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(a) For \(n=100, p=0.02,\) and \(r=2,\) compute \(P(r)\) using the formula for the binomial distribution and your calculator: $$ P(r)=C_{n, p^{\prime}}(1-p)^{n-r} $$ (b) For \(n=100, p=0.02,\) and \(r=2,\) estimate \(P(r)\) using the Poisson approximation to the binomial. (c) Compare the results of parts (a) and (b). Does it appear that the Poisson distribution with \(\lambda=n p\) provides a good approximation for \(P(r=2) ?\) (d) Repeat parts (a) to (c) for \(r=3\)

Short Answer

Expert verified
The Poisson distribution does not provide a good approximation for both cases.

Step by step solution

01

Calculate Binomial Probability for r=2

To find the binomial probability \(P(r=2)\), use the formula for the binomial distribution:\[ P(r) = \binom{n}{r} p^r (1-p)^{n-r}, \] where \(n=100\), \(p=0.02\), and \(r=2\). Compute \( \binom{100}{2} \), \( p^2 \), and \( (1-p)^{98} \), then use these in the formula.\[ \binom{100}{2} = \frac{100 \times 99}{2 \times 1} = 495, \] \( p^2 = 0.02^2 = 0.0004 \), and \( (1-p)^{98} = 0.98^{98} \). Using a calculator, \(0.98^{98} \approx 0.1326\). Substitute to get:\[ P(r=2) = 495 \times 0.0004 \times 0.1326 \approx 0.0267. \]
02

Poisson Approximation for r=2

For the Poisson approximation, use \( \lambda = n \times p = 100 \times 0.02 = 2 \). The formula for the Poisson probability is:\[ P(r; \lambda) = \frac{e^{-\lambda} \lambda^r}{r!} \]. For \(r=2\), compute: \[ P(2; 2) = \frac{e^{-2} \times 2^2}{2!} = \frac{e^{-2} \times 4}{2}. \] Using a calculator, \(e^{-2} \approx 0.1353\), so \[ P(2; 2) = \frac{0.1353 \times 4}{2} \approx 0.2706. \]
03

Compare Results for r=2

Compare the binomial probability of \(0.0267\) with the Poisson approximation of \(0.2706\). The values are significantly different, indicating the Poisson approximation is not very accurate in this case.
04

Calculate Binomial Probability for r=3

Calculate the binomial probability \(P(r=3)\) using the formula:\[ P(r) = \binom{n}{r} p^r (1-p)^{n-r}, \] where \( \binom{100}{3} = \frac{100 \times 99 \times 98}{3 \times 2 \times 1} = 161700 \). \( p^3 = 0.02^3 \), and \( (1-p)^{97} = 0.98^{97} \). Calculate \(0.02^3 = 0.000008\), and \(0.98^{97} \approx 0.1353\). Substitute in the formula: \[ P(r=3) = 161700 \times 0.000008 \times 0.1353 \approx 0.0044. \]
05

Poisson Approximation for r=3

Using the same \(\lambda=2\) from above, calculate the probability:\[ P(3; 2) = \frac{e^{-2} \times 2^3}{3!} = \frac{e^{-2} \times 8}{6}. \] Using \(e^{-2} \approx 0.1353\), we get:\[ P(3; 2) = \frac{0.1353 \times 8}{6} \approx 0.1804. \]
06

Compare Results for r=3

Compare the binomial probability of \(0.0044\) with the Poisson approximation of \(0.1804\). Again, there's a significant difference, showing that the Poisson approximation is not suitable in this scenario.

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Key Concepts

These are the key concepts you need to understand to accurately answer the question.

Poisson approximation
The Poisson approximation is a useful tool when dealing with probability distributions, especially when calculating binomial probabilities for a large number of trials. The approximation becomes useful when the number of trials, \( n \), is large, the probability of success, \( p \), is small, and the mean \( \lambda = n \times p \) is moderate. In such scenarios, the binomial distribution can be computationally intensive due to the calculation of large factorials.
For example, if we have an event that happens rarely within a large set of trials, like finding exactly two successes in 100 trials with each trial having a success probability of 0.02, we can apply the Poisson approximation. The parameter \( \lambda \), representing the expected number of occurrences, should be equal to \( n \times p \), hence \( \lambda = 100 \times 0.02 = 2 \). This approximation simplifies the process by using a straightforward formula \( P(r; \lambda) = \frac{e^{-\lambda} \lambda^r}{r!} \), which can be easier to handle than binomial calculations.However, one needs to be cautious when using the Poisson approximation as it might not always align closely with the exact binomial probabilities depending on the specific situation.
probability calculation
Probability calculation is a fundamental concept in statistics used to determine the likelihood of an event occurring. When using the binomial distribution for probability calculation, you compute the possibility of getting exactly \( r \) successes in \( n \) independent trials, each with a success probability of \( p \). The formula to find this probability is:
\[P(r) = \binom{n}{r} p^r (1-p)^{n-r},\]where
  • \( \binom{n}{r} \) is the combination of \( n \) items taken \( r \) at a time, representing the number of ways to choose \( r \) successes out of \( n \) trials.
  • \( p^r \) shows the probability of \( r \) successes, and
  • \( (1-p)^{n-r} \) calculates the probability of \( n-r \) failures.
Suppose, for \( n = 100 \), \( p = 0.02 \), and \( r = 2 \), you determine each component: \( \binom{100}{2} = 495 \), \( p^2 = 0.0004 \), and \( (1-p)^{98} \approx 0.1326 \). These are combined to yield an approximate probability of 0.0267 for exactly 2 successes.
The ease of calculation varies depending on the size of \( n \) and values of \( p \), and sometimes, alternative methods like the Poisson approximation are employed for simplicity.
statistical comparison
Statistical comparison helps to evaluate the accuracy of different methods used for calculating probabilities. It is crucial to assess if approximations provide valid results in specific contexts. Typically, you might compare the probabilities obtained from a more precise method, such as the binomial distribution, against an approximation, like the Poisson.In the given exercise, the binomial probability for \( r=2 \) (approximately 0.0267) differs significantly from the Poisson approximation (0.2706). A similar discrepancy is seen when \( r=3 \), where the binomial probability is around 0.0044, contrasting with the Poisson approximation of 0.1804. This variance indicates that the Poisson approximation might not be suitable for these parameter values since the approximated values deviate considerably from the binomial results.Engaging in such comparisons is vital, especially when practical applications demand precise probability estimates. By evaluating these methods under different scenarios, you can identify when an approximation suffices or if the exact calculation is necessary, ensuring accurate and meaningful statistical analysis.

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Most popular questions from this chapter

Consider a binomial experiment with \(n=7\) trials where the probability of success on a single trial is \(p=0.30\) (a) Find \(P(r=0)\) (b) Find \(P(r \geq 1)\) by using the complement rule.

Consider a binomial distribution with \(n=10\) trials and the probability of success on a single trial \(p=0.85\) (a) Is the distribution skewed left, skewed right, or symmetric? (b) Compute the expected number of successes in 10 trials. (c) Given the high probability of success \(p\) on a single trial, would you expect \(P(r \leq 3)\) to be very high or very low? Explain. (d) Given the high probability of success \(p\) on a single trial, would you expect \(P(r \geq 8)\) to be very high or very low? Explain.

Insurance Risk Insurance companies know the risk of insurance is greatly reduced if the company insures not just one person, but many people. How does this work? Let \(x\) be a random variable representing the expectation of life in years for a 25 -year-old male (i.e., number of years until death). Then the mean and standard deviation of \(x\) are \(\mu=50.2\) years and \(\sigma=11.5\) years (Vital Statistics Section of the Statistical Abstract of the United States, 116th edition). Suppose Big Rock Insurance Company has sold life insurance policies to Joel and David. Both are 25 years old, unrelated, live in different states, and have about the same health record. Let \(x_{1}\) and \(x_{2}\) be random variables representing Joel's and David's life expectancies. It is reasonable to assume \(x_{1}\) and \(x_{2}\) are independent. $$\begin{aligned} &\text { Joel, } x_{1}: \mu_{1}=50.2 ; \sigma_{1}=11.5\\\ &\text { David, } x_{2}: \mu_{2}=50.2 ; \sigma_{2}=11.5 \end{aligned}$$ If life expectancy can be predicted with more accuracy, Big Rock will have less risk in its insurance business. Risk in this case is measured by \(\sigma\) (larger \(\sigma\) means more risk). (a) The average life expectancy for Joel and David is \(W=0.5 x_{1}+0.5 x_{2}\) Compute the mean, variance, and standard deviation of \(W\). (b) Compare the mean life expectancy for a single policy \(\left(x_{1}\right)\) with that for two policies \((W).\) (c) Compare the standard deviation of the life expectancy for a single policy \(\left(x_{1}\right)\) with that for two policies \((W).\) (d) The mean life expectancy is the same for a single policy \(\left(x_{1}\right)\) as it is for two policies \((W),\) but the standard deviation is smaller for two policies. What happens to the mean life expectancy and the standard deviation when we include more policies issued to people whose life expectancies have the same mean and standard deviation (i.e., 25 -year-old males)? For instance, for three policies, \(W=(\mu+\mu+\mu) / 3=\mu\) and \(\sigma_{W}^{2}=(1 / 3)^{2} \sigma^{2}+(1 / 3)^{2} \sigma^{2}+(1 / 3)^{2} \sigma^{2}=\) \((1 / 3)^{2}\left(3 \sigma^{2}\right)=(1 / 3) \sigma^{2}\) and \(\sigma_{W}=\frac{1}{\sqrt{3}} \sigma .\) Likewise, for \(n\) such policies, \(W=\mu\) and \(\sigma_{W}^{2}=(1 / n) \sigma^{2}\) and \(\sigma_{W}=\frac{1}{\sqrt{n}} \sigma .\) Looking at the general result, is it appropriate to say that when we increase the number of policies to \(n\), the risk decreases by a factor of \(\sigma_{W}=\frac{1}{\sqrt{n}} ?\)

Suppose you are a hospital manager and have been told that there is no need to worry that respirator monitoring equipment might fail because the probability any one monitor will fail is only \(0.01 .\) The hospital has 20 such monitors and they work independently. Should you be more concerned about the probability that exactly one of the 20 monitors fails, or that at least one fails? Explain.

Trevor is interested in purchasing the local hardware/sporting goods store in the small town of Dove Creck, Montana. After examining accounting records for the past several years, he found that the store has been grossing over 850 per day about 60 of the business days it is open. Estimate the probability that the store will gross over 850 (a) at least 3 out of 5 business days. (b) at least 6 out of 10 business days. (c) fewer than 5 out of 10 business days. (d) fewer than 6 out of the next 20 business days. Interpretation If this actually happened, might it shake your confidence in the statement \(p=0.60 ?\) Might it make you suspect that \(p\) is less than \(0.60 ?\) Explain. (e) more than 17 out of the next 20 business days. Interpretation If this actually happened, might you suspect that \(p\) is greater than \(0.60 ?\) Explain.

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