Contemporary
Business Statistics, 3e
by
Williams, Sweeney, and Anderson
Slides by
JOHN
LOUCKS
St. Edward’s
University
© 2009 Cengage South-Western. All Rights Reserved 1
Chapter 6
Continuous Probability Distributions
Uniform Probability Distribution
Normal Probability Distribution
Exponential Probability Distribution
f (x) Exponential
Uniform
f (x)
f (x) Normal
x
x
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Continuous Probability Distributions
A continuous random variable can assume any
value in an interval on the real line or in a
collection of intervals.
It is not possible to talk about the probability of the
random variable assuming a particular value.
Instead, we talk about the probability of the random
variable assuming a value within a given interval.
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Continuous Probability Distributions
The probability of the random variable
assuming a value within some given interval
from x1 to x2 is defined to be the area under
the graph of the probability density function
between x1 and x2.
f (x) Exponential
Uniform
f (x)
f (x) Normal
x
x xx1122 x22
x11 x22 x11
x
x11 x22
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Uniform Probability Distribution
A random variable is uniformly distributed
whenever the probability is proportional to the
interval’s length.
The uniform probability density function is:
ff ((xx)) =
= 1/(
1/(bb –– aa)) for
for aa <
< xx <
<bb
=
=0 0 elsewhere
elsewhere
where: a = smallest value the variable can assume
b = largest value the variable can assume
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Uniform Probability Distribution
Expected Value of x
E(
E(xx)) =
= ((aa +
+bb)/2
)/2
Variance of x
Var(
Var(xx)) =
= ((b
b -- aa))22/12
/12
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Uniform Probability Distribution
Example: Slater's Buffet
Slater customers are charged for the amount of
salad they take. Sampling suggests that the amount
of salad taken is uniformly distributed between 5
ounces and 15 ounces.
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Uniform Probability Distribution
Uniform Probability Density Function
ff((xx)) =
= 1/10
1/10 for
for 5
5<< xx <
< 15
15
=
=0 0 elsewhere
elsewhere
where:
x = salad plate filling weight
© 2009 Cengage South-Western. All Rights Reserved 8
Uniform Probability Distribution
Expected Value of x
E(x) = (a + b)/2
= (5 + 15)/2
= 10
Variance of x
Var(x) = (b - a)22/12
= (15 – 5)22/12
= 8.33
© 2009 Cengage South-Western. All Rights Reserved 9
Uniform Probability Distribution
Uniform Probability Distribution
for Salad Plate Filling Weight
f(x)
1/10
x
0 5 10 15
Salad Weight (oz.)
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Uniform Probability Distribution
What is the probability that a customer
will take between 12 and 15 ounces of
salad?
f(x)
P(12 < x < 15) = 1/10(3) = .3
1/10
x
0 5 10 12 15
Salad Weight (oz.)
© 2009 Cengage South-Western. All Rights Reserved 11
Normal Probability Distribution
The normal probability distribution is the most
important distribution for describing a
continuous random variable.
It is widely used in statistical inference.
It has been used in a wide variety of
applications
including:
•Heights of people
•Test scores
•Rainfall amounts
•Scientific measurements
© 2009 Cengage South-Western. All Rights Reserved 12
Normal Probability Distribution
Normal Probability Density Function
1 (x )2 / 2 2
f (x) e
2
where:
= mean
= standard deviation
= 3.14159
e = 2.71828
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Normal Probability Distribution
Characteristics
The distribution is symmetric; its skewness
measure is zero.
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Normal Probability Distribution
Characteristics
The entire family of normal probability
distributions is defined by its mean and its
standard deviation .
Standard Deviation
x
Mean
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Normal Probability Distribution
Characteristics
The highest point on the normal curve is at the
mean, which is also the median and mode.
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Normal Probability Distribution
Characteristics
The mean can be any numerical value: negative,
zero, or positive.
x
-10 0 25
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Normal Probability Distribution
Characteristics
The standard deviation determines the width of the
curve: larger values result in wider, flatter curves.
= 15
= 25
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Normal Probability Distribution
Characteristics
Probabilities for the normal random variable are
given by areas under the curve. The total area
under the curve is 1 (.5 to the left of the mean and
.5 to the right).
.5 .5
x
© 2009 Cengage South-Western. All Rights Reserved 19
Normal Probability Distribution
Characteristics
68.26% of values of a normal random variable
are within+/- 1 standard deviation of its mea
95.44% of values of a normal random variable
are within +/- 2 standard deviations of its mea
99.72% of values of a normal random variable
are within +/- 3 standard deviations of its mea
me
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Normal Probability Distribution
Characteristics
99.72%
95.44%
68.26%
x
– 3 – 1 + 1 + 3
– 2 + 2
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Standard Normal Probability Distribution
Characteristics
A
A random
random variable
variable having
having aa normal
normal distribution
distribution
with
with aa mean
mean ofof 00 and
and aa standard
standard deviation
deviation of
of 11 is
is
said
said to
to have
have aa standard
standard normal
normal probability
probability
distribution
distribution..
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Standard Normal Probability Distribution
Characteristics
The letter z is used to designate the standard
normal random variable.
z
0
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Standard Normal Probability Distribution
Converting to the Standard Normal
Distribution
x
z
We can think of z as a measure of the number of
standard deviations x is from .
© 2009 Cengage South-Western. All Rights Reserved 24
Using Excel to Compute
Standard Normal Probabilities
Excel has two functions for computing
probabilities and z values for a standard
normal distribution:
NORM S DIST
NORMSDIST is used to compute the cumulativ
probability given a z value.
NORMSINV
NORM S INV is used to compute the z value
given a cumulative probability.
The “S” in the function names reminds
us that they relate to the standard
normal probability distribution.
© 2009 Cengage South-Western. All Rights Reserved 25
Using Excel to Compute
Standard Normal Probabilities
Excel Formula Worksheet
A B
1 Probabilities: Standard Normal Distribution
2
3 P (z < 1.00) =NORMSDIST(1)
4 P (0.00 < z < 1.00) =NORMSDIST(1)-NORMSDIST(0)
5 P (0.00 < z < 1.25) =NORMSDIST(1.25)-NORMSDIST(0)
6 P (-1.00 < z < 1.00) =NORMSDIST(1)-NORMSDIST(-1)
7 P (z > 1.58) =1-NORMSDIST(1.58)
8 P (z < -0.50) =NORMSDIST(-0.5)
9
© 2009 Cengage South-Western. All Rights Reserved 26
Using Excel to Compute
Standard Normal Probabilities
Excel Value
WorksheetA B
1 Probabilities: Standard Normal Distribution
2
3 P (z < 1.00) 0.8413
4 P (0.00 < z < 1.00) 0.3413
5 P (0.00 < z < 1.25) 0.3944
6 P (-1.00 < z < 1.00) 0.6827
7 P (z > 1.58) 0.0571
8 P (z < -0.50) 0.3085
9
© 2009 Cengage South-Western. All Rights Reserved 27
Using Excel to Compute
Standard Normal Probabilities
Excel Formula Worksheet
A B
1 Finding z Values, Given Probabilities
2
3 z value with .10 in upper tail =NORMSINV(0.9)
4 z value with .025 in upper tail =NORMSINV(0.975)
5 z value with .025 in lower tail =NORMSINV(0.025)
6
© 2009 Cengage South-Western. All Rights Reserved 28
Using Excel to Compute
Standard Normal Probabilities
Excel Value Worksheet
A B
1 Finding z Values, Given Probabilities
2
3 z value with .10 in upper tail 1.28
4 z value with .025 in upper tail 1.96
5 z value with .025 in lower tail -1.96
6
© 2009 Cengage South-Western. All Rights Reserved 29
Standard Normal Probability Distribution
Example: Pep Zone
Pep Zone sells auto parts and supplies including
a popular multi-grade motor oil. When the stock of
this oil drops to 20 gallons, a replenishment order
is
placed.
The store manager is concerned that sales are
being lost due to stockouts while waiting for a
replenishment order.
© 2009 Cengage South-Western. All Rights Reserved 30
Standard Normal Probability Distribution
Example: Pep Zone
It has been determined that demand
during
replenishment lead-time is normally
distributed
with a mean
The of 15would
manager gallons
likeand a standard
to know the
deviation
probability
of
of 6 gallons. during replenishment lead-time.
a stockout
In
other words, what is the probability that
demand P(x > 20) = ?
during lead-time will exceed 20 gallons?
© 2009 Cengage South-Western. All Rights Reserved 31
Standard Normal Probability Distribution
Solving for the Stockout Probability
Step 1: Convert x to the standard normal distributio
z = (x - )/
= (20 - 15)/6
= .83
Step 2: Find the area under the standard normal
curve to the left of z = .83.
see next slide
© 2009 Cengage South-Western. All Rights Reserved 32
Standard Normal Probability Distribution
Cumulative Probability Table for
the Standard Normal Distribution
z .00 .01 .02 .03 .04 .05 .06 .07 .08 .09
. . . . . . . . . . .
.5 .6915 .6950 .6985 .7019 .7054 .7088 .7123 .7157 .7190 .7224
.6 .7257 .7291 .7324 .7357 .7389 .7422 .7454 .7486 .7517 .7549
.7 .7580 .7611 .7642 .7673 .7704 .7734 .7764 .7794 .7823 .7852
.8 .7881 .7910 .7939 .7967 .7995 .8023 .8051 .8078 .8106 .8133
.9 .8159 .8186 .8212 .8238 .8264 .8289 .8315 .8340 .8365 .8389
. . . . . . . . . . .
P(z
< .83)
© 2009 Cengage South-Western. All Rights Reserved 33
Standard Normal Probability Distribution
Solving for the Stockout Probability
Step
Step 3:
3: Compute
Compute thethe area
area under
under the
the standard
standard norm
norm
curve
curve to
to the
the right
right of
of zz =
= .83.
.83.
P(z > .83) = 1 – P(z < .83)
= 1- .7967
= .2033
Probability
of a P(x >
stockout 20)
© 2009 Cengage South-Western. All Rights Reserved 34
Standard Normal Probability Distribution
Solving for the Stockout Probability
Area = 1 - .7967
Area = .7967
= .2033
z
0 .83
© 2009 Cengage South-Western. All Rights Reserved 35
Standard Normal Probability Distribution
Standard Normal Probability Distribution
If the manager of Pep Zone wants the
probability
of a stockout during replenishment lead-time
to be
no more than .05, what should the reorder
point be?
© 2009 Cengage South-Western. All Rights Reserved 36
Standard Normal Probability Distribution
Solving for the Reorder Point
Area = .9500
Area = .0500
z
0 z.05
© 2009 Cengage South-Western. All Rights Reserved 37
Standard Normal Probability Distribution
Solving for the Reorder Point
Step
Step 1:
1: Find
Find the
the zz-value
-value that
that cuts
cuts off
off an
an area
area of
of .05
.05
in
in the
the right
right tail
tail of
of the
the standard
standard normal
normal
distribution.
distribution.
z .00 .01 .02 .03 .04 .05 .06 .07 .08 .09
. . . . . . . . . . .
1.5 .9332 .9345 .9357 .9370 .9382 .9394 .9406 .9418 .9429 .9441
1.6 .9452 .9463 .9474 .9484 .9495 .9505 .9515 .9525 .9535 .9545
1.7 .9554 .9564 .9573 .9582 .9591 .9599 .9608 .9616 .9625 .9633
1.8 .9641 .9649 .9656 .9664 .9671 .9678
We look up
.9686 .9693 .9699 .9706
the
1.9 .9713 .9719 .9726 .9732 .9738 .9744 .9750 .9756 .9761 .9767
complement
. . . . . . . . of the
. tail. area.
(1 - .05 = .95)
© 2009 Cengage South-Western. All Rights Reserved 38
Standard Normal Probability Distribution
Solving for the Reorder Point
Step
Step 2:
2: Convert
Convert zz.05 to the corresponding value of x.
.05 to the corresponding value of x.
x = + z.05
.05
= 15 + 1.645(6)
= 24.87 or 25
A reorder point of 25 gallons will place the probabili
of a stockout during leadtime at (slightly less than)
© 2009 Cengage South-Western. All Rights Reserved 39
Standard Normal Probability Distribution
Solving for the Reorder Point
By raising the reorder point from 20 gallons to
25 gallons on hand, the probability of a stockout
decreases from about .20 to .05.
This is a significant decrease in the chance that
Pep Zone will be out of stock and unable to meet a
customer’s desire to make a purchase.
© 2009 Cengage South-Western. All Rights Reserved 40
Using Excel to Compute
Normal Probabilities
Excel has two functions for computing
cumulative probabilities and x values for any
normal distribution:
NORMDIST
NORMDIST is is used
used to
to compute
compute the
the cumulative
cumulative
probability
probability given
given an
an xx value.
value.
NORMINV
NORMINV isis used
used to
to compute
compute the
the xx value
value given
given
aa cumulative
cumulative probability.
probability.
© 2009 Cengage South-Western. All Rights Reserved 41
Using Excel to Compute
Normal Probabilities
Excel Formula Worksheet
A B
1 Probabilities: Normal Distribution
2
3 P (x > 20) =1-NORMDIST(20,15,6,TRUE)
4
5 Finding x Values, Given Probabilities
6
7 x value with .05 in upper tail =NORMINV(0.95,15,6)
8
© 2009 Cengage South-Western. All Rights Reserved 42
Using Excel to Compute
Normal Probabilities
Excel Value Worksheet
A B
1 Probabilities: Normal Distribution
2
3 P (x > 20) 0.2023
4
5 Finding x Values, Given Probabilities
6
7 x value with .05 in upper tail 24.87
8
Note: P(x > 20) = .2023 here using Excel, while our
previous manual approach using the z table yielded
.2033 due to our rounding of the z value.
© 2009 Cengage South-Western. All Rights Reserved 43
Exponential Probability Distribution
The exponential probability distribution is
useful in describing the time it takes to
complete a task. random variables can be used
The exponential
to describe:
•Time between vehicle arrivals at a toll booth
•Time required to complete a questionnaire
•Distance between major defects in a highway
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Exponential Probability Distribution
Density Function
1
f ( x ) e x / for x > 0, > 0
where: = mean
e = 2.71828
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Exponential Probability Distribution
Cumulative Probabilities
P ( x x0 ) 1 e xo /
where:
x0 = some specific value of x
© 2009 Cengage South-Western. All Rights Reserved 46
Using Excel to Compute
Exponential Probabilities
The EXPONDIST function can be used to compute
exponential probabilities.
The EXPONDIST function has three arguments:
1st
st The value of the random variable x
2nd
nd 1/ the inverse of the
mean
3rd
rd “TRUE” or “FALSE”number of
occurrences
We will always enter in an interval
“TRUE” because we’re
seeking a cumulative
probability.
© 2009 Cengage South-Western. All Rights Reserved 47
Using Excel to Compute
Exponential Probabilities
Excel Formula Worksheet
A B
1 Probabilities: Exponential Distribution
2
3 P (x < 18) =EXPONDIST(18,1/15,TRUE)
4 P (6 < x < 18) =EXPONDIST(18,1/15,TRUE)-EXPONDIST(6,1/15,TRUE)
5 P (x > 8) =1-EXPONDIST(8,1/15,TRUE)
6
© 2009 Cengage South-Western. All Rights Reserved 48
Using Excel to Compute
Exponential Probabilities
Excel Value Worksheet
A B
1 Probabilities: Exponential Distribution
2
3 P (x < 18) 0.6988
4 P (6 < x < 18) 0.3691
5 P (x > 8) 0.5866
6
© 2009 Cengage South-Western. All Rights Reserved 49
Exponential Probability Distribution
Example: Al’s Full-Service Pump
The time between arrivals of cars at Al’s full-
service gas pump follows an exponential probability
distribution with a mean time between arrivals of 3
minutes. Al would like to know the probability that
the time between two successive arrivals will be 2
minutes or less.
© 2009 Cengage South-Western. All Rights Reserved 50
Exponential Probability Distribution
Example: Al’s Full-Service Pump
f(x)
.4 P(x < 2) = 1 - 2.71828-2/3
-2/3 = 1 - .5134 = .4
.3
.2
.1
x
0 1 2 3 4 5 6 7 8 9 10
Time Between Successive Arrivals (mins.)
© 2009 Cengage South-Western. All Rights Reserved 51
Using Excel to Compute
Exponential Probabilities
Excel Formula Worksheet
A B
1 Probabilities: Exponential Distribution
2
3 P (x < 2) =EXPONDIST(2,1/3,TRUE)
4
© 2009 Cengage South-Western. All Rights Reserved 52
Using Excel to Compute
Exponential Probabilities
Excel Value Worksheet
A B
1 Probabilities: Exponential Distribution
2
3 P (x < 2) 0.4866
4
© 2009 Cengage South-Western. All Rights Reserved 53
Relationship between the Poisson
and Exponential Distributions
The Poisson distribution
provides an appropriate description
of the number of occurrences
per interval
The exponential distribution
provides an appropriate description
of the length of the interval
between occurrences
© 2009 Cengage South-Western. All Rights Reserved 54
End of Chapter 6
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