Statistics for Managers

Using Microsoft® Excel

5th Edition

Chapter 4 (Textbook Ch6)

Important Continuous
Distributions

1
 Chapter Goals
After completing this chapter, you should be
able to:
§  Describe the characteristics of the normal distribution
§  Translate normal distribution problems into standardized
normal distribution problems
§  Find probabilities using a normal distribution table
§  Evaluate the normality assumption
§  Recognize when to apply the uniform and exponential
distributions

2
 Probability Distributions
Probability
Distributions

Ch. 3 Discrete Continuous Ch. 4

Probability Probability
Distributions Distributions

Binomial Normal

Hypergeometric Uniform

Poisson Exponential

3
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.
4
The Normal Distribution
Probability
Distributions

Continuous
Probability
Distributions

Normal

Uniform

Exponential

5
 The Normal Distribution
§  ‘Bell Shaped’
§  Symmetrical f(X)
§  Mean, Median and Mode
are Equal
Location is determined by the σ
mean, µ X
Spread is determined by the µ
standard deviation, σ
Mean
The random variable has an = Median
infinite theoretical range: = Mode
+ ! to ! !

6
 Many Normal Distributions

By varying the parameters µ and σ, we obtain

different normal distributions

7
 The Normal Distribution
Shape

f(X) Changing µ shifts the

distribution left or
right.
Changing σ increases
or decreases the
σ spread.

µ X

8
 The Normal Probability
Density Function

§  The formula for the normal probability density

function is

1 −(1/2)[(X −µ)/σ] 2
f(X) = e
2πσ
Where e = the mathematical constant approximated by 2.71828
π = the mathematical constant approximated by 3.14159
µ = the population mean
σ = the population standard deviation
X = any value of the continuous variable
9
 The Standardized Normal

§  Any normal distribution (with any mean and

standard deviation combination) can be
transformed into the standardized normal
distribution (Z)

§  Need to transform X units into Z units

10
 Translation to the Standardized
Normal Distribution

§  Translate from X to the standardized normal

(the “Z” distribution) by subtracting the
mean
of X and dividing by its standard deviation:
X −µ
Z=
σ
Z always has mean = 0 and standard deviation = 1

11
Translation to the Standardized
Normal Distribution

X −µ
Z=
σ

12
 The Standardized Normal
Probability Density Function

§  The formula for the standardized normal

probability density function is

1 −(1/2)Z2
f(Z) = e
2π
Where e = the mathematical constant approximated by 2.71828
π = the mathematical constant approximated by 3.14159
Z = any value of the standardized normal distribution

13
 The Standardized
Normal Distribution

§  Also known as the “Z” distribution

§  Mean is 0
§  Standard Deviation is 1
f(Z)

0 Z

Values above the mean have positive Z-values

, values below the mean have negative Z-values
14
 Example

§  If X is distributed normally with mean of 100

and standard deviation of 50, the Z value for
X = 200 is
X − µ 200 − 100
Z= = = 2.0
σ 50
§  This says that X = 200 is two standard
deviations (2 increments of 50 units) above
the mean of 100.

15
 Comparing X and Z units

100 200 X (µ = 100, σ = 50)

0 2.0 Z (µ = 0, σ = 1)

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)

16
 Finding Normal Probabilities

Probability is measured by the area

under the curve
f(X)
P (a ≤ X ≤ b)
= P (a < X < b)
(Note that the
probability of any
individual value is zero)

a b X

17
 Probability as
Area Under the Curve
The total area under the curve is 1.0, and the curve is
symmetric, so half is above the mean, half is below

f(X) P( −∞ < X < µ) = 0.5

P(µ < X < ∞ ) = 0.5

0.5 0.5

µ X
P( −∞ < X < ∞ ) = 1.0
18
 Probability: Area Under the Curve

§  Probability of observing a value between a and b is area under the

curve More likely
Less likely
a b a b
§  Note: total area = 1
Probability = 0.50

Probability = 0.68 Probability = 0.95

(one std. dev.) (two std. devs.)

!! !!
! !
19
 The Standardized Normal Table

§  The Standardized Normal table in the

textbook (Appendix table E.2) gives the
probability less than a desired value for
Z (i.e., from negative infinity to Z)

Example: .9772
P(Z < 2.00) = .9772

0 2.00 Z

20
 The Standardized Normal Table
(continued)

The column gives the value of

Z to the second decimal point
Z 0.00 0.01 0.02 …

The row shows 0.0

the value of Z 0.1
to the first . The value within the
.
decimal point . table gives the
2.0 .9772 probability from Z = !
! up to the desired Z
2.0
value
P(Z < 2.00) = .9772

21
 General Procedure for
Finding Probabilities

To find P(a < X < b) when X is

distributed normally:

§  Draw the normal curve for the problem in

terms of X

§  Translate X-values to Z-values

§  Use the Standardized Normal Table

22
 Finding Normal Probabilities

§  Suppose X is normal with mean 8.0 and

standard deviation 5.0
§  Find P(X < 8.6)

X
8.0
8.6
23
 Finding Normal Probabilities
(continued)
§  Suppose X is normal with mean 8.0 and
standard deviation 5.0. Find P(X < 8.6)
X − µ 8.6 − 8.0
Z= = = 0.12
σ 5.0

µ=8 µ=0
σ = 10 σ=1

8 8.6 X 0 0.12 Z

P(X < 8.6) P(Z < 0.12)

24
 Solution: Finding P(Z < 0.12)

Standardized Normal Probability P(X < 8.6)

Table (Portion) = P(Z < 0.12)
Z .00 .01 .02 .5478
0.0 .5000 .5040 .5080

0.1 .5398 .5438 .5478

0.2 .5793 .5832 .5871
Z
0.00
0.3 .6179 .6217 .6255
0.12

25
 Upper Tail Probabilities

§  Suppose X is normal with mean 8.0 and

standard deviation 5.0.
§  Now Find P(X > 8.6)

X
8.0
8.6
26
 Upper Tail Probabilities
(continued)

§  Now Find P(X > 8.6)…

P(X > 8.6) = P(Z > 0.12) = 1.0 - P(Z ≤ 0.12)
= 1.0 - .5478 = .4522

.5478
1.000 1.0 - .5478
= .4522

Z Z
0 0
0.12 0.12
27
 Probability Between
Two Values

§  Suppose X is normal with mean 8.0 and

standard deviation 5.0. Find P(8 < X < 8.6)

Calculate Z-values:

X −µ 8 −8
Z= = =0
σ 5
8 8.6 X
X − µ 8.6 − 8 0 0.12 Z
Z= = = 0.12
σ 5 P(8 < X < 8.6)
= P(0 < Z < 0.12)
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 Solution: Finding P(0 < Z < 0.12)

Standardized Normal Probability P(8 < X < 8.6)

Table (Portion) = P(0 < Z < 0.12)
= P(Z < 0.12) – P(Z ≤ 0)
Z .00 .01 .02 = .5478 - .5000 = .0478
0.0 .5000 .5040 .5080 .0478
.5000
0.1 .5398 .5438 .5478
0.2 .5793 .5832 .5871

0.3 .6179 .6217 .6255 Z

0.00
0.12
29
 Probabilities in the Lower Tail

§  Suppose X is normal with mean 8.0 and

standard deviation 5.0.
§  Now Find P(7.4 < X < 8)

X
8.0
7.4

30
 Probabilities in the Lower Tail
(continued)

Now Find P(7.4 < X < 8)…

P(7.4 < X < 8)
= P(-0.12 < Z < 0) .0478
= P(Z < 0) – P(Z ≤ -0.12)
= .5000 - .4522 = .0478 .4522

The Normal distribution is

symmetric, so this probability
7.4 8.0 X
is the same as P(0 < Z < 0.12) Z
-0.12 0

31
 Empirical Rules

What can we say about the distribution of values

around the mean? There are some general rules:
f(X)

µ ± 1σ encloses about
68% of X’s!
σ σ

µ-1σ µ µ+1σ X

68.26%
32
 The Empirical Rule
(continued)

§  µ ± 2σ covers about 95% of X’s

§  µ ± 3σ covers about 99.7% of X’s

2σ 2σ 3σ 3σ
µ x µ x

95.44% 99.72%

33
 The Empirical Rule
§ 

34
 Finding the X value for a
Known Probability

§  Steps to find the X value for a known

probability:
1. Find the Z value for the known probability
2. Convert to X units using the formula:

X = µ + Zσ

35
 Finding the X value for a
Known Probability
(continued)

Example:
§  Suppose X is normal with mean 8.0 and
standard deviation 5.0.
§  Now find the X value so that only 20% of all
values are below this X

.2000

? 8.0 X
? 0 Z
36
 Find the Z value for
20% in the Lower Tail

1. Find the Z value for the known probability

Standardized Normal Probability §  20% area in the lower
Table (Portion)
tail is consistent with a
Z … .03 .04 .05 Z value of -0.84
-0.9 … .1762 .1736 .1711
.2000
-0.8 … .2033 .2005 .1977
-0.7 … .2327 .2296 .2266
? 8.0 X
-0.84 0 Z
37
 Finding the X value

2. Convert to X units using the formula:

X = µ + Zσ

= 8.0 + ( −0.84 )5.0

= 3.80
So 20% of the values from a distribution
with mean 8.0 and standard deviation
5.0 are less than 3.80

38
 Assessing Normality

§  Not all continuous random variables are

normally distributed
§  It is important to evaluate how well the data set
is approximated by a normal distribution

39
 Assessing Normality
(continued)
§  Construct charts or graphs
§  For small- or moderate-sized data sets, do stem-
and-leaf display and box-and-whisker plot look
symmetric?
§  For large data sets, does the histogram or polygon
appear bell-shaped?
§  Compute descriptive summary measures
§  Do the mean, median and mode have similar values?
§  Is the interquartile range approximately 1.33σ?
§  Is the range approximately 6σ?

40
 Assessing Normality
§ 

41
 Assessing Normality
§ 

42
 Assessing Normality
(continued)

§  Observe the distribution of the data set

§  Do approximately 2/3 of the observations lie within
mean ±1 standard deviation?
§  Do approximately 80% of the observations lie within
mean ±1.28 standard deviations?
§  Do approximately 95% of the observations lie within
mean ± 2 standard deviations?
§  Evaluate normal probability plot
§  Is the normal probability plot approximately linear with
positive slope?
43
 The Normal Probability Plot

§  Normal probability plot

§  Arrange data into ordered array
§  Find corresponding standardized normal quantile
values
§  Plot the pairs of points with observed data values
on the vertical axis and the standardized normal
quantile values on the horizontal axis
§  Evaluate the plot for evidence of linearity

44
The Normal Probability Plot
(continued)

A normal probability plot for data

from a normal distribution will be
approximately linear:

X
90

60

30

-2 -1 0 1 2 Z

45
 Normal Probability Plot
(continued)

Left-Skewed Right-Skewed
X 90 X 90
60 60
30 30
-2 -1 0 1 2 Z -2 -1 0 1 2 Z

Rectangular
X 90 Nonlinear plots indicate
a deviation from
60
normality
30
-2 -1 0 1 2 Z
46
The Uniform Distribution
Probability
Distributions

Continuous
Probability
Distributions

Normal

Uniform

Exponential

47
 The Uniform Distribution

§  The uniform distribution is a

probability distribution that has
equal probabilities for all possible
outcomes of the random variable

§  Also called a rectangular distribution

48
 The Uniform Distribution
(continued)

The Continuous Uniform Distribution:

1
if a ≤ X ≤ b
b−a
f(X) =
0 otherwise

where
f(X) = value of the density function at any X value
a = minimum value of X
b = maximum value of X

49
 Properties of the
Uniform Distribution

§  The mean of a uniform distribution is

a+b
µ=
2

§  The standard deviation is

(b - a)2
σ=
12

50
 Uniform Distribution Example

Example: Uniform probability distribution

over the range 2 ≤ X ≤ 6:

1
f(X) = 6 - 2 = .25 for 2 ≤ X ≤ 6

f(X)
a+b 2+6
µ= = =4
.25 2 2

(b - a)2 (6 - 2)2
σ= = = 1.1547
2 6 X 12 12

51
The Exponential Distribution
Probability
Distributions

Continuous
Probability
Distributions

Normal

Uniform

Exponential

52
 The Exponential Distribution

§  Used to model the length of time 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

53
 The Exponential Distribution
§  Defined by a single parameter, its mean λ
(lambda)
§  The probability that an arrival time is less than
some specified time X is
− λX
P(arrival time < X) = 1 − e
and f(x) = λe − λx

where e = mathematical constant approximated by 2.71828

λ = the population mean number of arrivals per unit
X = any value of the continuous variable where 0 < X < ∞
54
 Exponential Distribution
Example

Example: Customers arrive at the service counter at

the rate of 15 per hour. What is the probability that the
arrival time between consecutive customers is less
than three minutes?

§  The mean number of arrivals per hour is 15, so λ = 15

§  Three minutes is .05 hours
§  P(arrival time < .05) = 1 – e-λX = 1 – e-(15)(.05) = .5276
§  So there is a 52.76% probability that the arrival time
between successive customers is less than three
minutes
55
 Relationship between the Exponential
and the Poisson Distributions

§  When events happen over time independently and at a

constant rate:
1.  The number of events in any fixed time period is Poisson.
2.  The waiting time between events is exponential.

Example: Suppose customers arrive independently at a constant

mean rate of 40 per Hour. What is the probability that at least one
customer arrives in the next five Minutes?
The mean of this exponential random variable = 40/60 = 1/1.5 (minute).
P( X < 5 ) = 1 – e5/1.5 = 0.96.

The chances are high (96%) ! At least one customer will arrive in
the next 5 minutes.
56