You are on page 1of 74

# Chapter 2

Probability
Concepts and
Applications

## To accompany 2-1 2006 by

Quantitative Prentice Hall,
Learning Objectives
Students will be able to:
1. Understand the basic foundations of
probability analysis.
2. Describe statistically dependent and
independent events.
3. Use Bayes theorem to establish
posterior probabilities.
4. Describe and provide examples of both
discrete and continuous random
variables.
5. Explain the difference between discrete
and continuous probability distributions.
6. Calculate expected values and variances
and use the Normal table.

## To accompany 2-2 2006 by

Quantitative Prentice Hall,
Chapter Outline
2.1 Introduction
2.2 Fundamental Concepts
2.3 Mutually Exclusive and
Collectively Exhaustive
Events
2.4 Statistically Independent
Events
2.5 Statistically Dependent Events
2.6 Revising Probabilities with
Bayes Theorem
2.7 Further Probability Revisions

## To accompany 2-3 2006 by

Quantitative Prentice Hall,
Chapter Outline
continued
2.8 Random Variables
2.9 Probability Distributions
2.10 The Binomial Distribution
2.11 The Normal Distribution
2.12 The Exponential
Distribution
2.13 The Poisson Distribution

## To accompany 2-4 2006 by

Quantitative Prentice Hall,
Introduction
Life is uncertain!
We must deal with risk!
A probability is a numerical
that an event will occur.

## To accompany 2-5 2006 by

Quantitative Prentice Hall,
Probability
1. The probability, P, of any
event or state of nature
occurring is greater than or
equal to 0 and less than or
equal to 1.
That is: 0 P(event) 1
2. The sum of the simple
probabilities for all possible
outcomes of an activity must
equal 1.

## To accompany 2-6 2006 by

Quantitative Prentice Hall,
Diversey Paint Example
Demand for white latex paint at Diversey
Paint and Supply has always been either 0,
1, 2, 3, or 4 gallons per day. Over the past
200 days, the frequencies of demand are
represented in the following table:

0 40
1 80
2 50
3 20
4 10
Total 200

## To accompany 2-7 2006 by

Quantitative Prentice Hall,
Diversey Paint Example
(continued)

Probabilities of Demand
Quantity Freq. Probability
Demand (days) (Relative Freq)
0 40 (40/200) = 0.20
1 80 (80/200) = 0.40
2 50 (50/200) = 0.25
3 20 (20/200) = 0.10
4 10 (10/200) = 0.05
Total days = 200 Total Prob =1.00

Note: 0 P(event) 1
and P(event) = 1
To accompany 2-8 2006 by
Quantitative Prentice Hall,
Types of Probability
Objective probability is based on
logical observations:
Number of times event occurs
P ( event )
Total number of outcomes or occurrences

Determined by:
Relative frequency Obtained using
historical data (Diversey Paint)
Classical method Known
probability for each outcome (tossing
a coin)

## To accompany 2-9 2006 by

Quantitative Prentice Hall,
Types of Probability
Subjective probability is based on
personal experiences.
Determined by:
Judgment of experts
Opinion polls
Delphi method
Others

## To accompany 2-10 2006 by

Quantitative Prentice Hall,
Mutually Exclusive Events
Events are said to be mutually
exclusive if only one of the
events can occur on any one trial.

## Example: a fair coin toss results in

either a heads or a tails.

## To accompany 2-11 2006 by

Quantitative Prentice Hall,
Collectively Exhaustive
Events
Events are said to be collectively
exhaustive if the list of outcomes
includes every possible outcome.
Heads and tails as possible outcomes
of coin flip.

## Example: a collectively exhaustive list of

possible outcomes for a fair coin toss

## To accompany 2-12 2006 by

Quantitative Prentice Hall,
Die Roll Example
Outcome Probability
of Roll
1 1/6
This is a collectively 2 1/6
exhaustive list of 3 1/6
potential outcomes
for a single die roll. 4 1/6
5 1/6
6 1/6
Total = 1

## The outcome is a mutually exclusive event

because only one event can occur (a 1, 2, 3, 4,
5, or 6) on any single roll.

## To accompany 2-13 2006 by

Quantitative Prentice Hall,
Twin Birth Example
A woman is pregnant with non-
identical twins. Following is a list of
collectively exhaustive, mutually
exclusive possible outcomes:
Outcome Probability
of Birth

Boy/Boy
Boy/Girl
Girl/Girl
Girl/Boy
What is the probability that both
babies will be girls? / boys?
To accompany 2-14 2006 by
Quantitative Prentice Hall,
In-Class Practice
Assuming a traditional 52-card deck, can
you identify if these outcomes are mutually
exclusive and/or collectively exhaustive ??

## Draw a spade and a club

Draw a face card and a number
card
Draw an ace and a 3
Draw a club and a nonclub
Draw a 5 and a diamond
Draw a red card and a diamond

## To accompany 2-15 2006 by

Quantitative Prentice Hall,
Mutually Exclusive
P (event A or event B) =
P (event A) + P (event B)
or:
P (A or B) = P (A) + P (B)
Example:
= 13/52 + 13/52
= 26/52 = 1/2 = 50%

## To accompany 2-16 2006 by

Quantitative Prentice Hall,
not Mutually Exclusive
P(event A or event B) =
P(event A) + P(event B) -
P(event A and event B both
occurring)
or
P(A or B) = P(A)+P(B) - P(A and B)

## To accompany 2-17 2006 by

Quantitative Prentice Hall,
Venn Diagram

P(A
a nd
B)

P(A) P(B)

## To accompany 2-18 2006 by

Quantitative Prentice Hall,
Venn Diagram
P(A or B)

+ -

=
P(A or B)

## To accompany 2-19 2006 by

Quantitative Prentice Hall,
In-Class Example:
Specialized University
Specialized University offers four different
accounting, and science. Enrollment figures
show 25% of their graduate students are in
each specialty. Although 50% of the
students are female, only 15% are female
business majors. If a student is randomly
selected from the Universitys registration
database:

## What is the probability the student is a

What is the probability the student is a

## To accompany 2-20 2006 by

Quantitative Prentice Hall,
Specialized University
Solution
The probability that the student is a business
or education major is mutually exclusive
event. Thus:
P(Bus or Edu) = P(Bus) + P(Edu)
= .25 + .25
= .50 or 50%

## The probability that the student is a female

or a business major is not mutually exclusive
because the student could be a female
P(Fem or Bus) = P(Fem) + P(Bus)
P(Fem and Bus)
= .50 + .25 - .15
= .60 or 60%
To accompany 2-21 2006 by
Quantitative Prentice Hall,
Statistical Dependence
Events are either
statistically independent (the
occurrence of one event has no
effect on the probability of
occurrence of the other), or
statistically dependent (the
occurrence of one event gives
of the other).

## To accompany 2-22 2006 by

Quantitative Prentice Hall,
Which Are Independent?

(a) Draw a jack of hearts from a
full 52-card deck
(b) Draw a jack of clubs from a
full 52-card deck
(a) Chicago Cubs win the
National League pennant
(b) Chicago Cubs win the World
Series

## To accompany 2-23 2006 by

Quantitative Prentice Hall,
Probabilities:
Independent Events
Marginal probability: the probability of
an event occurring: P(A)
Joint probability: the probability of
multiple, independent events, occurring
at the same time:
P(AB) = P(A)*P(B)
Conditional probability (for
independent events):
the probability of event B given that
event A has occurred:
P(B|A) = P(B)
or, the probability of event A given
that event B has occurred:
P(A|B) = P(A)
To accompany 2-24 2006 by
Quantitative Prentice Hall,
Venn Diagram: P(A|B)

P(A)

P(B)

P(B|A) P(A|B)

## To accompany 2-25 2006 by

Quantitative Prentice Hall,
Independent Events
Example
1. P(black ball drawn
on first draw)
A bucket P(B) = 0.30
contains 3 black
balls and 7 (marginal
green balls. We probability)
draw a ball 2. P(two green balls
from the drawn)
bucket, replace P(GG) =
it, and draw a P(G)*P(G) =
second ball. 0.70*0.70 = 0.49
(joint probability
for two
independent
events)
To accompany 2-26 2006 by
Quantitative Prentice Hall,
Independent Events Example
continued
1. P(black ball drawn on second
draw, first draw was green)
P(B|G) = P(B) = 0.30
(conditional probability)

## 2. P(green ball drawn on second

draw, first draw was green)
P(G|G) = 0.70
(conditional probability)

## To accompany 2-27 2006 by

Quantitative Prentice Hall,
Probabilities: Dependent
Events
Marginal probability: probability of an
event occurring: P(A)
Conditional probability (for dependent
events):
The probability of event B given
that event A has occurred:
P(B|A) = P(AB)/P(A)
The probability of event A given
that event B has occurred:
P(A|B) = P(AB)/P(B)
Joint probability: The probability of
multiple events occurring at the same
time: P(AB) = P(B|A)*P(A)

## To accompany 2-28 2006 by

Quantitative Prentice Hall,
Venn Diagram: P(B|A)

P(A
P(A) P(B)

and
B)

/
P(B) P(AB) P(A)

P(B|A) = P(AB)/P(A)

## To accompany 2-29 2006 by

Quantitative Prentice Hall,
Venn Diagram: P(A|B)

P(A
P(A) P(B)

and
B)

/
P(A) P(AB) P(B)

P(A|B) = P(AB)/P(B)

## To accompany 2-30 2006 by

Quantitative Prentice Hall,
Dependent Events
Example
Then:
Assume that we P(WL) = 4/10 = 0.40
have an urn P(WN) = 2/10 = 0.20
containing 10 balls
of the following P(W) = 6/10 = 0.60
descriptions: P(YL) = 3/10 = 0.3
4 are white (W)
and lettered (L) P(YN) = 1/10 = 0.1
2 are white (W)
P(Y) = 4/10 = 0.4
and numbered (N)
3 are yellow (Y)
and lettered (L)
1 is yellow (Y)
and numbered (N)

## To accompany 2-31 2006 by

Quantitative Prentice Hall,
Dependent Events
Example (continued)

Then:
P(Y) = .4
- marginal probability

P(L|Y) = P(YL)/P(Y)
= 0.3/0.4 = 0.75
- conditional probability

P(W|L) = P(WL)/P(L)
= 0.4/0.7 = 0.57
- conditional probability

## To accompany 2-32 2006 by

Quantitative Prentice Hall,
Dependent Events: Joint
Probability Example
Your stockbroker informs you that if
the stock market reaches the 10,500
point level by January, there is a 70%
probability that Tubeless Electronics
will go up in value. Your own
feeling is that there is only a 40%
chance of the market reaching 10,500
by January.
What is the probability that both the
stock market will reach 10,500
points, and the price of Tubeless will
go up in value?

## To accompany 2-33 2006 by

Quantitative Prentice Hall,
Dependent Events: Joint
Probabilities Solution

Let M represent
the event of the
stock market Then:
reaching the P(MT) =P(T|M)P(M)
10,500 point = (0.70)(0.40)
level, and T
= 0.28
represent the
event that
Tubeless goes
up.

## To accompany 2-34 2006 by

Quantitative Prentice Hall,
Revising Probabilities:
Bayes Theorem
Bayes theorem can be used to
calculate revised or posterior
probabilities.

Prior
Probabilities
Bayes Posterior
Process Probabilities

New
Information

## To accompany 2-35 2006 by

Quantitative Prentice Hall,
General Form of
Bayes Theorem

P( AB)
P( A | B) or
P( B)
P ( B | A) P( A)
P( A | B)
P( B | A) P ( A) P ( B | A ) P ( A )

## For example, if the event A is " fair" die,

then the event A is " unfair" die.

## To accompany 2-36 2006 by

Quantitative Prentice Hall,
Posterior Probabilities
Example
A cup contains two dice identical in
appearance. One, however, is fair
(unbiased), the other is loaded (biased).
The probability of rolling a 3 on the fair
die is 1/6 or 0.166. The probability of
tossing the same number on the loaded
die is 0.60. We have no idea which die
is which, but we select one by chance,
and toss it. The result is a 3.

## What is the probability that the die

rolled was fair?
To accompany 2-37 2006 by
Quantitative Prentice Hall,
Posterior Probabilities
Example (continued)
We know that:
P(fair) = 0.50 P(loaded) = 0.50
P(3|fair) = 0.166 P(3|loaded) = 0.60
- marginal probability
Then:
P(3 and fair) = P(3|fair)P(fair)
= (0.166)(0.50)
= 0.083

= (0.60)(0.50)
= 0.300
- joint probability
To accompany 2-38 2006 by
Quantitative Prentice Hall,
Posterior Probabilities
Example continued
A 3 can occur in combination with the
state fair die or in combination with
the state loaded die. The sum of their
probabilities gives the marginal
probability of a 3 on a toss:

## P(3) = 0.083 + 0.0300 = 0.383

- marginal probability

## Then, the probability that the die rolled

was the fair one is given by:
P(Fair and 3) 0.083
P(Fair | 3) 0.22
P(3) 0.383
- conditional probability
To accompany 2-39 2006 by
Quantitative Prentice Hall,
Further Probability
Revisions
To obtain further information as to
whether the die just rolled is fair or
Again we get a 3.
Given that we have now rolled two 3s,
what is the probability that the die
rolled is fair?

## To accompany 2-40 2006 by

Quantitative Prentice Hall,
Further Probability
Revisions continued
We know from before that:
P(fair) = 0.50, P(loaded) = 0.50
Then:
P(3,3|fair) = P(3|fair)*P(3|fair)
= (0.166)(0.166) = 0.027
= (0.60)(0.60) = 0.36
So:
P(3,3 and fair) = P(3,3|fair)*P(fair)
= (0.027)(0.05) = 0.013
= (0.36)(0.5) = 0.18
Thus, the probability of getting two 3s is a marginal
probability obtained from the sum of the probability
of two joint probabilities:
P(3,3) = 0.013 + 0.18 = 0.193
To accompany Quantitative Analysis 2-41 2006 by Prentice Hall, Inc.,
for Management, 9e Upper Saddle River, NJ 07458
by Render/Stair/Hanna
Further Probability
Revisions continued
Using the probabilities from the
previous slide:

## P(3,3 and Fair)

P(Fair | 3,3)
P(3,3)
0.013
0.067
0.193

P(3,3)
0.18
0.933
0.193
To accompany 2-42 2006 by
Quantitative Prentice Hall,
Further Probability
Revisions continued
To give the final comparison:
P(fair|3) = 0.22
P(fair|3,3) = 0.067

## To accompany 2-43 2006 by

Quantitative Prentice Hall,
Random Variables
Discrete random variable - can
assume only a finite or limited
set of values - i.e., the number
of automobiles sold in a year.
Continuous random variable -
can assume any one of an
infinite set of values - i.e.,

## To accompany 2-44 2006 by

Quantitative Prentice Hall,
Random Variables
(Numeric)
Experiment Outcome Random Variable Range of
Random
Variable
Stock 50 Number of X = number of 0,1,2,, 50
Xmas trees trees sold trees sold

Discrete
Inspect 600 Number Y = number 0,1,2,,
items acceptable acceptable 600
Send out Number of Z = number of 0,1,2,,
5,000 sales people people responding 5,000
letters responding
Build an % completed R = % completed 0R100
apartment after 4 after 4 months

Continuous
building months
Test the Time bulb S = time bulb 0S80,000
lifetime of a lasts - up to burns
light bulb 80,000
(minutes) minutes

## To accompany 2-45 2006 by

Quantitative Prentice Hall,
Random
Variables (Non-numeric)
Experiment Outcome Random Range of
Variable Random
Variable
Students Strongly agree (SA) X = 5 if SA 1,2,3,4,5
respond to a Agree (A) 4 if A
questionnaire Neutral (N) 3 if N
Disagree (D) 2 if D
Strongly Disagree (SD) 1 if SD
One machine is Defective Y = 0 if defective 0,1
inspected Not defective 1 if not defective
Consumers Good Z = 3 if good 1,2,3
respond to how Average 2 if average
they like a Poor 1 if poor
product

## To accompany 2-46 2006 by

Quantitative Prentice Hall,
Probability Distributions

## Probability distribution the set of all

possible values of a random variable
and their associated probabilities.

## In a discrete probability distribution a

probability between 0 and 1 is assigned to
each discrete variable.The sum of the
probabilities sum to 1.

## To accompany 2-47 2006 by

Quantitative Prentice Hall,
Discrete Probability
Distribution Example
Dr. Shannon asked students to respond to the
statement, The textbook was well written and
helped me acquire the necessary information.
Shown below is the discrete probability
distribution of the respondents.

## Outcome X # Responding P(X)

SA 5 10 0.10
A 4 20 0.20
N 3 30 0.30
D 2 30 0.30
SD 1 10 0.10
Sum of P(X) = 1.0

## To accompany 2-48 2006 by

Quantitative Prentice Hall,
Discrete Probability
Distribution Graph
A graphical display of a probability distribution
yields information about its shape, the central
tendency (expected values) and the spread of the
data (variance). Below is a graphical depiction
of Dr. Shannons student responses.

0.3
0.25
0.2
0.15
0.1
0.05
0
SA A N DA SD

## To accompany 2-49 2006 by

Quantitative Prentice Hall,
Expected Value of a
Discrete Prob. Distribution
The expected value of a discrete
probability distribution is:
n
E( X )

X i P( X i )
i

## For Dr. Shannons class:

5
E( X ) X P( X
i 1
i i)

X 1P( X 1 ) X 2 P( X 2 ) X 3 P( X 3 )
X 4 P( X 4 ) X 5 P( X 5 )
(5)(0.1) ( 4)(0.2) (3)(0.3)
( 2)(0.3) (1)(0.1)
2.9
Thus, the mean response to Dr. Shannons
question is between disagree (2) and neutral (3),
with the average being closer to neutral.
To accompany 2-50 2006 by
Quantitative Prentice Hall,
Variance of a Discrete
Probability Distribution
The variance of a discrete probability
distribution is:
n 2
2 X i EX PX i
i 1
For Dr. Shannons class:
2 5 2.9 0.1 4 2.9 0.2
2 2

## 3 2.9 0.3 (2 - 2.9) 2 (0.3)

2

(1 2.9) 2 (0.1)
0.44 - 0.242 0.003 0.243 0.361
1.29
Thus, the standard deviation for Dr.
Shannons question is 1.29 = 1.136

## To accompany 2-51 2006 by

Quantitative Prentice Hall,
Variance of a Discrete
Probability Distribution
The standard deviation is a measure of
the dispersion or spread of the data that is
related to the variance. The formula for
the standard deviation of all probability
functions is:

2
For Dr. Shannons class:

1.29,
2

so,
1.358
To accompany 2-52 2006 by
Quantitative Prentice Hall,
Binomial Distribution
The binomial distribution is a
probability distribution with:
process and have two possible
outcomes.
probabilities that stay the same
from one trial to the next.
trials that are statistically
independent.
a positive integer number of trials.

## To accompany 2-53 2006 by

Quantitative Prentice Hall,
Binomial Formulas
The binomial formula can be
used to determine the
probability of r successes in n
trials.

n! r nr
pq
r!(n - r)!
Where,
n = number of trials
r = number of successes
p = probability of success
q = probability of failure (1-p)

## To accompany 2-54 2006 by

Quantitative Prentice Hall,
Binomial Formulas
(continued)
For a binomial distribution, the expected
value, or mean, is:

np
The variance is:

np ( is:
The standard deviation p)

## To accompany 2-55 2006 by

Quantitative Prentice Hall,
Soda Selection:
Binomial Example
Suppose 50% of your friends prefer
diet soda to regular soda.
You decide to practice your new
binomial skills while studying with
five friends.
You bring both diet and regular soda
to your next study session and offer
one to each of your friends.

## What is the probability that only one of

your friends will select a diet soda?
What is the probability that three of your
friends will select the diet soda?
What is the expected value, variance, and

## To accompany 2-56 2006 by

Quantitative Prentice Hall,
Soda Selection Solution
What is the probability that only one of your
friends will select a diet soda?
= .1563
What is the probability that three of your friends
will select the diet soda?
= .3125
These questions can be answered using the
binomial formula, where n = 5, r = 1 then 3, p = .
5
and q = .5.

## Below0.40is a graphical depiction of the answers.

P(r=3)
0.30

0.20 P(r=1)
P(r)

0.10

0.00
0 1 2 3 4 5
(r) Number of Successes

## To accompany 2-57 2006 by

Quantitative Prentice Hall,
Soda Selection Solution
Binomial Table
questions using the binomial table:
p= 50% success
n r 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50

1 0 0.9500 0.9000 0.8500 0.8000 0.7500 0.7000 0.6500 0.6000 0.5500 0.5000

1 0.0500 0.1000 0.1500 0.2000 0.2500 0.3000 0.3500 0.4000 0.4500 0.5000

2 0 0.9025 0.8100 0.7225 0.6400 0.5625 0.4900 0.4225 0.3600 0.3025 0.2500

1 0.0950 0.1800 0.2550 0.3200 0.3750 0.4200 0.4550 0.4800 0.4950 0.5000

2 0.0025 0.0100 0.0225 0.0400 0.0625 0.0900 0.1225 0.1600 0.2025 0.2500

3 0 0.8574 0.7290 0.6141 0.5120 0.4219 0.3430 0.2746 0.2160 0.1664 0.1250

1 0.1354 0.2430 0.3251 0.3840 0.4219 0.4410 0.4436 0.4320 0.4084 0.3750

2 0.0071 0.0270 0.0574 0.0960 0.1406 0.1890 0.2389 0.2880 0.3341 0.3750

3 0.0001 0.0010 0.0034 0.0080 0.0156 0.0270 0.0429 0.0640 0.0911 0.1250

4 0 0.8145 0.6561 0.5220 0.4096 0.3164 0.2401 0.1785 0.1296 0.0915 0.0625

1 0.1715 0.2916 0.3685 0.4096 0.4219 0.4116 0.3845 0.3456 0.2995 0.2500

n= 5 friends
2 0.0135 0.0486 0.0975 0.1536 0.2109 0.2646 0.3105 0.3456 0.3675 0.3750

3 0.0005 0.0036 0.0115 0.0256 0.0469 0.0756 0.1115 0.1536 0.2005 0.2500

4 0.0000 0.0001 0.0005 0.0016 0.0039 0.0081 0.0150 0.0256 0.0410 0.0625

5 0 0.7738 0.5905 0.4437 0.3277 0.2373 0.1681 0.1160 0.0778 0.0503 0.0313

1 0.2036 0.3281 0.3915 0.4096 0.3955 0.3602 0.3124 0.2592 0.2059 0.1563

2 0.0214 0.0729 0.1382 0.2048 0.2637 0.3087 0.3364 0.3456 0.3369 0.3125

3 0.0011 0.0081 0.0244 0.0512 0.0879 0.1323 0.1811 0.2304 0.2757 0.3125

4 0.0000 0.0005 0.0022 0.0064 0.0146 0.0284 0.0488 0.0768 0.1128 0.1563

5 0.0000 0.0000 0.0001 0.0003 0.0010 0.0024 0.0053 0.0102 0.0185 0.0313

6 0 0.7351 0.5314 0.3771 0.2621 0.1780 0.1176 0.0754 0.0467 0.0277 0.0156

1 0.2321 0.3543 0.3993 0.3932 0.3560 0.3025 0.2437 0.1866 0.1359 0.0938

2 0.0305 0.0984 0.1762 0.2458 0.2966 0.3241 0.3280 0.3110 0.2780 0.2344

3 0.0021 0.0146 0.0415 0.0819 0.1318 0.1852 0.2355 0.2765 0.3032 0.3125

To accompany
4 0.0001 0.0012 0.0055
2-58
0.0154 0.0330
2006 by
0.0595 0.0951 0.1382 0.1861 0.2344

5 0.0000 0.0001 0.0004 0.0015 0.0044 0.0102 0.0205 0.0369 0.0609 0.0938
Quantitative
6 0.0000 0.0000 0.0000 0.0001 0.0002 Prentice Hall,
0.0007 0.0018 0.0041 0.0083 0.0156
Soda Selection Solution
continued
What is the expected value, variance, and
expected value (u) = np
= 5(.5) = 2.5

variance = np(1-p)
= 5(.5)(.5) = 1.25

= 1.25 = 1.118

## So, on average half of your five friends will select

diet soda this is intuitive because 50% of your
friends prefer diet soda.

## To accompany 2-59 2006 by

Quantitative Prentice Hall,
Normal Distribution
The normal distribution is the
most popular and useful
continuous probability
distribution.

## Specified completely by the mean

and standard deviation
Symmetrical, with the midpoint
representing the mean
Values on the X axis are measured
in the number of standard
deviations away from the mean.
As the standard deviation becomes
larger the curve flattens.

## To accompany 2-60 2006 by

Quantitative Prentice Hall,
Normal Distribution
continued
Normal Distribution
Probability density function - f(X)

## 5 5.05 5.1 5.15 5.2 5.25 5.3 5.35 5.4

1 / 2 ( X ) 2
1
f (X ) e 2

2
To accompany 2-61 2006 by
Quantitative Prentice Hall,
Normal Distribution for
Different Values of
Different values of the mean shift the curve, but
do not affect the shape of the distribution.

0
30 40 50 60 70

## To accompany 2-62 2006 by

Quantitative Prentice Hall,
Normal Distribution for
Different Values of
Different values of the standard deviation will
flatten the curve, but do not affect the mean.

=1
=0.1

=0.3 =0.2

0 0.5 1 1.5 2

## To accompany 2-63 2006 by

Quantitative Prentice Hall,
Three Common Areas
under the Curve
Three
commonly used
areas under the
normal curve
are +/- 1, 2 and
3 standard
deviations.

## To accompany 2-64 2006 by

Quantitative Prentice Hall,
The Relationship Between
Z and X

=100
=15
x
Z

-3 -2 -1 0 1 2 3

## To accompany 2-65 2006 by

Quantitative Prentice Hall,
Haynes Construction
Company Example
Haynes Construction Company builds
primarily
triplex and quadraplex apartment buildings for
investors, and it is believed that the total
construction time follows a normal distribution.
The mean time to construct a triplex is 100
days, and the standard deviation is 20 days.
Failure to complete the construction in 125
days results in penalty fees. However, early
completion of 75 days or less results in a
bonus.

penalty fee?

a bonus?

## To accompany 2-66 2006 by

Quantitative Prentice Hall,
Haynes Construction
Company Solution
What is the probability Haynes will pay a
penalty fee?

x
Z = (125 100) / 20

= 1.25

## To accompany 2-67 2006 by

Quantitative Prentice Hall,
The Standard Normal
Table
There is an 89.44% chance the construction will
be complete in 125 days or less, thus, there is a
1-.89435, or a 10.57% chance the construction
will take longer causing Haynes to pay a penalty!
Z 0 0.01 0.02 0.03 0.04 0.05 0.06
0.5000 0.5039 0.5079 0.5159 0.5199 0.5239
0.0 0 9 8 0.51197 5 4 2
0.5398 0.5438 0.5477 0.5517 0.5556 0.5596 0.5635
0.1 3 0 6 2 7 2 6
0.5792 0.5831 0.5870 0.5909 0.5948 0.5987 0.6025
0.2 6 7 6 5 3 1 7
0.6179 0.6217 0.6255 0.6293 0.6330 0.6368 0.6405
0.3 1 2 2 0 7 3 8
0.6554 0.6591 0.6627 0.6664 0.6700 0.6736 0.6772
0.4 2 0 6 0 3 4 4
0.6914 0.6949 0.6984 0.7019 0.7054 0.7088 0.7122
0.5 6 7 7 4 0 4 6
0.7257 0.7290 0.7323 0.7356 0.7389 0.7421 0.7453
0.6 5 7 7 5 1 5 7
0.7580 0.7642 0.7673 0.7703 0.7733 0.7763
0.7 4 0.76115 4 0 5 7 7
0.7881 0.7910 0.7938 0.7967 0.7995 0.8023
0.8 4 3 9 3 5 4 0.80511
0.8159 0.8185 0.8212 0.8238 0.8263 0.8289 0.8314
0.9 4 9 1 1 9 4 7
0.8413 0.8437 0.8461 0.8484 0.8508 0.8531 0.8554
1.0 4 5 4 9 3 4 3
To accompany
0.8643 0.8665 2-68 0.8707
0.8686 2006
0.8728 by 0.8769
0.8749
1.1 3 0 4 6
Quantitative Prentice3Hall, 8
6
Haynes Construction
Company Solution
What is the probability Haynes will pay a
penalty fee?

x
Z = (75 100) / 20

= -1.25

## To accompany 2-69 2006 by

Quantitative Prentice Hall,
The Standard Normal
Table
The standard normal table does not have negative
value, so we must look up the positive value and
subtract from one ~ this works because of the
symmetrical property of the normal. Thus, there is a
1-.89435, or a 10.57% chance the construction will
take less than 75 days and Haynes will get a bonus!
Z 0 0.01 0.02 0.03 0.04 0.05 0.06
0.5000 0.5039 0.5079 0.5159 0.5199 0.5239
0.0 0 9 8 0.51197 5 4 2
0.5398 0.5438 0.5477 0.5517 0.5556 0.5596 0.5635
0.1 3 0 6 2 7 2 6
0.5792 0.5831 0.5870 0.5909 0.5948 0.5987 0.6025
0.2 6 7 6 5 3 1 7
0.6179 0.6217 0.6255 0.6293 0.6330 0.6368 0.6405
0.3 1 2 2 0 7 3 8
0.6554 0.6591 0.6627 0.6664 0.6700 0.6736 0.6772
0.4 2 0 6 0 3 4 4
0.6914 0.6949 0.6984 0.7019 0.7054 0.7088 0.7122
0.5 6 7 7 4 0 4 6
0.7257 0.7290 0.7323 0.7356 0.7389 0.7421 0.7453
0.6 5 7 7 5 1 5 7
0.7580 0.7642 0.7673 0.7703 0.7733 0.7763
0.7 4 0.76115 4 0 5 7 7
0.7881 0.7910 0.7938 0.7967 0.7995 0.8023
0.8 4 3 9 3 5 4 0.80511
0.8159 0.8185 0.8212 0.8238 0.8263 0.8289 0.8314
To
0.9
accompany
4 9
2-701 1
2006 by
9 4 7
0.8413 0.8437 0.8461 0.8484 0.8508 0.8531 0.8554
Quantitative
1.0 4 5 4 9 Prentice
3 4Hall, 3
Haynes Construction
Company Example
Other questions, such as the probability that the
construction will be completed between 110 and
125 days can also be answered.

## x = (125 100) / 20 = 1.25

Z and
= (110 100) / 20 = .5
To accompany 2-71 2006 by
Quantitative Prentice Hall,
Haynes Construction
Company Example
The area under the curve must be found for
both z values and subtracted from one another.

Z (.5) = .69146

Z (1.25) = .89435

## P(.5 < Z < 1.25) = .89435 - .69146

= .20289 or 20.29%

## To accompany 2-72 2006 by

Quantitative Prentice Hall,
The Negative
Exponential Distribution
The negative exponential distribution is
a continuous distribution that is often
used to describe the time required to
service a customer.

5 f ( X ) e x

4 =5 Expected value = 1/
3 Variance = 1/2

0
0 0.2 0.4 0.6 0.8 1 1.2

## To accompany 2-73 2006 by

Quantitative Prentice Hall,
The Poisson Distribution
The Poisson distribution is a
discrete distribution that is often
used to describe arrival rates.
0.30
=2 x
e
0.25
P( X )
0.20
X!
Expected value =
0.15 Variance =

0.10

0.05

0.00
1 2 3 4 5 6 7 8 9

## To accompany 2-74 2006 by

Quantitative Prentice Hall,