Lecture 5b PDF

INTRODUCTION TO STATISTICS
(ECON 1005)- LECTURE 5 (B)

Mrs. Asha Forde
Email: asha.forde@cavehill.uwi.edu
2
Uniform Probability Distribution

•  Salad Plate Filling Weight
f(x)
1/10
x
0 5 10 15
Salad Weight (oz.)
3
Area as a Measure of Probability

•  The area under the graph of f(x) and probability are identical.
•  This is valid for all continuous random variables.
•  The probability that x takes on a value between some lower value x1 and
some higher value x2 can be found by computing the area under the graph of
f(x) over the interval from x1 to x2.
4
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.)
5
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

•  Amounts of rainfall •  Scientific measurements
A normal probability distribution , when plotted, gives a bell-shaped curve such that:
1. The total area under the curve is 1.0.
2. The curve is symmetric about the mean.
3. The two tails of the curve extend indefinitely.
Prem Mann, Introductory Statistics, 9/E Copyright © 2015

John Wiley & Sons. All rights reserved.
7

•  Normal Probability Density Function
where: µ = mean
σ = standard deviation
π = 3.14159
e = 2.71828
8

•  Characteristics
The distribution is symmetric; its skewness measure is zero.
x
9

The entire family of normal probability distributions is defined by its
mean µ and its standard deviation σ .
Standard Deviation σ
x
Mean µ
10

The highest point on the normal curve is at the mean, which is also the
median and mode.
x
µ
11

The mean can be any numerical value: negative, zero, or positive.
x
-10 0 25
12

The standard deviation determines the width of the
curve: larger values result in wider, flatter curves.
σ = 15
σ = 25
x
µ
Three Normal Distribution Curves with the Same Mean but Different Standard Deviations

Three Normal Distribution Curves with Different Means but the Same Standard Deviation

15

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
Total Area under a Normal Curve

A Normal Curve is Symmetric about the Mean

18

•  Characteristics (basis for the empirical rule)
68.26% of values of a normal random variable

are within +/- 1 standard deviation of its mean.

are within +/- 2 standard deviations of its mean.

are within +/- 3 standard deviations of its mean.
19

•  Characteristics (basis for the empirical rule)
99.72%
95.44%
68.26%
µ
x
µ – 3σ µ – 1σ µ + 1σ µ + 3σ
µ – 2σ µ + 2σ
Figure 6.14 Areas of the Normal Curve beyond µ ± 3σ

21
Standard Normal Probability Distribution

A random variable having a normal distribution with a mean of 0 and a
standard deviation of 1 is said to have a standard normal probability
distribution.
μ = 0 and σ = 1.
22

The letter z is used to designate the standard normal random variable.
σ=1
z
µ= 0
Z Values or Z Scores
Definition
The units marked on the horizontal axis of the standard normal curve are denoted by z and are
called the z values or z scores. A specific value of z gives the distance between the mean and the
point represented by z in terms of the standard deviation.

Area under the Standard Normal Curve

Example 6-1
 Find the area under the standard normal curve to the left of z = 1.95.

Table 6.2 Area Under the Standard Normal Curve to the Left of z = 1.95

Area to the Left of z = 1.95

Example 6-2
 Find the area under the standard normal curve from z = -2.17 to z = 0.

Example 6-2: Solution
To find the area from z =-2.17 to z =0, first we find the areas to the left of z =0 and to the left of z
=-2.17 in Table IV.
As shown in Table 6.3, these two areas are .5 and .0150, respectively. Next we subtract .0150
from .5 to find the required area.
Area from -2.17 to 0 = P(-2.17≤ z ≤ 0)

= .5000 – .0150 = .4850

Table 6.3 Area Under the Standard Normal Curve

Figure 6.20 Area from z = -2.17 to z = 0

Example 6-3
Find the following areas under the standard normal curve.

(a) Area to the right of z = 2.32
(b) Area to the left of z = -1.54

(a) To find the area to the right of z =2.32, first we find the area to the left of z =2.32. Then we
subtract this area from 1.0, which is the total area under the curve.
The required area is 1.0 – .9898 = .0102, as shown in Figure 6.21.

Figure 6.21 Area to the Right of z = 2.32

(b) To find the area under the standard normal curve to the left of z =-1.54, we find the area in
Table IV that corresponds to -1.5 in the z column and .04 in the top row. This area is .0618, as
shown in Figure 6.22.
Area to the left of -1.54 = P (z < -1.54) = .0618

Figure 6.22 Area to the Left of z = -1.54

Example 6-4
Find the following probabilities for the standard normal curve.

(a) P (1.19 < z < 2.12)
(b) P (-1.56 < z < 2.31)
(c) P (z > -.75)

(a)  P (1.19 < z < 2.12) = Area between 1.19 and 2.12
= .9830 – .8830
= .1000

Figure 6.23 Finding P (1.19 < z < 2.12)

(b) P (-1.56 < z < 2.31) = Area between -1.56 and 2.31
= .9896 – .0594
= .9302

Figure 6.24 Finding P (-1.56 < z < 2.31)

(c) P (z > -.75) = Area to the right of -.75

= 1.0 – .2266
= .7734

Figure 6.25 Finding P (z > -.75)

Standardizing a Normal Distribution
 Converting an x Value to a z Value

 For a normal random variable x, a particular value of x can be converted to its corresponding z value
by using the formula
x−µ
z =
σ
 where µ and σ are the mean and standard deviation of the normal distribution of x, respectively.

Example 6-6
Let x be a continuous random variable that has a normal distribution with a mean of 50 and a
standard deviation of 10. Convert the following x values to z values and find the probability to the left
of these points.
(a) x = 55
(b) x = 35

(a) x = 55
x−µ 55 − 50
z = = = .50
σ 10
P(x < 55) = P(z < .50) = .6915

Figure 6.31 z Value for x = 55

(b) x = 35
x −µ 35 − 50
z= = = −1.50
σ 10
P(x < 35) = P(z < -1.50) = .0668

Figure 6.32 z Value for x = 35

Example 6-7
Let x be a continuous random variable that is normally distributed with a mean of 25 and a standard
deviation of 4.
Find the area
(a) between x = 25 and x = 32
(b) between x = 18 and x = 34

(a) The z value for x = 25 is 0

The z value for x = 32 is
x−µ 32 − 25
z= = = 1.75
σ 4
P (25 < x < 32) = P(0 < z < 1.75)
= .9599 – .5000 = .4599

Figure 6.33 Area between x = 25 and x = 32

(b) For x = 18:

18 − 25
z= = −1.75
4
For x = 34:
34 − 25
z= = 2.25
4
P (18 < x < 34) = P (-1.75 < z < 2.25)

= .9878 – .0401 = .9477


Example 6-8
Let x be a normal random variable with its mean equal to 40 and standard deviation equal to 5.
Find the following probabilities for this normal distribution.
(a) P (x > 55)
(b) P (x < 49)
Prem Mann, Introductory Statistics 9/E Copyright © 2015

(a) For x = 55:

55 − 40
z= = 3.00
5
P (x > 55) = P (z > 3.00)
= 1.0 – .9987
= .0013

Figure 6.35 Finding P (x > 55)

(b) For x = 49:

49 − 40
z= = 1.80
5
P (x < 49) = P (z < 1.80) = .9641

Figure 6.36 Finding P (x < 49)

Example 6-9
  Let x be a continuous random variable that has a normal distribution with µ = 50 and σ = 8. Find
the probability
  P (30 ≤ x ≤ 39).

For x = 30:
30 − 50
z= = −2.50
8
For x = 39:
39 − 50
z= = −1.38
8
P (30 ≤ x ≤ 39) = P (-2.50 ≤ z ≤ -1.38)

= .0838 – .0062 = .0776

Figure 6.37 Finding P (30 ≤ x ≤ 39)

Example 6-10
Let x be a continuous random variable that has a normal distribution with a mean of 80 and a
standard deviation of 12. Find the area under the normal distribution curve
(a) from x = 70 to x = 135
(b) to the left of 27

(a) For x = 70:

70 − 80
z= = −.83
12
For x = 135: 135 − 80

z= = 4.58
12
P (70 ≤ x ≤ 135) = P (-.83 ≤ z ≤ 4.58)

= 1 – .2033
= .7967 approximately


(b) For x = 27:

27 − 80
z= = −4.42
12
P (x < 27) = P (z < -4.42)

= .00 approximately

Figure 6.39 Area to the Left of x = 27

Applications of the Normal Distribution
  Sections 6.1 and 6.2 discussed the normal distribution, how to convert a normal distribution to the
standard normal distribution, and how to find areas under a normal distribution curve. This section
presents examples that illustrate the applications of the normal distribution.

Example 6-11
According to the 2015 Physician Compensation Report by Medscape (a subsidiary of WebMD),

American internal medicine physicians earned an average of $196,000 in 2014. Suppose that the 2014
earnings of all American internal medicine physicians are normally distributed with a mean of
$196,000 and a standard deviation of $20,000. Find the probability that the 2014 earnings of a
randomly selected American internal medicine physician are between $169,400 and $206,800.

For x = $169,400:
𝑧= 169,400 −196,000/20,000 =−1.33
For x = $206,800:
𝑧= 206,800 −196,000/20,000 =.54
P ($169,400 < x < $206,800) = P (-1.33 < z < .54)

= .7054 - .0918
= .6136 = 61.36%

Figure 6.40 Area between x = $169,400 and x = $206,800

Example 6-12
  A racing car is one of the many toys manufactured by Mack Corporation. The assembly times for
this toy follow a normal distribution with a mean of 55 minutes and a standard deviation of 4
minutes. The company closes at 5 p.m. every day. If one worker starts to assemble a racing car at 4
p.m., what is the probability that she will finish this job before the company closes for the day?

For x = 60:
𝑧= 60−55/4  = 1.25
P(x ≤ 60) = P(z ≤ 1.25) = .8944
Thus, the probability is .8944 that this worker will finish assembling this racing car before the
company closes for the day.


Example 6-13
Hupper Corporation produces many types of soft drinks, including Orange Cola. The filling
machines are adjusted to pour 12 ounces of soda into each 12-ounce can of Orange Cola.
However, the actual amount of soda poured into each can is not exactly 12 ounces; it varies
from can to can. It has been observed that the net amount of soda in such a can has a normal
distribution with a mean of 12 ounces and a standard deviation of .015 ounce.

Example 6-13
(a) What is the probability that a randomly selected can of Orange Cola contains 11.97 to 11.99
ounces of soda?
(b) What percentage of the Orange Cola cans contain 12.02 to 12.07 ounces of soda?

(a) For x = 11.97:

11.97 − 12
z= = −2.00
.015
For x = 11.99:
11.99 − 12
z= = −.67
.015
P (11.97 ≤ x ≤ 11.99) = P (-2.00 ≤ z ≤ -.67)

= .2514 – .0228
= .2286

Figure 6.42 Area between x = 11.97 and x = 11.99

(b) For x = 12.02:

12.02 − 12
z= = 1.33
.015
For x = 12.07: 12.07 − 12

z= = 4.67
.015
P (12.02 ≤ x ≤ 12.07) = P (1.33 ≤ z ≤ 4.67)

= 1.0 – .9082
= .0918

Figure 6.43 Area from x = 12.02 to x = 12.07

Example 6-14
  Suppose the life span of a calculator manufactured by Calculators Corporation has a normal
distribution with a mean of 54 months and a standard deviation of 8 months. The company
guarantees that any calculator that starts malfunctioning within 36 months of the purchase will be
replaced by a new one. About what percentage of calculators made by this company are expected to
be replaced?

For x = 36:
36 − 54
z= = −2.25
8
P(x < 36) = P (z < -2.25) = .0122
Hence, 1.22% of the calculators are expected to be replaced.


84

•  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.
85

•  Example: Pep Zone
It has been determined that demand during replenishment lead-time is
normally distributed with a mean of 15 gallons and a standard deviation
of 6 gallons.
The manager would like to know the probability of a stockout during
replenishment lead-time. In other words, what is the probability that
demand during lead-time will exceed 20 gallons?
P(x > 20) = ?
86

•  Solving for the Stockout Probability
Step 1: Convert x to the standard normal distribution.
z = (x - µ)/σ
= (20 - 15)/6
= .83
Step 2: Find the area under the standard normal curve to the left of z = .83.
87

•  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) = .7967

88

Step 3: Compute the area under the standard normal
curve to the right of z = .83.
P(z > .83) = 1 – P(z < .83)

= 1- .7967
= .2033
89

Area = .7967 Area = 1 - .7967

= .2033
z
0 .83
Determining the z and x Values When an Area Under the Normal Distribution Curve Is
Known
So far we have discussed how to find the area under a normal distribution curve for an interval of z
or x.
Now we invert this procedure and learn how to find the corresponding value of z or x when an area
under a normal distribution curve is known.

Example 6-15
  Find the value of z such that the area under the standard normal curve to the left of z is .9251.

Figure 6.45 Finding the z Value

Table 6.4 Finding the z Value When Area Is Known

Example 6-16
  Find the value of z such that the area under the standard normal curve in the right tail is .0050.

To find the value of z, we first find the area to the left of z by

Area to the left of z = 1.0 – .0050 = .9950
Now we look for .9950 in the body of the normal distribution table. Table IV does not contain .
9950.
So we find the value closest to .9950, which is either .9949 or .9951.
If we choose .9951, then z = 2.58.
If we choose .9949, then z = 2.57.
We can use either of these two values.


Example 6-17
  Find the value of z such that the area under the standard normal curve in the left tail is .05.

Because .05 is less than .5 and it is the area in the left tail, the value of z is negative.
We look for .0500 in the body of the normal distribution table. The value closest to .0500 in
Table IV is either .0505 or .0495.
If we choose .0495, then z = -1.65.


Finding an x Value for a Normal Distribution
  For a normal curve with known values of µ and σ and for a given area under the curve to the left of
x, the x value is calculated as
  x=µ+zσ

Example 6-18
  Recall Example 6-14. It is known that the life of a calculator manufactured by Calculators
Corporation has a normal distribution with a mean of 54 months and a standard deviation of 8
months. What should the warranty period be to replace a malfunctioning calculator if the company
does not want to replace more than 1% of all the calculators sold?

Let x be the life of a calculator.

Area to the left of x = .01 or 1%
Find the z value from the normal distribution table for .0100. Table IV does not contain a value that
is exactly .0100 and so, the value closest to .0100 in the table is .0099.
Hence, z = -2.33.
x = μ + z σ = 54 + (-2.33)(8)
= 54 – 18.64 = 35.36

  Thus, the company should replace all the calculators that start to malfunction within 35.36 months
(which can be rounded to 35 months) of the date of purchase so that they will not have to replace
more than 1% of the calculators.

Figure 6.48 Finding an x Value

Example 6-19
According to the 2015 Physician Compensation Report by Medscape (a subsidiary of WebMD),

American internal medicine physicians earned an average of $196,000 in 2014. Suppose that the
2014 earnings of all American internal medicine physicians are normally distributed with a mean of
$196,000 and a standard deviation of $20,000. Dr. Susan Garcia practices internal medicine in New
Jersey. What were Dr. Garcia’s 2014 earnings if 10% of all American internal medicine physicians
earned more than Dr. Susan Garcia in 2014?

Area to the left of the x value = 1.0 – .10 = .9000
Look for .9000 in the body of the normal distribution table. The value closest to .9000 in Table IV
is .8997, and the z value is 1.28.
x = μ + z σ = 196,000 + 1.28 (20,000)

= 196,000 + 25,600 = $221,600
Thus, Dr. Garcia earned $221,600 in 2014.

Figure 6.49 Finding an x Value

6.5 The Normal Approximation to the Binomial Distribution
1. The binomial distribution is applied to a discrete random variable.

2. Each repetition, called a trial, of a binomial experiment results in one of two possible outcomes (or
events), either a success or a failure.
3. The probabilities of the two (possible) outcomes (or events) remain the same for each repetition of
the experiment.
4. The trials are independent.

109

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?
(Hint: Given a probability, we can use the standard normal table in an
inverse fashion to find the corresponding z value.)
110

•  Solving for the Reorder Point
Area = .9500
Area = .0500
z
0 z.05
111

Step 1: Find the z-value that cuts off an area of .05 in the right tail of the
standard normal 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 .9686 .9693 .9699 .9706
1.9 .9713 .9719 .9726 .9732 .9738 .9744 .9750 .9756 .9761 .9767
. . . . . . . . . . .
We look up the complement of the tail area (1 - .05 = .95)

112

Step 2: Convert z.05 to the corresponding value of x.
x = µ + z.05σ
= 15 + 1.645(6)
= 24.87 or 25
A reorder point of 25 gallons will place the probability

of a stockout during lead time at (slightly less than) .05.
113

Probability of no Probability of a
stockout during stockout during
replenishment replenishment
lead-time = .95 lead-time = .05
x
15 24.87
114

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.
115
Using Excel to Compute Normal Probabilities

•  Excel has two functions for computing cumulative probabilities and x values
for any normal distribution:
•  NORM.DIST is used to compute the cumulative probability given an
x value.
•  NORM.INV is used to compute the x value given a cumulative
probability.
116
End of Chapter 6

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INTRODUCTION TO STATISTICS

(ECON 1005)- LECTURE 5 (B)

Uniform Probability Distribution

Area as a Measure of Probability

Uniform Probability Distribution

P(12 < x < 15) = 1/10(3) = .3

Normal Probability Distribution

• The normal probability distribution is the most important distribution for

• It is widely used in statistical inference.

• It has been used in a wide variety of applications including:

• Heights of people • Test scores

Prem Mann, Introductory Statistics, 9/E Copyright © 2015

Normal Probability Distribution

Normal Probability Distribution

Normal Probability Distribution

Normal Probability Distribution

Normal Probability Distribution

Normal Probability Distribution

Prem Mann, Introductory Statistics, 9/E Copyright © 2015

Prem Mann, Introductory Statistics, 9/E Copyright © 2015

Normal Probability Distribution

Prem Mann, Introductory Statistics, 9/E Copyright © 2015

Prem Mann, Introductory Statistics, 9/E Copyright © 2015

Normal Probability Distribution

68.26% of values of a normal random variable

95.44% of values of a normal random variable

99.72% of values of a normal random variable

Normal Probability Distribution

Prem Mann, Introductory Statistics, 9/E Copyright © 2015

Standard Normal Probability Distribution

Standard Normal Probability Distribution

Prem Mann, Introductory Statistics, 9/E Copyright © 2015

Prem Mann, Introductory Statistics, 9/E Copyright © 2015

Prem Mann, Introductory Statistics, 9/E Copyright © 2015

Prem Mann, Introductory Statistics, 9/E Copyright © 2015

Prem Mann, Introductory Statistics, 9/E Copyright © 2015

Prem Mann, Introductory Statistics, 9/E Copyright © 2015

Area from -2.17 to 0 = P(-2.17≤ z ≤ 0)

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Prem Mann, Introductory Statistics, 9/E Copyright © 2015

Prem Mann, Introductory Statistics, 9/E Copyright © 2015

Find the following areas under the standard normal curve.

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Prem Mann, Introductory Statistics, 9/E Copyright © 2015

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Area to the left of -1.54 = P (z < -1.54) = .0618

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Prem Mann, Introductory Statistics, 9/E Copyright © 2015

Find the following probabilities for the standard normal curve.

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Prem Mann, Introductory Statistics, 9/E Copyright © 2015

Prem Mann, Introductory Statistics, 9/E Copyright © 2015

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Prem Mann, Introductory Statistics, 9/E Copyright © 2015

(c) P (z > -.75) = Area to the right of -.75

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Prem Mann, Introductory Statistics, 9/E Copyright © 2015

Converting an x Value to a z Value

Prem Mann, Introductory Statistics, 9/E Copyright © 2015

Prem Mann, Introductory Statistics, 9/E Copyright © 2015

P(x < 55) = P(z < .50) = .6915

Prem Mann, Introductory Statistics, 9/E Copyright © 2015

Prem Mann, Introductory Statistics, 9/E Copyright © 2015

•  The normal probability distribution is the most important distribution for

•  It is widely used in statistical inference.

•  It has been used in a wide variety of applications including:

•  Heights of people •  Test scores

 Converting an x Value to a z Value