Business Statistics: Module 3.

Normal Distribution Page 1 of 8

Module 3. Normal Distribution

Normal distribution – generally and frequently used continuous probability distribution

 Bell shaped (symmetrical)

 Mean and median are equal
 Whole curve has an area of
probability of 100% or 1
 Z-score of mean is 0
 Left side of the mean represents the
lower 50% area of probability and
negative z-scores; while the right http://mathcenter.oxford.emory.edu/site/math1
17/normalDistribution/
side, the upper 50% and positive z-
scores
 Has infinite range

 To solve for the z-score, use the following formula:

Z = (x - ɥ) ɥ = population mean x = any given value

δ δ = population standard deviation z = z-score

 To determine the area of probability of the calculated z-score, use the cumulative
standardized normal distribution table shown after the references section of this
module
The table has rows and columns; the row headings represent the first two digits of
the z-score; and the column headings represent the last digit of the z-scores.

Draw the normal curve and shade the part which represents the required area of
probability in certain problem.

 If the area of probability is given and we are asked to find the x-value, use the
following formula:

x = ɥ + zδ

 Before we start with problem illustration, you need to be familiar with the following
terms which we can use to represent the symbols < and > in the probability
equation.

< >
Less than greater than
Lower higher
Under over
Below above
Maximum minimum
At most at least
Business Statistics: Module 3. Normal Distribution Page 2 of 8

Note, use two < to represent the word “between” and two > to represent “either, or”
in the probability equations.

Problem Illustrations

 Assuming normal distribution with µ = 50 and δ = 4.45,

1. What is the probability that x is below 40?
2. What is the probability that x is higher than 50?
3. What is the probability that x is between 45 and 55?
4. What is the probability that x is either less than 43 or greater than 59?
5. 25% of the values are less than what x value?

Let us solve the probabilities required in the above problem. To start with, convert
each question into a probability equation. Next, calculate each z-score; and then,
determine each area of probability. Afterwards, plot the identified z-score and area of
probability in the normal curve.

1. P(x < 40)

z-score = (40 – 50) = -2.25
4.45
To know the area of probability for z-score of -2.25, look at the normal distribution
table with negative z-scores. Check row -2.2 and column 0.05, and the value
wherein row -2.2 and column 0.05 intersect is its area of probability.

Area of probability of -2.25 is .01222

Normal curve .01222

x = 40
z = -2.25
2. P(x > 50)
Z = (50 – 50) = 0.00
4.45

In the table, check row 0.0 and column .00

Area of probability of 0.00 is 0.50000

Since we used > in the equation, we need to identify the area of probability on
the right side of the normal curve. To do so, we have to subtract the initially
identified area of probability from 1.

Area of probability = 1 - .50000 = .50000 .50000

Normal curve x 50
z 0.0
Business Statistics: Module 3. Normal Distribution Page 3 of 8

3. P(45 < x < 55)

There are two x-values given in the equation, which are 45 and 55. We need to
compute the z-score of each value separately.

zupper = (55 – 50) = 1.12 Areaupper = .86864

4.45
zlower = (45 – 50) = -1.12 Arealower = .13136
4.45

We need the area of probability between two values. In order to identify the
required probability area, subtract the lower area from the upper area.
For the normal curve, we shade its middle part to represents the area of
probability between two x values.

Area of probability = .86864 – .13136 = .73728 .73728

Normal curve
x 45 55
z -1.12 1.12
4. P(43 > x > 59)

zupper = (59 – 50) = 2.02 Areaupper = .97831 = 1 – .07831 = .02169

4.45
zlower = (43 – 50) = -1.57 Arealower = .05821
4.45

In probability equation no. 2 wherein we used > symbol, we subtract the initial
area identified from 1. However, in probability equation no. 4 wherein we use
two > symbols, we only need to subtract the higher area of probability from 1,
and we retain the lower probability. After which, add the two areas to get the
needed probability area.
For the normal curve, we shade the left side of the lower tail and right side of the
upper tail to represents the area of probability for either or of two x values.

Area of probability = .02169 + .05821 = .0799 .0799

Normal curve x 43 59
z -1.57 2.02

5. P(25% < x)

Before we can solve for x-value, we need to determine the z-score which
represents the 25% area of the probability. Since 25% belongs to the lower 50%,
locate 25% or .25000 inside the table with negative z-scores. If you cannot find
Business Statistics: Module 3. Normal Distribution Page 4 of 8

the exact .25000, look for the nearest area which is higher or lower than .25000.
The nearest probability area to .25000 in the table is .25143 with z-score of -0.67.

Area = .25000 ≈ .25143 z-score = -0.67

x = 50 + (-0.67 X 4.45) = 47.02 .25143

Normal curve x 47.02

z -0.67

 A first year college student sells electronic prepaid call and text loads to augment his
daily allowance. His average daily revenue is P3,500 with standard deviation of
P381.
1. What is the probability that his daily revenue is at most P3000?
2. What is the probability that his daily revenue is greater than P4150?
3. What is the probability that his daily revenue is between P3,250 and P4,200?
4. What is the probability that his daily revenue is either under P3,750 or over
P4,350?
5. 85% of his daily revenue is greater than what x value?

Computations
Normal curve
1. P(x < 3000)? .09510

z = (3000 – 3500) = -1.31 x 3000

381 z -1.31

Area = - 1.31 = .09510

2. P(x > 4150)? Normal curve

z = (4150 – 3500) = 1.71 .04363

381
x 4150
Area = 1.71 = .95637 z 1.71
1 – .95637 = .04363

3. P(3250 < x < 4200)? Normal curve

.71249
zupper = (4200 – 3500) = 1.84
381
zlower = (3250 – 3500) = -0.66 x 3250 4200
381 z -0.66 1.84
Areaupper = 1.84 = .96712
Arealower = -0.66 = .25463
Area = .96712 – .25463 = .71249
Business Statistics: Module 3. Normal Distribution Page 5 of 8

4. P(3750 > x > 4350)? Normal curve .83408

zupper = (4350 – 3500) = 2.23

381 x 3850 4350
zlower = (3850 – 3500) = 0.92 z 0.92 2.23
381
Areaupper = 2.23 = .98713 = 1 – .98713 = .01287
Arealower = 0.92 = .82121
Area = .01287 + .82121 = .83408

5. P(85% > x)? Normal curve .85083

Area = 1 - .85000 = .15000 ≈ .14917

z-score = -1.04 x 3103.76
x = 3500 + (-1.04 X 381) = 3103.76 z -1.04

End of Module Questions

1. What are the two primary characteristics of normal distribution?

2. How useful is the normal distribution?

End of Module Exercises

1. Given normal distribution with mean of 85 and standard deviation of 6.95,

a. What is the probability that x is below 75?
b. What is the probability that x is greater than 92?
c. What is the probability that x is between 70 and 95?
d. What is the probability that x is either less than 60 or greater than 105?
e. 10% of the values are less than what x value?

2. Given normal distribution with mean of 10 and standard deviation of 0.95

a. What is the probability that x is 12 at the least?
b. What is the probability that x is less than 8.5?
c. What is the probability that x is either below 7 or above 13.5?
d. What is the probability that x is between 7.5 and 13?
e. What is the x-value if 90% are under it?

3. The average travel time of a student from home to school is 90 minutes with
standard deviation of 8.5 minutes.
a. What is the probability that a student’s home-to-school travel time is over 100
minutes?
b. What is the probability that a student’s home-to-school travel time is either under
70 minutes or over 95 minutes?
c. What is the probability that a student’s home-to-school travel time is less than 60
minutes?
Business Statistics: Module 3. Normal Distribution Page 6 of 8

d. What is the probability that a student’s home-to-school travel time is between 65

minutes and 110 minutes?

4. A domestic tourist from Luzon spends an average of P20,000 with standard

deviation of P2,650 every time she goes to certain tourist destinations in Visayas.
a. What is the probability that a domestic tourist spent between P15,000 and
P18,000?
b. What is the probability that a domestic tourist spent over P27,000)?
c. What is the probability that a domestic tourist spent P30,000 at the least?
d. What is the probability that a domestic tourist spent either below P12,500 or
above P29,500?

References

Albright, S. et al. (2015). Business analytics: data analysis and decision making (5th
ed). Cengage Learning.
Anderson, D., Sweeney, D.J., et.al., (2018). Modern business statistics. Australia:
Cengage Learning.
Antivola, H. (2015). Business statistics: a modular approach. Books Atbp. Publishing.
Anywhere Math. (2016). Introduction to Statistics.
https://www.youtube.com/watch?v=LMSyiAJm99g.
Berenson, M.L., Levine, D.M., & Krehbiel, T.C. (2015). Basic business statistics:
concepts and applications. Pearson Education Sou7th Asia Pte. Ltd.
Bowerman, B. (2017). Business statistics in practice: using modeling, data, and
analytics (8th ed.). McGraw-Hill Education.
Jaggia, S. (2019). Business statistics: communicating with numbers (3rd ed.). McGraw-
Hill Education.
Lee, N. (2016). Business statistics: using excel & SPSS. Sage.
Simple Learning Pro. (2015). Mean, median, mode, range, and standard deviation.
https://www.youtube.com/watch?v=mk8tOD0t8M0.
Sharpe, N. (2015). Business statistics 3rd ed. Pearson Education.
Willoughby, D. (2015). An essential guide to business statistics. John Wiley & Sons.
Business Statistics: Module 3. Normal Distribution Page 7 of 8

Cumulative Standardized Normal Distribution Table

Business Statistics: Module 3. Normal Distribution Page 8 of 8