uantitative Analysis for Management – I
Prof. Tamalika Koley
Decision Sciences Area
Indian Institute of Management Lucknow
Continuous Random Variable
A continuous random variable can take any value within its range of variation.
Probability is assigned to the intervals using the density function f(x).
Probability of taking any specific value is zero.
Examples:
Time to complete an exam for a 60 minute test. Possible values = all real
numbers on the interval [0,60].
Graphical Representation
Common Distributions
Three standard distributions are:
1. Uniform Distribution
2. Exponential Distribution
3. Normal Distribution
Uniform Distribution
The uniform distribution (continuous) is one of the simplest probability
distributions in statistics.
The two quantities that define the Uniform Distribution are: a = minimum and
b = maximum.
A continuous random variable in which all values between a minimum value and
a maximum value have the same probability.
Probability Distribution
X is a uniform random variable.
The range of X is R = [a, b], where a = minimum value and b = maximum value.
The probability density function for X taking values in the range [a,b] is
and 0, otherwise.
Notation: X ~ Unif (a, b).
: Standard Uniform Distribution
Probability Density Function: Graph
Example
You arrive into a building and are about to take an elevator to the your floor.
Once you call the elevator, it will take between 0 and 40 seconds to arrive to you.
We will assume that the elevator arrives uniformly between 0 and 40 seconds
after you press the button.
X = the time required for the arrival of the elevator after a call.
Calculating Probabilities: CDF
The cumulative distribution function of X is given by
Graphical Representation: CDF
Example
In the elevator example, calculate the probability that the elevator takes less
than 15 seconds to arrive.
Solution:
Required probability is
Moments
Expectation: Let Then the mean or the expected value of X is
Variance: Let Then the variance of X is
Example
The average weight gained by a person over the winter months is uniformly
distributed and ranges from 0 to 30 lbs.
Find the probability of a person that he will gain between 10 and 15lbs in the
winter months.
Calculate the expected weight gain and the standard deviation.
Solution
Let X denote the average weight (in lbs ) gained by a person over the winter
months.
Required probability is
Exercise
The total duration of baseball games in the major league in the 2011 season is
uniformly distributed between 447 hours and 521 hours inclusive.
Find a and b and describe what they represent.
What is the probability that the duration of games for a team for the 2011
season is between 480 and 500 hours?
Find the mean and the standard deviation.
Exponential Distribution
The exponential distribution is one of the widely used continuous distributions to
model the time elapsed between events or arrivals.
Notation:
The number of arrivals per unit time is then the time between arrivals
(interarrival times) follows
The distribution is characterized by the quantity , which measures the rate of
occurrence per unit time (Recall Poisson).
Examples: length, in minutes, of long distance business telephone calls, the
amount of time, in months, a car battery lasts.
Probability Density Function
Let . The probability density function of X is given by
𝜆 larger (smaller) means waiting time
smaller(larger).
Small values of waiting time will have high probability.
Cumulative Distribution Function
Let . The cumulative distribution function of X is given by
Exponential Distribution
Values for an exponential random variable occur in the following way: Fewer
large values and more small values.
Example: Imagine you run an e-commerce platform, and you're analyzing the
time between consecutive orders placed on your website. From past data:
On average, 1 order arrives every 5 minutes.
T is the time (in minutes) between two orders.
Continues…
Example
On the average, a certain computer part lasts ten years. The length of time the
computer part lasts is exponentially distributed.
What is the probability that a computer part lasts more than 7 years?
Solution:
X denote the length of time (in years) the computer part lasts.
Required probability is
= 0.4966
Moments
Expectation: Let The mean or expected value of X is
Variance: Let The variance of X is
The standard deviation of X is .
Remarks
Rate of occurrence — average number of events per unit time
Mean waiting time between events.
High events happen frequently, short waiting times.
Low 𝜆: events happen rarely, short waiting times
Example
The time in minutes, between the arrival of successive customers at a post office
is exponentially distributed with mean 5.
A customer walks into the post office at 12:30 p.m. What is the probability that
the next customer arrives:
on or before 12:32 p.m.?
after 12:35 p.m.?
Calculate the standard deviation of X.
Solution
Let X denote the time (in minutes) between the arrivals of successive customers
at the post office.
Given mean = This implies
The probability that a new customer will arrive on or before 12:32 p.m. is equal
to
The probability that a new customer will arrive after 12:35 p.m. is equal to
The standard deviation of X is
Exercise
It is assumed that the average time customers spends on hold when contacting a
gas company's call center is five minutes. The company has a policy that if a
customer waits for longer than 15 minutes they are entitled to claim 5$ off their
next quarterly bill.
If the company employs a new team, at some expense, then the average waiting
time is reduced to four minutes.
The director of the company thinks the idea is only worthwhile if the probability
that a customer waits for longer than 15 minutes is reduced by at least 0.025.
Determine whether the director should employ a new team or keep his current
team.
Memoryless Property: Example
You are standing at the side of the road, waiting for a cab. Cabs arrive randomly,
but on average, one comes every 5 minutes.
waiting time
Given that the event has not happened yet at time 5, what's the probability of
waiting more than 3 additional minutes?
Forget that you have already waited for 5 mins and calculate the probability of
waiting more than 3 mins.
The cab doesn’t care how long you’ve been standing there.
Memoryless Property
If X is exponential with parameter then X is a memoryless random variable, that
is
From the point of view of waiting time until arrival of a customer, the
memoryless property means that it does not matter how long you have waited
so far.
The probability you’ll wait at least x more minutes, given you've already waited a
minutes, is the same as if you'd just started waiting.
Normal Distribution
Imagine we measure the heights of every student in this class. If we plot a graph of everyone’s
height, what kind of shape do you think we’ll get?
Mean height: 160 cm — the center of the distribution where most students' heights cluster.
Standard deviation (SD): 10 cm
— indicates the spread of the height data
Bell-shaped curve
Fewer students fall in the very short (<140 cm)
or very tall (>180 cm) range (Tail)
Most students have average height (Mode); extreme heights are rare.
Symmetry: The curve is symmetric around the mean, meaning as many students are taller
than 160 cm as are shorter.
Both sides of the curve are mirror images of each other.
Properties of a Normal distribution
Symmetric, bell shaped
The range is , that is the entire real line.
Two quantities (parameters) and determine the shape of the distribution.
Notation:
The probability density function of X is
where x belongs to the real line.
Graphical Representation
Moments
Expectation: Let then the expected value is
Variance: Let then the variance of X is
Probability Computation
Difficulty in solving the above integration.
Standard Normal Distribution
Standard Normal Distribution if and
Let The transformation
The CDF of standard normal distribution is denoted by
The values of CDF of standard normal random variable are computed using the
standard normal table or the Z-table.
Standard Normal Distribution
Standard Normal Table
Example
Assume that the height of women in the US is normally distributed with a mean
of 64 inches and a standard deviation of 2.5 inches, find
1. The probability that a randomly selected woman is taller than 70.4 inches (5
foot 10.4 inches).
2. The probability that a randomly selected woman is between 60.3 and 65 inches
tall.
Solution
X denote the height of the women in US.
Required probability is
= 0.0012.
Solution
Required probability is
Note that for all x.
Exercise
The weekly wages of 1000 workers are normally distributed with a mean of Rs. 70
and standard deviation of Rs. 5.
Estimate the number of workers whose weekly wages are:
(i) Between Rs. 70 and Rs. 72 (155 workers)
(ii) Between Rs. 69 and Rs. 72 (235 workers)
(iii) More than Rs. 75 (159 workers)
(iv) Less than Rs. 63 (81 workers).