E( X )   and  2  E[( X   ) 2 ]  

Example: A computer center manager, reports that his computer system

experienced three component failures during the past 100 days.
a. What is the probability of no failures in a given day?
b. What is the probability of one or more component failures in a given day?
c. What is the probability of at least two failures in a 3-day period?

Solution: A modern computer system has a very large number of components,

each of which could fail and thus result in a computer system failure. To
compute the probability of failures using the Poisson distribution, assume that
all each of the millions of components has the same very small probability of

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failure. Also assume the first failure does not affect the probability of a second
failure (in some cases, these assumptions may not hold, and more complex
distributions would be used).
From past experience the expected number of failures per day is 3/100, or
  0.03 .

a. P(No failures in a given day) = P(X = 0/  = 0.03)

e 0.03 0
  0.970446
0!

b. The probability of at least one failure is the complement of the probability

of 0 failure:
P ( X  1)  1  P ( X  0)

=1-0.970446

c. P(At least two failures in a 3-day period) = P ( X  2 /   0.09), where the

average over a 3-day period is  = 3(0.03)=0.09:
P( X  2 /   0.09)  1  P( X  2)  1  [ P( X  0)  P( X  1)]  1  [0.913931  0.082254]

 1  0.996185  0.003815

Example: Customers arrive at a photocopying machine at an average rate of

two every 5 minutes. Assume that these arrivals are independent, with a
constant arrival rate, and that this problem follows a Poisson model, with X
denoting the number of arriving customers in a 5-minute period and mean  =
2. Find the probability that more than two customers arrive in a 5-minute
period.

Solution: Since the mean number of arrivals in 5 minutes is two, then  = 2. To

find the probability that more than two customers arrive, first compute the
probability of at most two arrivals in a 5-minute period, and then use
complement rule. So,

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 e 2 2 0
P( X  0)   e  2  0.1353
0!

e 2 2 1
P ( X  1)   2e  2  0.2707
1!

e 2 2 2
P( X  2)   2e  2  0.2707
2!

Thus P ( X  2)  1  P ( X  2)  1  [0.1353  0.2707  0.2707]  0.323325

Example: A professor receives, on average, 4.2 telephone calls from students

the day before a final examination. If the distribution of calls is Poisson, what is
the probability of receiving at least three of these calls on such a day?

Solution: The distribution of X, number of telephone calls, is Poisson with

  4.2 . Thus the probability distribution function is
e   x e4.2 (4.2) x
P( X  x)  
x! x!
The probability of receiving at least three calls is:
P( X �3)  1  P( X  3)  1  [ P( X  0)  P( X  1)  P( X  2)]

e4.2 (4.2)0
Now P ( X  0)   0.015
0!
e4.2 (4.2)1
P ( X  0)   0.063
1!
e4.2 (4.2) 2
P ( X  0)   0.132
2!
P ( X �3)  1  P( X  3)  1  [0.015  0.063  0.132]
 1  .021  0.79
Example: In a case study it is found that 2.5% small companies are reported for
bankruptcy in the year 2012. A random sample of 200 companies is selected.
Find the probability that (i) at least 3 companies are reported for bankruptcy, (ii)
exactly 3 companies are reported for bankruptcy, (iii) at best 3 companies are
reported for bankruptcy.

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Solution:
Let X is a random variable which indicates the no. of companies that are
reported for bankruptcy and follows the Poisson distribution.
Here P  0.025 ,   np  200 0.025  5

The probability distribution function of Poisson distribution is:

e   x
P( x) 
x!

(i) Probability that at least 3 companies are reported for bankruptcy

P ( X  3)  1  P  X  3

 1   P X  0  P X  1  P X  2  

 1   0.0067  0.0337  0.0842

=0.8753
(ii) Probability that exactly 3 companies are reported for bankruptcy
e 5 5 3
P ( X  3)   0.1404
3!

(iii) Probability that at best 3 companies are reported for bankruptcy

P( X  3)  P X  0  P X  1  P X  2  P X  3

 0.0067  0.0337  0.0842  0.1563

 0.2650

Assignment on lecture 7 & 8

A rent-a-car-shop has 5 cars which it hires day by day. The number of demands
of a car on each day is distributed as a Poisson distribution with mean 3. Find
the probability that there is no demand of a car in a day. Find the probability that
the demand of a car in a day is 4. Find the proportion of days on which some
demand is refused in a day.
Normal distribution
Probability density function
Let X be a continuous random variable, and let x be any number lying in the
range of values this random variable can take. The probability density function,
f (x), of the random variable is a function with the following properties:
1. f(x) > 0 for all values of x.

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2. The area under the probability density function, f(x), over all values of the
random variable, X, is equal to 1.0.
3. Suppose that this density function is graphed. Let a and b be two possible
values of random variable X, with a < b. Then the probability that X lies
between a and b is the area under the density function between these points.
4. The cumulative distribution function, F( x0 ), is the area under the probability
density function , f(x), up to x0 :
x0

F ( x0 )   f ( x)dx
 xm

where xm is the minimum value of the random variable x.

Areas under continuous probability density functions

Let X be a continuous random variable with probability density function f(x)
and cumulative distribution function F(x). Then the following properties hold:
1. The total area under the curve f(x) is 1.
2. The area under the curve f(x) to the left of x0 is F(x0), where x0 is any value
that the random variable can take.

Probability density function

The probability density function for a normally distributed random variable X is
1
for    x  
2
/ 2 2
f ( x)  e ( x   )
2 2

where  and  2 are any numbers such that       and 0   2   and e and
 are physical constants, e = 2.71828…. and   3.14159.......

The normal probability distribution represents a large family of distributions,

each with a unique specification for the parameters  and  2 . These
parameters have a very convenient interpretation.

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Properties of the Normal distribution
Suppose that the random variable X follows a normal distribution with
parameters  and  2 . Then the following properties hold:
1. The mean of the random variable is  :
E( X )  

2. The variance of the random variable is  2 :

Var(X) = E[( X   ) 2 ]   2

3. The shape of the probability density function is a symmetrical bell-shaped

curve centered on the mean,  , as shown in Figure 1.
4. If we know the mean and variance, we can define the normal distribution by
using the notation
X ~ N ( , 2 )

Figure: Probability density function for a Normal Distribution.

f(x)

For our applied statistical analyses the normal distribution has a number of
important characteristics. It is symmetric. Different central tendencies are
indicated by differences in  . In contrast, differences in  2 result in density
functions of different widths. By selecting values for  and  2 we can define a
large family of normal probability density functions. Differences in the mean
result in shifts of entire distributions. In contrast, differences in the variance
result in distributions with different widths.

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Figure: Effects of  and  2 on the probability density function of a Normal
random variable.
a. Two normal distributions with different means.
b. Two normal distributions with different variances and mean = 5.

f(x) f(x)

Mean =5 Mean = 6 Variance = 0.056

Variance = 1
x x
(a) (b)

Cumulative distribution function of the Normal distribution

Suppose that X is a normal random variable with mean  and variance  2 ; that
is, X ~ N (  ,  2 ). Then the cumulative distribution function is
F ( x0 )  P( X  x0 )

This is the area under the normal probability density function to the left of x 0.
As for any proper density function, the total area under the curve is 1; that is,
F ( )  1

Figure: The shaded area is the probability that X does not exceed x 0 for a
normal random variable.
f(x)

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 x

Range probabilities for Normal random variables

Let X be a normal random variable with cumulative distribution function F(x),
and let a and b be two possible values of X, with a < b. Then
P (a  X  b)  F (b)  F ( a)

The probability is the area under the corresponding probability density function
between a and b, as shown in the following Figure.

Figure: Normal density function with the shaded area indicating the probability
that X is between a and b.
f(x)

x
a  b

Standard normal distribution

Let Z be a normal random variable with mean 0 and variance 1; that is,
Z~N(0, 1)
We say that Z follows the standard normal distribution.
Denote the cumulative distribution function as F(z) and a and b as two numbers
with a < b; then
P(a<Z<b)= F(b) – F(a)

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We can obtain probabilities for any normally distributed random variable by
first converting the random variable to the standard normally distributed random
variable, Z. There is always a direct relationship between any normally
distributed random variable and Z. That relationship uses the transformation
X 
Z


where X is a normally distributed random variable

X~N (  ,  2 )

This important result allows us to use the standard normal table to compute
probabilities associated with any normally distributed random variable. Now let
us see how probabilities can be computed for the standard normal Z.
The cumulative distribution function of the standard normal distribution is
tabulated in Table 1 in the Appendix. This table gives values of
F(z) = P(Z  z )
for non-negative values of z. For example, the cumulative probability for a Z
value of 1.25 from Table 1 is
F(1.25) = 0.8944
This is the area, designated in the following Figure, for Z less than 1.25.
Because of the symmetry of the normal distribution, the probability that Z >
-1.25 is also equal to .8944. In general, values of the cumulative distribution
function for negative values of Z can be inferred using the symmetry of the
probability density function.
To find the cumulative probability for a negative Z (for example, Z = -1.0)
defined as
F(-Z0 ) = P(Z   z 0 )  F (1.0)

we use the complement of the probability for Z = +1, as shown in the following
Figure.
Figure: Standard Normal Distribution for Negative Z equal to –1.

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 F(-1) =0.1587 1 –F(z) = 1 –0.1587 = 0.8413

Example:
The life time of a electric bulbs manufactured by a company A has a mean of
720 hours and standard deviation is of 10 hours. We are assuming that the
distribution of life times of electric bulbs is normal.
(i) What is the probability that the life time of a bulb will be less than or equal
to 740 hours?
(ii) What is the probability that the life time of a bulb will be greater than or
equal to 740 hours?
(iii) What is the probability that the life time of a bulb lies between 730 hours
and 740 hours?

Solution:
Let X is a random variable which indicates the life times of bulbs, and which is
normally distributed with mean 720 hours and standard deviation is 10 hours.
(i) The probability that the life time of a bulb will be less than or equal to 740
hours is given by:
 X   740  720 
P  X  740  P    P  Z  2   0.50  0.4772  0.9772
  10 
(ii) The probability that the life time of a bulb will be greater than or equal to
740 hours is given by:
 X   740  720 
P  X  740  P    P Z  2   0.50  P  0  Z  2   0.50  .4772  0.0228
  10 
(iii) The probability that the life time of a bulb lies between 730 hours and 740
hours is given by:
 730  720 X   740  720 
P 730  X  740  P     P1  Z  2   P 0  Z  2   P 0  Z  1
 10  10 
 0.4772  0.3413
 0.1359

Assignment on lecture 7 & 8

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1. A recent study of the hourly wages of maintenance crews for major airlines
showed that the mean hourly wages is $20 with standard deviation is $2. Let
hourly wages of crews is normally distributed. What is the probability that a
crew earns: (i) more than or equal to $ 25 per hour, (ii) between $25 and $30 per
hour, (iii) less than or equal to $30.

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