chapter 6 continuous probability distributions

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Chapter 6Chapter 6 Continuous Probability Distributions Continuous Probability Distributions

Uniform Probability DistributionUniform Probability Distribution Normal Probability DistributionNormal Probability Distribution Exponential Probability DistributionExponential Probability Distribution

f (x)

x

UniformUniform

xx

f f ((xx)) NormalNormal

x

f (x) ExponentialExponential

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Continuous Probability DistributionsContinuous Probability Distributions

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

It is not possible to talk about the probability of It is not possible to talk about the probability of the random variable assuming a particular value.the random variable assuming a particular value.

Instead, we talk about the probability of the random Instead, we talk about the probability of the random variable assuming a value within a given interval.variable assuming a value within a given interval.

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Continuous Probability DistributionsContinuous Probability Distributions

The probability of the random variable The probability of the random variable assuming a value within some given interval assuming a value within some given interval from from xx11 to to xx22 is defined to be the is defined to be the area under area under the graphthe graph of the of the probability density functionprobability density function betweenbetween x x11 andand x x22..

f (x)

x

UniformUniform

xx11 xx22

xx

f f ((xx)) NormalNormal

xx11 xx22

xx11 xx22

ExponentialExponential

x

f (x)

xx11

xx22

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Normal Probability DistributionNormal Probability Distribution

The The normal probability distributionnormal probability distribution is the most is the most important distribution for describing a important distribution for describing a continuous random variable.continuous random variable.

It is widely used in statistical inference.It is widely used in statistical inference.

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HeightsHeightsof peopleof people

Normal Probability DistributionNormal Probability Distribution

It has been used in a wide variety of It has been used in a wide variety of applications:applications:

ScientificScientific measurementsmeasurements

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AmountsAmountsof rainfallof rainfall

Normal Probability DistributionNormal Probability Distribution

It has been used in a wide variety of It has been used in a wide variety of applications:applications:

TestTest scoresscores

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Normal Probability DistributionNormal Probability Distribution

Normal Probability Density FunctionNormal Probability Density Function

2 2( ) / 21( ) 2xf x e

= mean= mean = standard deviation= standard deviation = 3.14159= 3.14159ee = 2.71828 = 2.71828

where:where:

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The distribution is The distribution is symmetricsymmetric; its skewness; its skewness measure is zero.measure is zero.

Normal Probability DistributionNormal Probability Distribution

CharacteristicsCharacteristics

xx

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The entire family of normal probabilityThe entire family of normal probability distributions is defined by itsdistributions is defined by its meanmean and its and its standard deviationstandard deviation . .

Normal Probability DistributionNormal Probability Distribution

CharacteristicsCharacteristics

Standard Deviation Standard Deviation

Mean Mean xx

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The The highest pointhighest point on the normal curve is at the on the normal curve is at the meanmean, which is also the , which is also the medianmedian and and modemode..

Normal Probability DistributionNormal Probability Distribution

CharacteristicsCharacteristics

xx

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Normal Probability DistributionNormal Probability Distribution

CharacteristicsCharacteristics

-10-10 00 2020

The mean can be any numerical value: negative,The mean can be any numerical value: negative, zero, or positive.zero, or positive.

xx

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Normal Probability DistributionNormal Probability Distribution

CharacteristicsCharacteristics

= 15= 15

= 25= 25

The standard deviation determines the width of theThe standard deviation determines the width of thecurve: larger values result in wider, flatter curves.curve: larger values result in wider, flatter curves.

xx

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Probabilities for the normal random variable areProbabilities for the normal random variable are given by given by areas under the curveareas under the curve. The total area. The total area under the curve is 1 (.5 to the left of the mean andunder the curve is 1 (.5 to the left of the mean and .5 to the right)..5 to the right).

Normal Probability DistributionNormal Probability Distribution

CharacteristicsCharacteristics

.5.5 .5.5xx

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Normal Probability DistributionNormal Probability Distribution

CharacteristicsCharacteristics

of values of a normal random variableof values of a normal random variable are within of its mean.are within of its mean.68.26%68.26%

+/- 1 standard deviation+/- 1 standard deviation

of values of a normal random variableof values of a normal random variable are within of its mean.are within of its mean.95.44%95.44%

+/- 2 standard deviations+/- 2 standard deviations

of values of a normal random variableof values of a normal random variable are within of its mean.are within of its mean.99.72%99.72%

+/- 3 standard deviations+/- 3 standard deviations

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Normal Probability DistributionNormal Probability Distribution

CharacteristicsCharacteristics

xx – – 33 – – 11

– – 22 + 1+ 1

+ 2+ 2 + 3+ 3

68.26%68.26%95.44%95.44%99.72%99.72%

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Standard Normal Probability DistributionStandard Normal Probability Distribution

A random variable having a normal distributionA random variable having a normal distribution with a mean of 0 and a standard deviation of 1 iswith a mean of 0 and a standard deviation of 1 is said to have a said to have a standard normal probabilitystandard normal probability distributiondistribution..

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00zz

The letter The letter z z is used to designate the standardis used to designate the standard normal random variable.normal random variable.

Standard Normal Probability DistributionStandard Normal Probability Distribution

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Converting to the Standard Normal Converting to the Standard Normal Distribution Distribution

Standard Normal Probability DistributionStandard Normal Probability Distribution

z x

We can think of We can think of zz as a measure of the number of as a measure of the number ofstandard deviations standard deviations xx is from is from ..

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Standard Normal Probability DistributionStandard Normal Probability Distribution

Standard Normal Density FunctionStandard Normal Density Function

2 / 21( ) 2zf x e

z z = ( = (xx – – )/)/ = 3.14159= 3.14159ee = 2.71828 = 2.71828

where:where:

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Standard Normal Probability DistributionStandard Normal Probability Distribution

Example: Pep ZoneExample: Pep ZonePep Zone sells auto parts and supplies Pep Zone sells auto parts and supplies

includingincludinga popular multi-grade motor oil. When thea popular multi-grade motor oil. When thestock of this oil drops to 20 gallons, astock of this oil drops to 20 gallons, areplenishment order is placed.replenishment order is placed. Pep

Zone5w-20Motor Oil

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The store manager is concerned that sales The store manager is concerned that sales are beingare beinglost due to stockouts while waiting for an order.lost due to stockouts while waiting for an order.It has been determined that demand duringIt has been determined that demand duringreplenishment lead-time is normallyreplenishment lead-time is normallydistributed with a mean of 15 gallons anddistributed with a mean of 15 gallons anda standard deviation of 6 gallons. a standard deviation of 6 gallons.

The manager would like to know theThe manager would like to know theprobability of a stockout, probability of a stockout, PP((xx > 20). (Demand > 20). (Demand exceeding 20 gallons)exceeding 20 gallons)

Standard Normal Probability DistributionStandard Normal Probability Distribution

PepZone5w-20Motor Oil

Example: Pep ZoneExample: Pep Zone

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zz = ( = (xx - - )/)/ = (20 - 15)/6= (20 - 15)/6 = .83= .83

Solving for the Stockout ProbabilitySolving for the Stockout Probability

Step 1: Convert Step 1: Convert xx to the standard normal distribution. to the standard normal distribution.

PepZone5w-20

Motor Oil

Step 2: Find the area under the standard normalStep 2: Find the area under the standard normal curve to the left of curve to the left of zz = .83. = .83.

see next slidesee next slide

Standard Normal Probability DistributionStandard Normal Probability Distribution

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Cumulative Probability Table for Cumulative Probability Table for the Standard Normal Distributionthe Standard Normal Distributionz .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. . . . . . . . . . .

PepZone5w-20

Motor Oil

PP((zz << .83) .83)

Standard Normal Probability DistributionStandard Normal Probability Distribution

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PP((z z > .83) = 1 – > .83) = 1 – PP((zz << .83) .83) = 1- .7967= 1- .7967 = .2033= .2033

Solving for the Stockout ProbabilitySolving for the Stockout Probability

Step 3: Compute the area under the standard normalStep 3: Compute the area under the standard normal curve to the right of curve to the right of zz = .83. = .83.

PepZone5w-20

Motor Oil

ProbabilityProbability of a of a

stockoutstockoutPP((xx > > 20)20)

Standard Normal Probability DistributionStandard Normal Probability Distribution

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Solving for the Stockout ProbabilitySolving for the Stockout Probability

00 .83.83

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

zz

PepZone5w-20

Motor Oil

Standard Normal Probability DistributionStandard Normal Probability Distribution

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Standard Normal Probability DistributionStandard Normal Probability DistributionIf the manager of Pep Zone wants the If the manager of Pep Zone wants the

probability of a stockout to be no more probability of a stockout to be no more than .05, what should the reorder point be?than .05, what should the reorder point be?

PepZone5w-20

Motor Oil

Standard Normal Probability DistributionStandard Normal Probability Distribution

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Solving for the Reorder PointSolving for the Reorder PointPepZone5w-20

Motor Oil

00

Area = .9500Area = .9500

Area = .0500Area = .0500

zzzz.05.05

Standard Normal Probability DistributionStandard Normal Probability Distribution

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Solving for the Reorder PointSolving for the Reorder PointPepZone5w-20

Motor Oil

Step 1: Find the Step 1: Find the zz-value that cuts off an area of .05-value that cuts off an area of .05 in the right tail of the standard normalin the right tail of the standard normal distribution.distribution.

z .00 .01 .02 .03 .04 .05 .06 .07 .08 .09. . . . . . . . . . .

1.5 .9332 .9345 .9357 .9370 .9382 .9394 .9406 .9418 .9429 .94411.6 .9452 .9463 .9474 .9484 .9495 .9505 .9515 .9525 .9535 .95451.7 .9554 .9564 .9573 .9582 .9591 .9599 .9608 .9616 .9625 .96331.8 .9641 .9649 .9656 .9664 .9671 .9678 .9686 .9693 .9699 .97061.9 .9713 .9719 .9726 .9732 .9738 .9744 .9750 .9756 .9761 .9767 . . . . . . . . . . .

We look up the We look up the complement of the tail complement of the tail

area (1 - .05 = .95)area (1 - .05 = .95)

Standard Normal Probability DistributionStandard Normal Probability Distribution

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Solving for the Reorder PointSolving for the Reorder PointPepZone5w-20

Motor Oil

Step 2: Convert Step 2: Convert zz.05.05 to the corresponding value of to the corresponding value of xx..

xx = = + + zz.05.05

= 15 + 1.645(6)= 15 + 1.645(6) = 24.87 or 25= 24.87 or 25

A reorder point of 25 gallons will place the probabilityA reorder point of 25 gallons will place the probability of a stockout during leadtime at (slightly less than) .05.of a stockout during leadtime at (slightly less than) .05.

Standard Normal Probability DistributionStandard Normal Probability Distribution

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Solving for the Reorder PointSolving for the Reorder PointPepZone5w-20

Motor Oil

By raising the reorder point from 20 gallons to By raising the reorder point from 20 gallons to 25 gallons on hand, the probability of a stockout25 gallons on hand, the probability of a stockoutdecreases from about .20 to .05.decreases from about .20 to .05. This is a significant decrease in the chance that PepThis is a significant decrease in the chance that PepZone will be out of stock and unable to meet aZone will be out of stock and unable to meet acustomer’s desire to make a purchase.customer’s desire to make a purchase.

Standard Normal Probability DistributionStandard Normal Probability Distribution