Business Statistics, 4e

by Ken Black

Chapter 6
Discrete Distributions

Continuous
Distributions

Business Statistics, 4e, by Ken Black. 2003 John Wiley & Sons.
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 Learning Objectives

Understand concepts of the uniform

distribution.
Appreciate the importance of the normal
distribution.
Recognize normal distribution problems, and
know how to solve them.
Decide when to use the normal distribution to
approximate binomial distribution problems,
and know how to work them.
Decide when to use the exponential distribution
to solve problems in business, and know how to
work them.

Business Statistics, 4e, by Ken Black. 2003 John Wiley & Sons.
6-2
 Uniform Distribution

1
b a for a x b
1
f ( x)
0 ba

for all other values f (x)

Area = 1
a x b

Business Statistics, 4e, by Ken Black. 2003 John Wiley & Sons.
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 Uniform Distribution of Lot Weights
1
47 41 for 41 x 47
1 1
f ( x)
0 47 41 6
for all other values f (x)

Area = 1

41 47 x

Business Statistics, 4e, by Ken Black. 2003 John Wiley & Sons.
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 Uniform Distribution Probability

P( x X x ) x x 2 1
1
ba 2
45 42 1

47 41 2
f (x)
45 42 1
P( 42 X 45)
47 41 2 Area
= 0.5

41 42 45 47 x

Business Statistics, 4e, by Ken Black. 2003 John Wiley & Sons.
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 Uniform Distribution
Mean and Standard Deviation
Mean Mean
a+b 41 + 47 88
= = 44
2 2 2

Standard Deviation Standard Deviation

ba 47 41 6
1. 732
12 12 3. 464

Business Statistics, 4e, by Ken Black. 2003 John Wiley & Sons.
6-6
 Characteristics of the Normal
Distribution
Continuous distribution
Symmetrical distribution
Asymptotic to the
horizontal axis
Unimodal
A family of curves 1/2 1/2
Area under the curve
sums to 1. X
Area to right of mean is
1/2.
Area to left of mean is
1/2.

Business Statistics, 4e, by Ken Black. 2003 John Wiley & Sons.
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 Probability Density Function
of the Normal Distribution
x
2

1
1
f ( x)
2 e
2

Where:
mean of X
standard deviation of X
= 3.14159 . . .
e 2.71828 . . . X

Business Statistics, 4e, by Ken Black. 2003 John Wiley & Sons.
6-8
 Normal Curves for Different
Means and Standard Deviations

5 5

10

20 30 40 50 60 70 80 90 100 110 120

Business Statistics, 4e, by Ken Black. 2003 John Wiley & Sons.
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 Standardized Normal Distribution
A normal distribution with
a mean of zero, and
1
a standard deviation of
one
Z Formula
standardizes any normal 0
distribution
Z Score
computed by the Z
Formula X
the number of standard Z
deviations which a value
is away from the mean
Business Statistics, 4e, by Ken Black. 2003 John Wiley & Sons.
6-10
 Z Table
Second Decimal Place in Z
Z 0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09

0.00 0.0000 0.0040 0.0080 0.0120 0.0160 0.0199 0.0239 0.0279 0.0319 0.0359
0.10 0.0398 0.0438 0.0478 0.0517 0.0557 0.0596 0.0636 0.0675 0.0714 0.0753
0.20 0.0793 0.0832 0.0871 0.0910 0.0948 0.0987 0.1026 0.1064 0.1103 0.1141
0.30 0.1179 0.1217 0.1255 0.1293 0.1331 0.1368 0.1406 0.1443 0.1480 0.1517

0.90 0.3159 0.3186 0.3212 0.3238 0.3264 0.3289 0.3315 0.3340 0.3365 0.3389
1.00 0.3413 0.3438 0.3461 0.3485 0.3508 0.3531 0.3554 0.3577 0.3599 0.3621
1.10 0.3643 0.3665 0.3686 0.3708 0.3729 0.3749 0.3770 0.3790 0.3810 0.3830
1.20 0.3849 0.3869 0.3888 0.3907 0.3925 0.3944 0.3962 0.3980 0.3997 0.4015

2.00 0.4772 0.4778 0.4783 0.4788 0.4793 0.4798 0.4803 0.4808 0.4812 0.4817

3.00 0.4987 0.4987 0.4987 0.4988 0.4988 0.4989 0.4989 0.4989 0.4990 0.4990
3.40 0.4997 0.4997 0.4997 0.4997 0.4997 0.4997 0.4997 0.4997 0.4997 0.4998
3.50 0.4998 0.4998 0.4998 0.4998 0.4998 0.4998 0.4998 0.4998 0.4998 0.4998

Business Statistics, 4e, by Ken Black. 2003 John Wiley & Sons.
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 Table Lookup of a
Standard Normal Probability
P(0 Z 1) 0. 3413
Z 0.00 0.01 0.02

0.00 0.0000 0.0040 0.0080

0.10 0.0398 0.0438 0.0478
0.20 0.0793 0.0832 0.0871

1.00 0.3413 0.3438 0.3461

1.10 0.3643 0.3665 0.3686

1.20 0.3849 0.3869 0.3888
-3 -2 -1 0 1 2 3

Business Statistics, 4e, by Ken Black. 2003 John Wiley & Sons.
6-12
 Applying the Z Formula

X is normally distributed with = 485, and = 105

P( 485 X 600) P(0 Z 1.10) . 3643
For X = 485, Z 0.00 0.01 0.02
X - 485 485
Z= 0 0.00 0.0000 0.0040 0.0080
105 0.10 0.0398 0.0438 0.0478

1.00 0.3413 0.3438 0.3461

For X = 600,
X - 600 485 1.10 0.3643 0.3665 0.3686
Z= 1.10
105 1.20 0.3849 0.3869 0.3888

Business Statistics, 4e, by Ken Black. 2003 John Wiley & Sons.
6-13
 Normal Approximation
of the Binomial Distribution
The normal distribution can be used to
approximate binomial probabilities
Procedure
Convert binomial parameters to normal
parameters
Does the interval 3 lie between 0 and n?
If so, continue; otherwise, do not use the
normal approximation.
Correct for continuity
Solve the normal distribution problem

Business Statistics, 4e, by Ken Black. 2003 John Wiley & Sons.
6-14
 Normal Approximation of Binomial:
Parameter Conversion
Conversion equations
n p
n pq
Conversion example:
Given that X has a binomial distribution , find
P( X 25| n 60 and p . 30 ).
n p (60)(. 30) 18
n p q (60)(. 30)(. 70) 3. 55
Business Statistics, 4e, by Ken Black. 2003 John Wiley & Sons.
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Normal Approximation of Binomial:
Interval Check

3 18 3(355
. ) 18 10.65
3 7.35
3 28.65

0 10 20 30 40 50 60 70
n

Business Statistics, 4e, by Ken Black. 2003 John Wiley & Sons.
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Normal Approximation of Binomial:
Correcting for Continuity

Values The binomial probability ,

Being Correction
Determined P( X 25| n 60 and p . 30 )
is approximated by the normal probability
X +.50
X -.50 P(X 24.5| 18 and 3. 55).
X -.50
X +.05
X -.50 and +.50
X +.50 and -.50

Business Statistics, 4e, by Ken Black. 2003 John Wiley & Sons.
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Normal Approximation of Binomial:
Graphs

0.12
0.10
0.08
0.06
0.04
0.02
0
6 8 10 12 14 16 18 20 22 24 26 28 30

Business Statistics, 4e, by Ken Black. 2003 John Wiley & Sons.
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Normal Approximation of Binomial:
Computations
X P(X)
The normal approximation,
P(X 24.5| 18 and 355
. )
25 0.0167
24.5 18
26 0.0096
P Z
27 0.0052 355
.
28 0.0026
29 0.0012 P( Z 183
. )
30 0.0005
31 0.0002 .5 P 0 Z 183
.
32 0.0001
33 0.0000 .5.4664
Total 0.0361
.0336

Business Statistics, 4e, by Ken Black. 2003 John Wiley & Sons.
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 Exponential Distribution
Continuous
Family of distributions
Skewed to the right
X varies from 0 to infinity
Apex is always at X = 0
Steadily decreases as X gets larger
Probability function
X
f (X) e for X 0, 0
Business Statistics, 4e, by Ken Black. 2003 John Wiley & Sons.
6-20
 Graphs of Selected Exponential
Distributions

2.0
1.8
1.6


1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
0 1 2 3 4 5 6 7 8

Business Statistics, 4e, by Ken Black. 2003 John Wiley & Sons.
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 Exponential Distribution:
Probability Computation
1.2

X 0
1.0
P X X 0 e
(12
P X 2| 12
. e
. )(2)
0.8
.0907
0.6

0.4

0.2

0.0
0 1 2 3 4 5

Business Statistics, 4e, by Ken Black. 2003 John Wiley & Sons.
6-22