Telephone Calls

Suppose an office receives, on average, 15 calls per hour. In a two hour period, the office
received 45 calls.

Question: Is this a rare event?

Let X be the number of calls in two hours. Then,

E(X) = 30

and the probability mass function of X is

X=x P(x)
15 0.0010268
16 0.00192525
17 0.00339749
18 0.00566249
19 0.00894077
20 0.01341115 P
21 0.01915879 0.08
22 0.02612562
23 0.03407689 0.07
24 0.04259611
25 0.05111534 0.06
26 0.05897924
27 0.06553248
0.05
28 0.07021338
29 0.07263453
0.04
30 0.07263453
31 0.07029148
0.03
32 0.06589826
33 0.05990751
34 0.05285957 0.02
35 0.0453082
36 0.03775683 0.01
37 0.03061365
38 0.02416867 0
39 0.01859128 15 16 17 18 19 20 21 22 23 24 25
40 0.01394346
41 0.01020253
42 0.00728752
43 0.00508432
44 0.00346658
45 0.00231105

where we have left out values below 15 and above 45, since they are small.
The distribution is charted to the right. It is very slightly skewed to the right.

We are interested in P(X>=45), i.e., the probability of observing 45 or more calls. This can
be computed as:

P(X>=45) = 1 - P(X<=44)

Using the cumulative version of POISSON() (by specifying TRUE in the third argument), we obtain:

P(X<=44) = 0.99373139

Therefore,

P(X>=45) = 0.00626861

Answer: Observing X=45 or more is a rare event, according to our standard specification
of either 0.05 or 0.01 probability.
 Poisson with Mean 30
0.08

0.07

0.06

0.05

0.04

0.03

0.02

0.01

0
15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45
ument), we obtain:
Accidents at a Plant

Suppose a manufacturing plant has, on average, 24 accidents per year. In a

one month period, 5 accidents were observed.

Question: Is this a rare event?

Let X be the number of accidents in a month. Then,

E(X) = 2
P
and the probability mass function of X is 0.3

X=x P(x) 0.25

0 0.13533528
1 0.27067057 0.2
2 0.27067057
3 0.18044704
0.15
4 0.09022352
5 0.03608941
6 0.0120298 0.1
7 0.00343709
8 0.00085927 0.05

where we have left out values above 8, since they are small. 0
The distribution is charted to the right; it is skewed to the right. 0 1 2

We are interested in P(X>=5), i.e., the probability of observing 5 or more accidents. This can
be computed as:

P(X>=5) = 1 - P(X<=4)

Using the cumulative version of POISSON() (by specifying TRUE in the third argument), we obtain:

P(X<=4) = 0.94734698

Therefore,

P(X>=5) = 0.05265302

Answer: Observing X=5 or more is not a rare event, according to our standard specification
of either 0.05 or 0.01 probability.
 Poisson with Mean 2
0.3

0.25

0.2

0.15

0.1

0.05

0
0 1 2 3 4 5 6 7 8

ument), we obtain:
Accidents of a Driver

Suppose a driver has, on average, 1 accident per 50,000 miles driven.

After driving a vehicle for 100,000 miles, this person has no accidents.

Question: Is this a rare event?

This is an example where the "exposure" rate is not per unit of time; it is
rather per distance driven. Let X be the number of accidents per mile. Then,
X is Poisson distributed with

E(X) = 2

The mean is the same as the previous example, and hence one can refer to the
previous worksheet for the probability mass function.

We are interested in P(X<=0), or simply P(X=0). This can be computed in three ways:

P(X<=0) = 0.13533528
P(X=0) = 0.13533528
P(X=0) = 0.13533528

These are of course consistent.

Answer: Observing X=0 (or less) is not a rare event, according to our standard specification
of either 0.05 or 0.01 probability.
Number of Defective Parts

Consider the situation of inspecting parts for defects. Assume that the defective rate is
1/1000. Suppose we inspected 1000 parts and found 3 of them to be defective.

Question: Should we worry about the quality of the manufacturing process?

The binomial distribution is applicable to this situation. Conceptually, each part

can be either defective or functional and it is not unreasonable to assume that
parts have a constant probability of being defective, independent of one another.
The parameters are:

n= 1000
p= 0.001

Let X = number of defective parts out of 1000. Then,

E(X) = 1 Binomial
0.4
and the probability mass function of X is
0.35

X=x P(x) 0.3

0 0.36769542 0.25
1 0.36806349
0.2
2 0.18403174
3 0.06128251 0.15
4 0.01528996 0.1
5 0.00304881
0.05
6 or more 0.00058807
Total = 1 0
0 1 2
Notice that although any value from 6 to 1000 is possible, their probabilities
are very small, and hence we have lumped them together into "6 or more."
The probability mass function is charted to the right.

For X=3, the p-value is given by:

p-value = 0.08020934

Answer: Observing X=3 or more is not a rare event, according to our standard specification
of either 0.05 or 0.01 probability.

The Effect of Increasing n:

Suppose instead that 5,000 parts were inspected, that we still have the same defective probability
1/1000, and that the fraction of defective parts (3/1000) stays the same. That is, suppose

n= 5000
p= 0.001
 and X=15 ((3/1000)*5000). Note that

E(X) = 5

The distribution of X becomes:

X=x P(x)
0 0.00672111
1 0.0336392
2 0.08416534 Binomial with n=
3 0.14035982
0.2
4 0.17552003
5 0.17555517 0.18
6 0.14629597 0.16
7 0.1044762
0.14
8 0.06527148
9 0.03624016 0.12
10 0.01810557 0.1
11 0.00822157
0.08
12 0.00342154
13 0.00131413 0.06
14 0.00046858 0.04
15 0.00015591
0.02
16 4.8625E-05
17 1.427E-05 0
18 3.9544E-06 0 1 2 3 4 5 6 7 8 9
19 1.0379E-06
20 2.5875E-07

where we have left out values above 20. This is charted to the right.

The p-value now becomes:

p-value = 0.00022414

This is much lower than either 0.05 or 0.01. Hence, we should look into better
quality control.

Question: If n is made arbitrarily large (while keeping the fraction of defective parts at 1/1000), the
variability of X would decrease to zero. This means that for sufficiently large n, we would always
a rare event. This may be disturbing to some. Anything wrong?

Answer: No. When n is large, the law of large numbers says that X would be close to E(X) with
a high probability. We have simply become more discriminative. We could also consider
a properly scaled version of the difference X - E(X) as we increase n. We will return
to this in detail later.

Poisson Approximation

When n is large and p is small, so that n*p is moderate, the Poisson distribution, with mean
n*p, can be used to approximate the binomial distribution.

Using function POISSON(), we obtain the following approximation:

X=x P(x)
0 0.00673795
1 0.03368973
2 0.08422434 Poisson Ap
3 0.1403739
0.2
4 0.17546737
0.18
5 0.17546737
6 0.14622281 0.16
7 0.10444486 0.14
8 0.06527804 0.12
9 0.03626558 0.1
10 0.01813279
0.08
11 0.00824218
12 0.00343424 0.06
13 0.00132086 0.04
14 0.00047174 0.02
15 0.00015725 0
16 4.9139E-05 0 1 2 3 4 5 6 7 8 9
17 1.4453E-05
18 4.0146E-06 Binomia
19 1.0565E-06
20 2.6412E-07

This and the original binomial distribution are charted together to the right.
It can be seen that the approximation is excellent.

If we used the Poisson distribution, the approximate p-value is:

p-value = 0.00022625

which, compared with the exact value in cell D86, only has a small error at the 6th decimal place.
 Binomial with n=1000 and p=0.001
0.4

0.35

0.3

0.25

0.2

0.15

0.1

0.05

0
0 1 2 3 4 5 6 or more

ective probability
 Binomial with n=5000 and p=0.001

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

rts at 1/1000), the

e would always have

se to E(X) with
could also consider
n. We will return
 Poisson Approximation

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Binomial Poisson

h decimal place.