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ECO2004 Ch7

Chapter 7 discusses continuous probability distributions, focusing on uniform and normal distributions. It covers characteristics, formulas, and examples, including mean and standard deviation calculations. The chapter also explains standardization, the empirical rule, and finding areas under the normal curve.

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0% found this document useful (0 votes)
14 views15 pages

ECO2004 Ch7

Chapter 7 discusses continuous probability distributions, focusing on uniform and normal distributions. It covers characteristics, formulas, and examples, including mean and standard deviation calculations. The chapter also explains standardization, the empirical rule, and finding areas under the normal curve.

Uploaded by

emily071919
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Chapter 7.

Continuous Probability Distribution

1. Uniform Probability Distribution



if  ≤  ≤ 
1) Formula: ( ) = 
0 otherwise

2) Characteristics of a uniform probability distribution


Ÿ The simplest distribution for a continuous random variable.
Ÿ This distribution is rectangular in shape and is defined by
minimum and maximum values.

3) Graph

4) Statistics

Ÿ Mean:  =

()
Ÿ Standard deviation:  = 


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2. Example of a Uniform Probability Distribution
Southwest Arizona State University provides bus service to
students while they are on campus. A bus arrives at the North
Main Street and College Drive stop every 30 minutes between 6
A.M. and 11 P.M. during weekdays. Students arrive at the bus stop
at random times. The time that a student waits is uniformly
distributed from 0 to 30 minutes.
a. Draw a graph of this distribution.
b. Show that the area of this distribution is 1.00.
c. How long will a student “typically” have to wait for a bus? In
other words what is the mean waiting time? What is the
standard deviation of the waiting times?
d. What is the probability a student will wait more than 25
minutes?
e. What is the probability a student will wait between 10 and 20
minutes?

a. A graph of this uniform distribution is shown below:

The horizontal line is drawn at a height of 0.0333, found by


1/(30 − 0). The range of this distribution is 30 minutes.

b. Area = (height)(base) = () (30 − 0) = 1.
c. The mean waiting time is computed by:
 
= = = 15
 

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And, the standard deviation of the waiting times is computed by:
() ()
= = = 8.66
 

d. (25 <  < 30) = (height)(base) = (5) = .1667



e. (10 <  < 20) = (height)(base) = (10) = .3333


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3. Normal Probability Distribution

()
  
1) Formula: ( ) =  
 √
2) Characteristics of a normal probability distribution
• Bell-shaped and symmetric.
• The total area under the curve is 1.00.
• Half the area under the normal curve is to the right of this
center point and the other half to the left of it.
• Asymptotic: The curve gets closer and closer to the X-axis
but never actually touches it. To put it another way, the tails
of the curve extend indefinitely in both directions.
• The location of a normal distribution is determined by the
mean, m , the dispersion or spread of the distribution is
determined by the standard deviation, .

3) Graph

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4) Families
Normal distribution with equal means but different SDs

Normal distribution with different means but equal SDs

Normal distribution with different means and SDs

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4. Standard Normal Distribution

1) The standard normal distribution is a normal distribution with a


mean of 0 and a standard deviation of 1.

2) It is also called the  distribution.

3) Areas under the standard normal curve


• How to find the area under the standard normal curve between
the mean of 0 and the  value? – Use Appendix B.1.
• Example: Find the probabilities for z: (Using the graph!!!)
(i) 0 <  < 1.50: 0.4332

(ii) −1.50 <  < 0: 0.4332

(iii) −1.33 <  < 1.33: 0.4082 × 2 = 0.8164

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(iv)  > 1.64: 0.5 − 0.4495 = 0.0505

(v)  < 0.67: 0.5 + 0.2486 = 0.7486

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5. Standardizing

1) Standardizing: To obtain the probability of a value falling in


the interval between the variable of interest () and the mean
(m), we first compute the distance between the value () and
the mean (m). Then, we express that difference in units of the
standard deviation by dividing ( − m) by the standard
deviation. This process is called standardizing.

2) -value:
• The distance from the mean, measured in units of the
standard deviation.

• Formula:  = ,

where  is the value of any particular observation,  is the
mean of the distribution, and  is the SD of the distribution.

3) Example of Standardizing: The weekly incomes of shift


foremen in the glass industry follow the normal probability
distribution with a mean of $1,000 and a standard deviation of
$100. What is the  value for the income, let’s call it , of a
foreman who earns $1,100 per week? For a foreman who
earns $900 per week?

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6. Empirical rule

1) 68-95-99.7% rule:
• About 68% of the area under the normal curve is within one
standard deviation of the mean.
• About 95% is within two standard deviations of the mean.
• About 99.7% is within three standard deviations of the
mean.

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2) Example: As part of its quality assurance program, the Autolite
Battery Company conducts tests on battery life. For a
particular battery, the mean life is 19 hours. The useful life of
the battery follows a normal distribution with a standard
deviation of 1.2 hours. Answer the following questions.
a. About 68% of the batteries failed between what two values?
b. About 95% of the batteries failed between what two values?
c. About 99.7% of the batteries failed between what two
values?

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7. Finding Areas under the Normal Curve

1) The next application of the standard normal distribution


involves finding the area in a normal distribution between the
mean and a selected value, which we identify as .

2) Example 1: We reported that the mean weekly income of a shift


foreman in the glass industry is normally distributed with a
mean of $1,000 and a standard deviation of $100.
a. What is the likelihood of selecting a foreman whose weekly
income is between $1,000 and $1,100?
(1000 <  < 1100) = (0 <  < 1.00) = .3413.

b. What is the likelihood of selecting a foreman whose weekly


income is less than $1,100?
( < 1100) = ( < 1.00) = .5 + .3413 = .8413.

c. What is the probability of selecting a shift foreman in the


glass industry whose income is:
i. between $790 and $1,000?
(790 <  < 1000) = (−2.10 <  < 0)
= (0 <  < 2.10) = .4821.

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ii. Below $790?
( < 790) = ( < −2.10) = ( > 2.10)
= .5 − .4821 = .0179.

d. What is the probability of selecting a shift foreman in the


glass industry whose income is between $840 and $1,200?
(840 <  < 1200) = (−1.60 <  < 2.00)
= .4452 + .4772 = .9224.

e. What is the probability of selecting a shift foreman in the


glass industry whose income is between $1,150 and $1,250?
(1150 <  < 1250) = (1.50 <  < 2.50)
= .4938 − .4332 = .0606.

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3) Example 2: A study of long-distance phone calls made from the
corporate office of Pepsi Bottling Group, Inc., in Somers, NY,
revealed the length of time per call was 4.2 minutes and the
standard deviation was 0.60 minutes.
a. What fraction of the calls last between 4.2 and 5 minutes?
(4.2 <  < 5) = (0 <  < 1.33) = .4082.

b. What fraction of the calls last more than 5 minutes?


( > 5) = ( > 1.33) = .5 − .4082 = .0918.

c. What fraction of the calls last between 5 and 6 minutes?


(5 <  < 6) = (1.33 <  < 3) = .4987 − .4082
= .0905.

d. What fraction of the calls last between 4 and 6 minutes?


(4 <  < 5) = (−0.33 <  < 3) = .1293 + .4987
= .6280.

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8. Using  in Finding  Given Area

1) Previous examples require finding the percent of the observations


located between two observations or the percent of the
observations above, or below, a particular observation X. A
further application of the normal distribution involves finding the
value of the observation X when the percent above or below the
observation is given.
2) Warming-up example: Find a z-score, call it  , such that
a. (0 ≤  ≤  ) = 0.0080. . 02

b. ( ≤  ) = 0.5080 .02

c. ( ≥  ) = 0.1492 . 5 − .1492 = .3508 1.04

3) Illustration: Layton Tire and Rubber Company wishes to set a


minimum mileage guarantee on its new MX100 tire. Tests reveal
the mean mileage is 67,900 with a standard deviation of 2,050
miles and that the distribution of miles follows the normal
probability distribution. It wants to set the minimum guaranteed

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mileage so that no more than 4 percent of the tires will have to be
replaced. What minimum guaranteed mileage should Layton
announce?

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