Statistics for

Business and Economics

8th Global Edition

Chapter 5

Continuous Probability
Distributions
Copyright © 2013 Pearson Education Ch. 5-1
 Probability Distributions
Probability
Distributions

Ch. 4 Discrete Continuous Ch. 5

Probability Probability
Distributions Distributions

Binomial Uniform

Hypergeometric Normal

Poisson Exponential

Copyright © 2013 Pearson Education Ch. 5-2

5.1
Continuous Random Variables
 A continuous random variable is a variable that
can assume any value in an interval
 thickness of an item
 time required to complete a task
 temperature of a solution
 height, in inches

 These can potentially take on any value,

depending only on the ability to measure
accurately.

Copyright © 2013 Pearson Education Ch. 5-3

 Cumulative Distribution Function

 The cumulative distribution function, F(x), for a

continuous random variable X expresses the
probability that X does not exceed the value of x

F(x)  P(X  x)
 Let a and b be two possible values of X, with
a < b. The probability that X lies between a
and b is

P(a  X  b)  F(b)  F(a)

Copyright © 2013 Pearson Education Ch. 5-4
 Probability Density Function
The probability density function, f(x), of random variable X
has the following properties:

1. f(x) > 0 for all values of x

2. The area under the probability density function f(x)
over all values of the random variable X within its
range, is equal to 1.0
3. The probability that X lies between two values is the
area under the density function graph between the two
values
b
P(a  X  b)   f(x)dx
a

Copyright © 2013 Pearson Education Ch. 5-5

 Probability Density Function
(continued)
The probability density function, f(x), of random variable X
has the following properties:

4. The cumulative density function F(x0) is the area under

the probability density function f(x) from the minimum
x value up to x0
x0

F(x 0 )   f(x)dx
xm

where xm is the minimum value of the random variable x

Copyright © 2013 Pearson Education Ch. 5-6

 Probability as an Area
Shaded area under the curve is the
probability that X is between a and b
f(x) P (a ≤ x ≤ b)
= P (a < x < b)
(Note that the probability
of any individual value is
zero)

a b x

Copyright © 2013 Pearson Education Ch. 5-7

 Probability as an Area
(continued)
1. The total area under the curve f(x) is 1
2. The area under the curve f(x) to the left of x0 is
F(x0), where x0 is any value that the random variable
can take.
f(x)

F(x 0 )  P(X  x 0 )

0 x0 x

Copyright © 2013 Pearson Education Ch. 5-8

 The Uniform Distribution
Probability
Distributions

Continuous
Probability
Distributions

Uniform

Normal

Exponential

Copyright © 2013 Pearson Education Ch. 5-9

 The Uniform Distribution

 The uniform distribution is a probability

distribution that has equal probabilities for all
equal-width intervals within the range of the
random variable

f(x)
Total area under the
uniform probability
density function is 1.0

xmin xmax x

Copyright © 2013 Pearson Education Ch. 5-10

 The Uniform Distribution
(continued)

The Continuous Uniform Distribution:

1
if a  x  b
ba
f(x) =
0 otherwise

where
f(x) = value of the density function at any x value
a = minimum value of x
b = maximum value of x

Copyright © 2013 Pearson Education Ch. 5-11

5.2
Expectations for
Continuous Random Variables

 The mean of X, denoted μX , is defined as the

expected value of X

μX  E[X]

 The variance of X, denoted σX2 , is defined as the

expectation of the squared deviation, (X - μX)2, of a
random variable from its mean

σ 2X  E[(X  μX )2 ]

Copyright © 2013 Pearson Education Ch. 5-12

 Mean and Variance of the
Uniform Distribution

 The mean of a uniform distribution is

ab
μ
2
 The variance is
2
(b - a)
σ2 
12
Where a = minimum value of x
b = maximum value of x

Copyright © 2013 Pearson Education Ch. 5-13

 Uniform Distribution Example

Example: Uniform probability distribution

over the range 2 ≤ x ≤ 6:

1
f(x) = 6 - 2 = .25 for 2 ≤ x ≤ 6

f(x)
ab 26
μ  4
.25 2 2

(b - a)2 (6 - 2)2
σ 
2
  1.333
2 6 x 12 12

Copyright © 2013 Pearson Education Ch. 5-14

 Uniform Probability Distribution

Example: Stein's Buffet

Stein customers are charged
for the amount of salad they take.
Sampling suggests that the
amount of salad taken is
uniformly distributed
between 140g and 420g.
 Uniform Probability Distribution

Uniform Probability Density Function

f(x) = 1/280 for 140 < x < 420

=0 elsewhere

where:
x = salad plate filling weight
Uniform Probability Distribution

Expected Value of x
E(x) = (a + b)/2
= (140 + 420)/2
= 280

Variance of x
Var(x) = (b - a)2/12
= (420 – 140)2/12
= 6533.33
 Uniform Probability Distribution
 Uniform Probability Distribution
for Salad Plate Filling Weight
f(x)

1/280

x
140 280 420
Salad Weight (g)
Uniform Probability Distribution
What is the probability that a customer
will take between 336 and 420 ounces of salad?

f(x)

P(336 < x < 420) = 1/280(84) = .3

1/280

x
140 280 336 420
Salad Weight (g)
 Linear Functions of
Random Variables
 Let W = a + bX , where X is a continuous var.
and has mean μX and variance σX2 , and a
and b are constants
 Then the mean of W is

μW  E[a  bX]  a  bμX

 the variance is

σ  Var[a  bX]  b σ
2
W
2 2
X

 the standard deviation of W is

σW  b σX
Copyright © 2013 Pearson Education Ch. 5-20
 Linear Functions of
Random Variables
(continued)

 An important special case of the result for the linear

function of random variable is the standardized random
variable
X  μX
Z
σX

 which has a mean 0 and variance 1

Copyright © 2013 Pearson Education Ch. 5-21

5.3
The Normal Distribution
Probability
Distributions

Continuous
Probability
Distributions

Uniform

Normal

Exponential

Copyright © 2013 Pearson Education Ch. 5-22

 The Normal Distribution
(continued)

 ‘Bell Shaped’
 Symmetrical f(x)
 Mean, Median and Mode
are Equal
Location is determined by the σ
mean, μ x
μ
Spread is determined by the
standard deviation, σ
Mean
= Median
The random variable has an
infinite theoretical range: = Mode
+  to  
Copyright © 2013 Pearson Education Ch. 5-23
 The Normal Distribution
(continued)

 The normal distribution closely approximates the

probability distributions of a wide range of random
variables
 Distributions of sample means approach a normal
distribution given a “large” sample size
 Computations of probabilities are direct and elegant
 The normal probability distribution has led to good
business decisions for a number of applications

Copyright © 2013 Pearson Education Ch. 5-24

 Many Normal Distributions

By varying the parameters μ and σ, we obtain

different normal distributions

Copyright © 2013 Pearson Education Ch. 5-25

 The Normal Distribution Shape
f(x) Changing μ shifts the
distribution left or right.

Changing σ increases
or decreases the
σ spread.

μ x

Given the mean μ and variance σ2 we define the normal

distribution using the notation
X ~ N(μ,σ 2 )
Copyright © 2013 Pearson Education Ch. 5-26
 The Normal Probability
Density Function

 The formula for the normal probability density

function is
1  (x μ) 2 /2σ 2
f(x)  e
2π 2

Where e = the mathematical constant approximated by 2.71828

π = the mathematical constant approximated by 3.14159
μ = the population mean
σ2 = the population variance
x = any value of the continuous variable,  < x < 
Copyright © 2013 Pearson Education Ch. 5-27
 Cumulative Normal Distribution

 For a normal random variable X with mean μ and

variance σ2 , i.e., X~N(μ, σ2), the cumulative
distribution function is

F(x 0 )  P(X  x 0 )

f(x)

P(X  x 0 )

µ x0 x

Copyright © 2013 Pearson Education Ch. 5-28

 Finding Normal Probabilities

The probability for a range of values is

measured by the area under the curve

P(a  X  b)  F(b)  F(a)

a μ b x

Copyright © 2013 Pearson Education Ch. 5-29

 Finding Normal Probabilities
(continued)

F(b)  P(X  b)

a μ b x

F(a)  P(X  a)

a μ b x

P(a  X  b)  F(b)  F(a)

a μ b x
Copyright © 2013 Pearson Education Ch. 5-30
 The
Standard Normal Distribution
 Any normal distribution (with any mean and
variance combination) can be transformed into the
standardized normal distribution (Z), with mean 0
and variance 1
f(Z)

Z ~ N(0 ,1) 1
Z
0
 Need to transform X units into Z units by subtracting the
mean of X and dividing by its standard deviation

X μ
Z
σ
Copyright © 2013 Pearson Education Ch. 5-31
 The
Standard Normal Distribution
Standard Normal Density Function

1  (z) 2 /2
f(z)  e
2π
where:
z = (x – m)/
 = 3.14159
e = 2.71828
 Example

 If X is distributed normally with mean of 100

and standard deviation of 50, the Z value for
X = 200 is

X  μ 200  100
Z   2.0
σ 50
 This says that X = 200 is two standard
deviations (2 increments of 50 units) above
the mean of 100.

Copyright © 2013 Pearson Education Ch. 5-33

 Comparing X and Z units

100 200 X (μ = 100, σ = 50)

0 2.0 Z ( μ = 0 , σ = 1)

Note that the distribution is the same, only the

scale has changed. We can express the problem in
original units (X) or in standardized units (Z)

Copyright © 2013 Pearson Education Ch. 5-34

 Finding Normal Probabilities
 a μ b μ
P(a  X  b)  P Z 
 σ σ 
f(x)  b μ  a μ
 F   F 
 σ   σ 

a µ b x
a μ b μ
0 Z
σ σ

Copyright © 2013 Pearson Education Ch. 5-35

 Probability as
Area Under the Curve
The total area under the curve is 1.0, and the curve is
symmetric, so half is above the mean, half is below

f(X) P(   X  μ)  0.5
P(μ  X   )  0.5

0.5 0.5

μ X
P(   X   )  1.0
Copyright © 2013 Pearson Education Ch. 5-36
 Appendix Table 1
 The Standard Normal Distribution table in the
textbook (Appendix Table 1) shows values of
the cumulative normal distribution function

 For a given Z-value a , the table shows F(a)

(the area under the curve from negative infinity to a )

F(a)  P(Z  a)

0 a Z
Copyright © 2013 Pearson Education Ch. 5-37
 Appendix Table 1

Copyright © 2013 Pearson Education Ch. 5-38

 The Standard Normal Table

 Appendix Table 1 gives the probability F(a) for

any value a

Example: .9772
P(Z < 2.00) = .9772

0 2.00 Z

Copyright © 2013 Pearson Education Ch. 5-39

 The Standard Normal Table
(continued)

 For negative Z-values, use the fact that the

distribution is symmetric to find the needed
probability:
.9772

.0228
Example:
0 2.00 Z
P(Z < -2.00) = 1 – 0.9772
= 0.0228 .9772
.0228

-2.00 0 Z
Copyright © 2013 Pearson Education Ch. 5-40
 General Procedure for Finding
Probabilities

To find P(a < X < b) when X is

distributed normally:
 Draw the normal curve for the problem in
terms of X

 Translate X-values to Z-values

 Use the Cumulative Normal Table

Copyright © 2013 Pearson Education Ch. 5-41

 Finding Normal Probabilities

 Suppose X is normal with mean 8.0 and

standard deviation 5.0
 Find P(X < 8.6)

X
8.0
8.6
Copyright © 2013 Pearson Education Ch. 5-42
 Finding Normal Probabilities
(continued)
 Suppose X is normal with mean 8.0 and
standard deviation 5.0. Find P(X < 8.6)
X  μ 8.6  8.0
Z   0.12
σ 5.0

μ=8 μ=0
σ = 10 σ=1

8 8.6 X 0 0.12 Z

P(X < 8.6) P(Z < 0.12)

Copyright © 2013 Pearson Education Ch. 5-43
 Solution: Finding P(Z < 0.12)

Standardized Normal Probability P(X < 8.6)

Table (Portion) = P(Z < 0.12)
z F(z) F(0.12) = 0.5478
.10 .5398

.11 .5438

.12 .5478
Z
0.00
.13 .5517
0.12

Copyright © 2013 Pearson Education Ch. 5-44

 Upper Tail Probabilities

 Suppose X is normal with mean 8.0 and

standard deviation 5.0.
 Now Find P(X > 8.6)

X
8.0
8.6
Copyright © 2013 Pearson Education Ch. 5-45
 Upper Tail Probabilities
(continued)

 Now Find P(X > 8.6)…

P(X > 8.6) = P(Z > 0.12) = 1.0 - P(Z ≤ 0.12)
= 1.0 - 0.5478 = 0.4522

0.5478
1.000 1.0 - 0.5478
= 0.4522

Z Z
0 0
0.12 0.12
Copyright © 2013 Pearson Education Ch. 5-46
 Finding the X value for a
Known Probability

 Steps to find the X value for a known

probability:
1. Find the Z value for the known probability
2. Convert to X units using the formula:

X  μ  Zσ

Copyright © 2013 Pearson Education Ch. 5-47

 Finding the X value for a
Known Probability
(continued)

Example:
 Suppose X is normal with mean 8.0 and

standard deviation 5.0.

 Now find the X value so that only 20% of all
values are below this X

.2000

? 8.0 X
? 0 Z
Copyright © 2013 Pearson Education Ch. 5-48
 Find the Z value for
20% in the Lower Tail
1. Find the Z value for the known probability
Standardized Normal Probability  20% area in the lower
Table (Portion) tail is consistent with a
z F(z) Z value of -0.84
.82 .7939 .80
.20
.83 .7967

.84 .7995
? 8.0 X
.85 .8023 -0.84 0 Z

Copyright © 2013 Pearson Education Ch. 5-49

 Finding the X value

2. Convert to X units using the formula:

X  μ  Zσ

 8.0  ( 0.84)5.0

 3.80

So 20% of the values from a distribution

with mean 8.0 and standard deviation
5.0 are less than 3.80

Copyright © 2013 Pearson Education Ch. 5-50

 Standard Normal Probability
Distribution
Example: Pep Zone
The store manager is concerned that sales are
being
lost due to stock outs while waiting for an order.
It has been determined that demand during
replenishment lead-time is normally
distributed with a mean of 60 gallons and
Pep
a standard deviation of 24 gallons.
Zone
The manager would like to know the
probability of a stock out, P(x > 80). 5w-80
Motor Oil
 Standard Normal Probability
Distribution Pep
Zone

Solving for the Stockout Probability 5w-20

Motor Oil

Step 1: Convert x to the standard normal distribution.

z = (x - m)/
= (80 - 60)/24
= .83

Step 2: Find the area under the standard normal

curve to the left of z = .83.
 Standard Normal Probability
Distribution Pep
Zone

Cumulative Probability Table for 5w-20

Motor Oil

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)

 Standard Normal Probability
Distribution Pep
Zone

Solving for the Stockout Probability 5w-20

Motor Oil

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

Probability P(x > 80)

of a
stockout
 Standard Normal Probability
Distribution Pep
Zone
5w-20
Motor Oil

Solving for the Stockout Probability

Area = 1 - .7967
Area = .7967
= .2033

z
0 .83
 Standard Normal Probability
Distribution Pep
Zone
5w-20
Motor Oil

 Standard Normal Probability Distribution

If the manager of Pep Zone wants the
probability of a stockout to be no more than
.05, what should the reorder point be?
Standard Normal Probability Distribution
Pep
Zone

Solving for the Reorder Point

5w-20
Motor Oil

Area = .9500

Area = .0500

z
0 z.05
Standard Normal Probability Distribution
Pep
Zone

Solving for the Reorder Point

5w-20
Motor Oil

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)
Standard Normal Probability Distribution
Pep
Zone

Solving for the Reorder Point

5w-20
Motor Oil

Step 2: Convert z.05 to the corresponding value of x.

x = m + z.05
= 60 + 1.645(24)
= 99.48 or 100

A reorder point of 100 litres will place the probability

of a stockout during leadtime at (slightly less than) .05.
5.5
The Exponential Distribution
Probability
Distributions

Continuous
Probability
Distributions

Normal

Uniform

Exponential

Copyright © 2013 Pearson Education Ch. 5-60

 The Exponential Distribution

 Used to model the length of time between two

occurrences of an event (the time between
arrivals)

 Examples:
 Time between trucks arriving at an unloading dock
 Time between transactions at an ATM Machine
 Time between phone calls to the main operator

Copyright © 2013 Pearson Education Ch. 5-61

 The Exponential Distribution
(continued)

 The exponential random variable T (t>0) has a

probability density function

λ t
f(t)  λ e for t  0
 Where
  is the mean number of occurrences per unit time
 t is the number of time units until the next occurrence
 e = 2.71828
 T is said to follow an exponential probability distribution

Copyright © 2013 Pearson Education Ch. 5-62

 The Exponential Distribution
(continued)

 Defined by a single parameter, its mean  (lambda)

 The cumulative distribution function (the probability that

an arrival time is less than some specified time t) is

λt
F(t)  1 e

where e = mathematical constant approximated by 2.71828

 = the population mean number of arrivals per unit
t = any value of the continuous variable where t > 0

Copyright © 2013 Pearson Education Ch. 5-63

 Exponential Distribution
Example

Example1: Customers arrive at the service counter at

the rate of 15 per hour. What is the probability that the
arrival time between consecutive customers is less
than three minutes?

 The mean number of arrivals per hour is 15, so  = 15

 Three minutes is .05 hours
 P(arrival time < .05) = 1 – e- X = 1 – e-(15)(.05) = 0.5276
 So there is a 52.76% probability that the arrival time
between successive customers is less than three
minutes
Copyright © 2013 Pearson Education Ch. 5-64
 Exponential Distribution
Example

Example2: Service times for customers at a library

information desk can be modeled by an exponential
distribution with a mean service time of 5 minutes.
What is the probability that a customer service time will
take longer than 10 minutes?

Copyright © 2013 Pearson Education Ch. 5-65