Course:

Business Mathematics and Statistics (523)

Presented To:
Sir Muhammad Ejaz

Presented By:
Uzair Ali Ansari

Roll # AD512332

Topic (Issue):
The Poisson distribution

ALAMA IQBAL OPEN UNIVERSITY ISLAMABAD

(Department of Business Administration)
A
ll praises to Allah, the Sustainer of the entire universe, the most
Affectionate, the most Merciful, the Supreme owner of the Day of
Judgment; the entire source of knowledge and wisdom to mankind.
And whose uniqueness, ones and wholeness, gave me enough
courage, knowledge and ability to accomplish this assignment.

My humble gratitude is also due to the last Prophet Hazrat

Muhammad (Peace Be upon Him) through whom Almighty Allah
communicated knowledge to mankind and who is fever a torch of
guidance and knowledge for the whole humanity.

I would like to pay my gratitude to The Honorable Sir,

MUHAMMAD EJAZ who continuously encouraged ME. Due to
his incredible support I am able to perform this collective effort.

I would also like to thank all those persons who directly or indirectly
helped me in this project. I hope this project will maximize your
satisfaction.
 INTRODUCTION

In probability theory and statistics, the Poisson distribution

Or Poisson law of large numbers is a discrete probability distribution that
expresses the probability of a number of events occurring in a fixed period of
time if these events occur with a known average rate and independently of the
time since the last event. The Poisson distribution can also be used for the
number of events in other specified intervals such as distance, area or volume.

Poisson distribution is a well-known statistical discrete distribution. It

expresses the probability of a number of events (or failures, arrivals,
occurrences ...) occurring in a fixed period of time, provided these events
occur with a known mean rate λ (events/time), and are independent of the time
since the last event.

The Poisson distribution is used to describe the number of events per

unit of a continuum. It is a useful modelling tool with wide and varied
applications which include simulating insurance claims, the requests made to
a web server and the goals scored in a soccer match. The distribution is
defined by a single parameter which is the mean number of events per unit of
continuum, e.g. claims/month, hits/minute or goals/match.
 History

The distribution was first introduced by Simon-Denis Poisson

(1781–1840), a French mathematician, In 1837 and published,
together with his probability theory, in 1838 in his work “Recherché
sur la probabilities des judgments en métier criminal et en matière
civile” (Research on the Probability of Judgments in Criminal and
Civil Matters). The work focused on certain random variables N that
count, among other things, the number of discrete occurrences
sometimes called “arrivals” that take place during a time-interval of
given length. First application was the description of the number of
death by horse kicking in the Prussian army.
Formula of Poisson distribution:

k representing the number of successes occurring in a given time interval or a

specified region of space is given by the formula. It has the Probability Mass
Function:

Where

k= 0, 1, 2, 3...

k is number of occurrences of an event - the probability of which is given by

the function

k! Is the factorial of k

e = 2.71828 (but use your calculator's e button)

λ = mean number of successes in the given time interval or region of space.

For instance, if the events occur on average 4 times per minute, and you are
interested in the number of events occurring in a 10 minute interval, you
would use as your model a Poisson distribution with λ = 10×4 = 40.
 Applications of Poisson distribution

The Poisson distribution can be applied to systems with a large number of

possible events, each of which is rare. A classic example is the nuclear decay
of atoms. The Poisson distribution is sometimes called a Poissonian,
analogous to the term Gaussian for a Gauss or normal distribution.
The Poisson distribution can also be used to study how 'accidents' or
'malfunctions' or the chance of winning the lottery never, once or more than
once, are distributed on the level of a population. If having one 'accident' has
no influence on the chance of having another accident, the victim is 'put back
into the population' immediately after an 'event', people may have one, two,
three, or more accidents during a certain period of time. The Poisson
distribution tells you how these chances are distributed. Mean or incidence is
the number of accidents divided by the size of the population and is given to
the program in the top expectation box. Note that although your calculation
may result in a value between zero and one, this value is not a proportion but a
true mean. You would get a true proportion if you divide the number of
people who had an accident by the number of people. In the second 'observed'
box is given the number of accidents you want to study. If you give 10 in the
observed box the output gives you the proportion of the population who had
'0' (zero) accidents, the proportion who had '1' (one) accident, the proportion
who had '2' (two) accidents etc. The cumulative distribution tells you the
proportion that had '1' or more accidents, '2' or more etc.

One assumption in this application of the Poisson distribution is that the

chance of having an accident is randomly distributed: every individual has an
equal chance. Mathematically this is expressed in the fact that the variance
and the mean for the Poisson distribution are equal. A good way to check if
this assumption that individuals have an equal chance of having the trait is
correct is to compare the variance of an (accident) distribution with its mean.
If the variance is larger, then the assumption was not correct. The Negative
Binomial Version 1 has been implemented to provide an alternative for the
Poisson distribution in the case of a non-random distribution.

An extraordinarily large number of natural and social phenomena have been

successfully modeled using the Poisson distribution.

• The "domain" in which counts are observed can be in interval of time:

as for the radioactive counts mentioned above or as for cases arriving at
the emergency room of a hospital during a one-hour period in mid-
afternoon.
• The domain can be a volume. In the volume represented by a beaker
containing cells in suspension, the number of cells that divide in a
particular unit of time may be modeled with the Poisson distribution.
Also the number of red giant stars in a volume of interstellar space has
been shown to be Poisson distributed.

• The domain can be an area. Bomb hits in acre tracts of metropolitan

London during WW2, the number of pollen grains collected in regions
of a sticky plate exposed to the open air, and the number of bird nests in
tracts San Francisco Bay marshes have all been successfully modeled as
Poisson
The Poisson distribution has Following Applications:

• birth defects and genetic mutations

• rare diseases (like Leukemia, but not AIDS because it is infectious and
so not independent) - especially in legal cases
• car accidents
• traffic flow and ideal gap distance
• number of typing errors on a page
• hairs found in McDonald's hamburgers
• spread of an endangered animal in Africa
• failure of a machine in one month

Mean and Variance of Poisson distribution

If μ is the average number of successes occurring in a given time interval or

region in the Poisson distribution, then the mean and the variance of the
Poisson distribution are both equal to μ.

E(X) = λ
And
V(X) = σ2 = λ

Note: In a Poisson distribution, only one parameter, μ is needed to

determine the probability of an event.
 Graphical Representation of Poisson
Distribution

The following graph illustrates how the PDF varies with the parameter λ:
 Implementation

In the following table λ is the mean of the distribution, k is the

random variable, p is the probability and q = 1-p.

Function Implementation Notes

pdf Using the relation: pdf = e-λ λk / k!
Using the relation: p = Γ(k+1, λ) / k! =
cdf
gamma_q(k+1, λ)
Using the relation: q = gamma_p(k+1,
cdf complement
λ)
Using the relation: k =
quantile
gamma_q_inva(λ, p) - 1
quantile from the Using the relation: k =
complement gamma_p_inva(λ, q) - 1
mean λ
mode floor (λ) or ⌊λ⌋
skewness 1/√λ
kurtosis 3 + 1/λ
kurtosis excess 1/λ