Groebner Business Statistics 7 Ch06

Business Statistics: A Decision-Making Approach, 7e 2008 Prentice-Hall, Inc.
Chap 6-1
Business Statistics:
A Decision-Making Approach
7
th
Edition
Chapter 6
Introduction to Continuous
Probability Distributions
Business Statistics: A Decision-Making Approach, 7e 2008 Prentice-Hall, Inc. Chap 6-2
Chapter Goals
After completing this chapter, you should be
able to:
Convert values from any normal distribution to a
standardized z-score
Find probabilities using a normal distribution table
Apply the normal distribution to business problems
Recognize when to apply the uniform and
exponential distributions
Probability Distributions
Continuous
Probability
Distributions
Binomial
Hypergeometric
Poisson
Probability
Distributions
Discrete
Probability
Distributions
Normal
Uniform
Exponential
Ch. 5 Ch. 6
Continuous Probability
Distributions
A continuous random variable is a variable that
can assume any value on a continuum (can
assume an uncountable number of values)
thickness of an item
time required to complete a task
temperature of a solution
height, in inches
These can potentially take on any value,
depending only on the ability to measure
accurately.
The Normal Distribution
Continuous
Probability
Distributions
Probability
Distributions
Normal
Uniform
Exponential
The Normal Distribution
Bell Shaped
Symmetrical
Mean, Median and Mode
are Equal
Location is determined by the
mean,
Spread is determined by the
standard deviation,
The random variable has an
infinite theoretical range:
+ to
Mean
= Median
= Mode
x
f(x)

By varying the parameters and , we obtain
different normal distributions
Many Normal Distributions
The Normal Distribution Shape
x
f(x)
Changing shifts the

distribution left or right.
Changing increases
or decreases the
spread.
Finding Normal Probabilities
a b
x
f(x)
P a x b (
)
s s
Probability is measured by the area
under the curve
f(x)
x
Probability as
Area Under the Curve
0.5 0.5
The total area under the curve is 1.0, and the curve is
symmetric, so half is above the mean, half is below
1.0 ) x P( = < <
0.5 ) x P( = < <
0.5 ) x P( = < <
Empirical Rules
1 encloses about
68% of xs
f(x)
x
+1 1
What can we say about the distribution of values
around the mean? There are some general rules:

68.26%
The Empirical Rule
2 covers about 95% of xs
3 covers about 99.7% of xs
x
2 2
x
3 3
95.44% 99.72%
(continued)
Importance of the Rule
If a value is about 2 or more standard
deviations away from the mean in a normal
distribution, then it is far from the mean
The chance that a value that far or farther
away from the mean is highly unlikely, given
that particular mean and standard deviation
The Standard Normal Distribution
Also known as the z distribution
Mean is defined to be 0
Standard Deviation is 1
z
f(z)
0
1
Values above the mean have positive z-values,
values below the mean have negative z-values
The Standard Normal
Any normal distribution (with any mean and
standard deviation combination) can be
transformed into the standard normal
distribution (z)
Need to transform x units into z units
Translation to the Standard
Normal Distribution
Translate from x to the standard normal (the
z distribution) by subtracting the mean of x
and dividing by its standard deviation:
x
z

=
Example
If x is distributed normally with mean of 100
and standard deviation of 50, the z value for
x = 250 is
This says that x = 250 is three standard
deviations (3 increments of 50 units) above
the mean of 100.
3.0
50
100 250
x
z =
=
Comparing x and z units
z
100
3.0 0
250 x
Note that the distribution is the same, only the
scale has changed. We can express the problem in
original units (x) or in standardized units (z)
= 100
= 50
The Standard Normal Table
The Standard Normal table in the textbook
(Appendix D)
gives the probability from the mean (zero)
up to a desired value for z
z
0 2.00
.4772
Example:
P(0 < z < 2.00) = .4772
The Standard Normal Table
The value within the
table gives the
probability from z = 0
up to the desired z
value
z 0.00 0.01 0.02
0.1
0.2

.4772
2.0
P(0 < z < 2.00) = .4772
The row shows
the value of z
to the first
decimal point
The column gives the value of
z to the second decimal point
2.0
.
.
.
(continued)
General Procedure for
Finding Probabilities
Draw the normal curve for the problem in
terms of x
Translate x-values to z-values
Use the Standard Normal Table
To find P(a < x < b) when x is distributed
normally:
Z Table example
Suppose x is normal with mean 8.0 and
standard deviation 5.0. Find P(8 < x < 8.6)
P(8 < x < 8.6)
= P(0 < z < 0.12)
Z 0.12 0
x 8.6 8
0
5
8 8
x
z =
=
0.12
5
8 8.6
x
z =
=
Calculate z-values:
Z Table example
Suppose x is normal with mean 8.0 and
standard deviation 5.0. Find P(8 < x < 8.6)
P(0 < z < 0.12)
z
0.12 0
x
8.6 8
P(8 < x < 8.6)
= 8
o = 5
= 0
o = 1
(continued)
Z
0.12
z .00 .01
0.0 .0000 .0040 .0080
.0398
.0438
0.2 .0793 .0832 .0871
0.3 .1179 .1217 .1255
Solution: Finding P(0 < z < 0.12)
.0478
.02
0.1
.0478
Standard Normal Probability
Table (Portion)
0.00
= P(0 < z < 0.12)
P(8 < x < 8.6)
Suppose x is normal with mean 8.0
and standard deviation 5.0.
Now Find P(x < 8.6)
Z
8.6
8.0
Now Find P(x < 8.6)
(continued)
Z
0.12
.0478
0.00
.5000
P(x < 8.6)
= P(z < 0.12)
= P(z < 0) + P(0 < z < 0.12)
= .5 + .0478 = .5478
Upper Tail Probabilities
Now Find P(x > 8.6)
Z
8.6
8.0
Now Find P(x > 8.6)
(continued)
Z
0.12
0
Z
0.12
.0478
0
.5000
.50 - .0478
= .4522
P(x > 8.6) = P(z > 0.12) = P(z > 0) - P(0 < z < 0.12)
= .5 - .0478 = .4522
Upper Tail Probabilities
Lower Tail Probabilities
Now Find P(7.4 < x < 8)
Z
7.4
8.0
Lower Tail Probabilities
Now Find P(7.4 < x < 8)
Z
7.4
8.0
The Normal distribution is
symmetric, so we use the
same table even if z-values
are negative:
P(7.4 < x < 8)
= P(-0.12 < z < 0)
= .0478
(continued)
.0478
Normal Probabilities in PHStat
We can use Excel and PHStat to quickly
generate probabilities for any normal
distribution
We will find P(8 < x < 8.6) when x is
normally distributed with mean 8 and
standard deviation 5
PHStat Dialogue Box
Select desired options
and enter values
PHStat Output
The Uniform Distribution
Continuous
Probability
Distributions
Probability
Distributions
Normal
Uniform
Exponential
The uniform distribution is a
probability distribution that has
equal probabilities for all possible
outcomes of the random variable
The Continuous Uniform Distribution:
otherwise 0
b x a if
a b
1
s s
where
f(x) = value of the density function at any x value
a = lower limit of the interval
b = upper limit of the interval
(continued)
f(x) =
The mean (expected value) is:
2
b a
E(x)
+
= =
where
a = lower limit of the interval from a to b
b = upper limit of the interval from a to b
The Mean and Standard Deviation
for the Uniform Distribution
The standard deviation is
12
a) (b
=
Uniform Distribution
Example: Uniform Probability Distribution
Over the range 2 x 6:
2 6
.25
f(x) = = .25 for 2 x 6
6 - 2
1
x
f(x)
Uniform Distribution
Example: Uniform Probability Distribution
Over the range 2 x 6:
4
2
6 2
E(x) =
+
= =
1.1547
12
2) (6
12
a) (b
2 2
=
=
The Exponential Distribution
Continuous
Probability
Distributions
Probability
Distributions
Normal
Uniform
Exponential
Used to measure the time that elapses
between two occurrences of an event (the
time between arrivals)
Examples:
Time between trucks arriving at an unloading
dock
Time between transactions at an ATM Machine
Time between phone calls to the main operator
a
e 1 a) x P(0

= s s
The probability that an arrival time is equal to or
less than some specified time a is
where 1/ is the mean time between events
Note that if the number of occurrences per time period is Poisson
with mean , then the time between occurrences is exponential
with mean time 1/
Exponential Distribution
Shape of the exponential distribution
(continued)
f(x)
x
= 1.0
(mean = 1.0)
= 0.5
(mean = 2.0)
= 3.0
(mean = .333)
Example
Example: Customers arrive at the claims counter at
the rate of 15 per hour (Poisson distributed). What
is the probability that the arrival time between
consecutive customers is less than five minutes?
Time between arrivals is exponentially distributed
with mean time between arrivals of 4 minutes (15
per 60 minutes, on average)
1/ = 4.0, so = .25
P(x < 5) = 1 - e
-a
= 1 e
-(.25)(5)
= .7135
Using PHStat
Chapter Summary
Reviewed key continuous distributions
normal
uniform
exponential
Found probabilities using formulas and tables
Recognized when to apply different distributions
Applied distributions to decision problems

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Business Statistics: A Decision-Making Approach, 7e 2008 Prentice-Hall, Inc.

Business Statistics: A Decision-Making Approach, 7e 2008 Prentice-Hall, Inc. Chap 6-7

Changing shifts the

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