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BUSI 1013 Statistics for Business

Unit 5 / Unit 6
The Normal Distribution and
Sampling Distributions
 Continuous Probability
Distributions
• Uniform Probability Distribution f (x) Exponential

• Normal Probability Distribution

• Exponential Probability Distribution
Uniform
x
f (x)
Normal
f (x)

x
x

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Continuous Probability
Distributions
• A continuous random variable can assume any
value in an interval on the real line or in a collection
of intervals.

• It is not possible to talk about the probability of the

random variable assuming a particular value.

• Instead, we talk about the probability of the

random variable assuming a value within a given
interval.
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Continuous Probability
Distributions
• The probability of the random variable assuming a
value within some given interval from x1 to x2 is
defined to be the area under the graph of the
probability density function between x1 and x2.
Uniform Normal f (x) Exponential
f (x) f (x)

x x x
x1 x2 x1 x2 x1 x2

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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.

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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
• Rainfall amounts
• Scientific measurements

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Normal Probability Distribution
Normal Probability Density Function

Where µ = mean
= standard deviation
p = 3.14159
e = 2.71828

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Normal Probability Distribution
Characteristics

• The distribution is symmetric; its skewness measure

is zero.

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Normal Probability Distribution
Characteristics
• The entire family of normal probability distributions
is defined by its mean m and its standard deviation
s.

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Normal Probability Distribution
Characteristics
• The highest point on the normal curve is at the
mean, which is also the median and mode.

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Normal Probability Distribution
Characteristics
• The mean can be any numerical value: negative,
zero, or positive.

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Normal Probability Distribution
Characteristics
• The standard deviation determines the width of
the curve: larger values result in wider, flatter
curves.

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Normal Probability Distribution
Characteristics
• 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).

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Normal Distribution

Characteristics of Normal Probability

Distribution
A normal probability distribution, when plotted, gives a
bell-shaped curve such that

 The total area under the curve is 1.0.

 The curve is symmetric about the mean.

 The two tails of the curve extend indefinitely.

Normal Probability Distribution
Characteristics (basis for the empirical rule)

• 68.3% of values of a normal random variable are within +/- 1 standard deviation
of its mean.

• 95.4% of values of a normal random variable are within +/- 2 standard

deviations of its mean.

• 99.7% of values of a normal random variable are within +/- 3 standard

deviations of its mean.

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Normal Probability Distribution
Characteristics (basis for the empirical rule)

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Standard Normal Probability
Distribution
Characteristics
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.

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Standard Normal Probability
Distribution
Characteristics
The letter z is used to designate the standard normal
random variable.

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Standard Normal Probability
Distribution
Converting to Standard Normal Distribution

z=

We can think of z as a measure of the number of

standard deviations x is from .

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Standard Normal Probability
Distribution
Example: Grear Tire Company
Problem

Grear Tire company has developed a new

steel-belted radial tire to be sold through a
chain of discount stores. But before
finalizing the tire mileage guarantee policy,
Grear’s managers want probability
information about the number of miles of
tires will last.

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Standard Normal Probability
Distribution
Example: Grear Tire Company Problem

It was estimated that the mean tire mileage is 36,500

miles with a standard deviation of 5000. The
manager now wants to know the probability that the
tire mileage x will exceed 40,000.

P(x > 40,000) = ?

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Standard Normal Probability
Distribution
Example: Grear Tire Company Problem

Solving for the Probability

• Step 1: Convert x to standard normal distribution.

• Step 2: Find the area under the standard normal curve to the left of z = .7.

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Standard Normal Probability
Distribution
Example: Grear Tire Company Problem
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 < .7) = .7580

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Standard Normal Probability
Distribution
Example: Grear Tire Company Problem
• Step 3: Compute the area under the standard normal curve to the right
of z = .

P(z > .7) = 1 – P(z < .7)

Area = .7580
Area = 1 - .7580
= .2420

z
0 .7

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Standard Normal Probability
Distribution
Example: Grear Tire Company Problem

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Examples:
• 1) The average grade of a class is 72, and the std.
dev. is 6.5. If grades are normally distributed, find
the range for the middle 95% of the class.

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Examples:
• 2) In a class with normally distributed grades, it is
known that the mid 68% of the grades are between
65 to 79. Find the min and max grade in that class.

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Normal Probabilities

Numerical entries represent the

probability that a standard normal
random variable is below z where
x
z


Examples: P ( Z  2.5)  0.0062 P ( Z  2.33)

P ( Z  2.26)  0.0119  1  0.0099  0.9901
Examples:
• 2) An officer finds the time it takes for immigration
case to be finalized is normally distributed with the
average of 18 months and std. dev. of 3 months.
• How likely is that a case finalizes in less than 10
months?

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Examples:
• 2) An officer finds the time it takes for immigration
case to be finalized is normally distributed with the
average of 18 months and std. dev. of 3 months.
• How likely is that a case takes more than 24 months
to finalize?

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Examples:
• 2) An officer finds the time it takes for immigration
case to be finalized is normally distributed with the
average of 18 months and std. dev. of 3 months.
• How likely is that a case comes to a conclusion in
between 12 to 24 months?

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Week 6
Central limit theorem
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The Central Limit Theorem – Sample Means

The Central Limit Theorem

It does not matter what the distribution of the
original population is, or whether you even need to
know it.

The important fact is that the distribution of sample

means tend to follow the normal distribution.
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The Central Limit Theorem – Sample Means

Suppose there are only five students in an advanced

statistics class and the midterm scores of these five
students are:
A 70 B 78 C 80 D 80 E 95

Randomly select a sample of size 3:

Sample Scores in the Sample X
Sample #1 ABC 70 78 80 76.00
Sample #2 ADB 70 80 78 76.00
Sample #3 BEA 78 95 70 81.00
   
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The Central Limit Theorem – Sample Means

By using the value of X , we record the frequency

distribution of X as follows:

The sampling distribution of the sample means

0.25

0.2

0.15

0.1

0.05

0
76 76.67 79.33 81 81.67 84.33 85
X
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The Central Limit Theorem – Sample Means

The Central Limit Theorem is concerned with drawing

finite samples of size n from a population with a known
mean, μ, and a known standard deviation, σ.

The conclusion is that if we collect samples of size n

with a “large enough n” ( n  30), calculate each sample's
mean, and create a histogram (distribution) of those
means, then the resulting distribution will tend to have
an approximate normal distribution.
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The Central Limit Theorem – Sample Means
Population Distribution Sample Mean Distribution
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The Central Limit Theorem – Sample Means
Population Distribution
Mean:  
Std.
Dev.:
Large Sample
Mean: X Std.
s
Dev.:

Sampling Distribution of X
Mean: E (  X )  

Std. Dev.:  X 
n
  
X ~ N  , 
 n
X 
Z
/ n
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The Central Limit Theorem – Sample Means
Examples:
28. A population has a mean of 120 and a standard deviation of 2.4.
If it is sampled repeatedly with samples of size 40, what is the mean
and standard deviation of the sample means?
Mean: E (  X )    120
 2.4
Std. Dev.:  X    0.3795
n 40

29. A population has a mean of 17 and a standard deviation of 1.2.

If it is sampled repeatedly with samples of size 50, what is the mean
and standard deviation of the sample means?
Mean: E (  X )    17
1.2
Std. Dev.:  X    0.1697
n 50
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The Central Limit Theorem – Sample Means
Examples:
30. A population has a mean of 17 and a standard deviation of 0.2.
If it is sampled repeatedly with samples of size 36, what is the
expected value and standard deviation of the sample means?
Mean: E (  X )    17
 0.2
Std. Dev.:  X    0.0333
n 36

31. A population has a mean of 38 and a standard deviation of 3. If

it is sampled repeatedly with samples of size 48, what is the
expected value and standard deviation of the sample means?
Mean: E (  X )    38
 3
Std. Dev.:  X    0.4330
n 48
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The Central Limit Theorem – Sample Proportions

Suppose now we wish to estimate p from the binomial

probability density function.

Recall (Unit 4)   np and  2  npq

In a sample with sample size n, let X = number of

successes, then the probability of success is estimated as
p'  x / n .
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The Central Limit Theorem – Sample Proportions
Boe Consultant Associates has five employees. The
following table gives the name of these five employees
and information concerning their knowledge of statistics.
Name A B C D E
Knows Statistics Yes No No Yes Yes

Randomly select a Sample p ' =P(yes)

sample of size 3: Sample #1 A, B, C 1/3 = 0.33
Sample #2 A, C, D 2/3 = 0.67
Sample #3 D, B, E 2/3 = 0.67
  
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The Central Limit Theorem – Sample Proportions

By using the value of p ' , we record the frequency

distribution of p ' as follows:

The sampling distribution of the sample proportions

1

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0
0.33 0.67 1
p'
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The Central Limit Theorem – Sample Proportions

By the Central Limit Theorem,

the sampling distribution for
sample proportions also
follows a Normal distribution.

Sampling Distribution of p '

Mean: E ( p ')  p
p(1  p )
Std. Dev.:  p ' 
n
 p(1  p ) 
p ' ~ N  p, 
 n 
p ' p
Z
p(1  p ) / n
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The Central Limit Theorem – Sample Proportions
Example:

33./34.
A question is asked of a class of 200 freshmen, and 23% of the
students know the correct answer. If a sample of 50 students is taken
repeatedly, what is the expected value of the mean of the sampling
distribution of sample proportions? What is the standard deviation of
the mean of the sampling distribution of sample proportions?

Mean: E ( p ')  p  0.23

p(1  p ) (0.23)(0.77)
Std. Dev.:  p '    0.0595
n 50


By C.L.T.
 p ' ~ N (0.23,0.0595)
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The Central Limit Theorem – Sample Proportions
Example:

35./36.
A game is played repeatedly. A player wins one-fifth of the time. If
samples of 40 times the game is played are taken repeatedly, what is
the expected value of the mean of the sampling distribution of
sample proportions? What is the standard deviation of the mean of
the sampling distribution of sample proportions?

Mean: E ( p ')  p  0.2

p(1  p ) (0.2)(0.8)
Std. Dev.:  p '    0.0632
n 40


By C.L.T.
 p ' ~ N (0.2,0.0632)
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The Central Limit Theorem – Sample Proportions
Example:

37./38.
A virus attacks one in three of the people exposed to it. An entire
large city is exposed. If samples of 70 people are taken, what is the
expected value of the mean of the sampling distribution of sample
proportions? What is the standard deviation of the mean of the
sampling distribution of sample proportions?

Mean: E ( p ')  p  1 / 3
p(1  p ) (1 / 3)(2 / 3)
Std. Dev.:  p '    0.0563
n 70


By C.L.T.
 p ' ~ N (1 / 3,0.0563)