CHapter 5and6 LectureNotes

Review on Probability Distributions
(Chapters 5 & 6)
© 2007 Thomson South-Western. All Rights Reserved Slide 1

Key Terms
 Random Variables
 Discrete vs Continuous Probability Distribution
• Properties
• Expected Value and Variance
• Cumulative Distribution Function
 The Uniform & Normal Distribution

Random Variables
A random variable is a numerical description of the

outcome of an experiment.
A discrete random variable may assume either a

finite number of values or an infinite sequence of
values.
A continuous random variable may assume any

numerical value in an interval or collection of
intervals.

Random Variables
Question Random Variable x Type

Family x = Number of dependents Discrete
size reported on tax return
Distance from x = Distance in miles from Continuous
home to store home to the store site
Own dog x = 1 if own no pet; Discrete
or cat = 2 if own dog(s) only;
= 3 if own cat(s) only;
= 4 if own dog(s) and cat(s)

Probability Distributions
The probability distribution for a random variable

describes how probabilities are distributed over
the values (discrete) or intervals (continuous) of a r.v.

Discrete VS Continuous Distributions
Discrete Continuous
 The probability distribution is  It is not possible to talk about the
defined by a probability function, probability for each value of the
denoted by f(x), which provides the random variable. Instead, we
probability for each value of the calculate the probability for
random variable. intervals.
 The required conditions for a  A probability distribution or
discrete probability function are: probability density function (pdf)
of r.v.X is a function f (x) such that
for any two numbers a and b,
f(x) > 0
𝑏
f(x) = 1 𝑃 𝑎≤𝑥≤𝑏 = 𝑓 𝑥 𝑑𝑥 ≤ 1
𝑎

Discrete Probability Distributions
 Using past data on TV sales, …

 a tabular representation of the probability
distribution for TV sales was developed.
Number 80/200
Units Sold of Days x f(x)
0 80 0 .40
1 50 1 .25
2 40 2 .20
3 10 3 .05
4 20 4 .10
200 1.00

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.
Normal
f (x)
𝑃 𝑥1 ≤ 𝑥 ≤ 𝑥2 = 𝑃 𝑥1 < 𝑥 ≤ 𝑥2
= 𝑃 𝑥1 ≤ 𝑥 < 𝑥2
= 𝑃(𝑥1 < 𝑥 < 𝑥2 )
x
x1 x2

Using the probability distribution – f(x)
The probability distribution of a random variable, if

known, can be used to calculate the mean, variance,
skewness, kurtosis and all other descriptive statistics
of the random variable.

Expected Value, Variance, Std. Deviation
Discrete Continuous
 Expected value, or mean:  Expected value, or mean:
+∞
 =E(x) = xf(x) 𝐸 𝑥 = 𝑥𝑓 𝑥 𝑑𝑥
−∞
 Variance  Variance
+∞
 = E (x -
2  )2 = (x - )2f(x) 𝜎2 = 𝑥 − 𝜇 2 𝑓 𝑥 𝑑𝑥
−∞
 Standard deviation  Standard deviation
𝜎= 𝜎2 𝜎= 𝜎2

More on distributions…
CUMULATIVE DISTRIBUTIONS
FUNCTIONS

Definition of CDF
 The cumulative distribution function, F(x) for a random variable X is

defined for every number x as the probability that the r.v. will take any
value up to x, i.e.
𝐹 𝑥 = 𝑃(𝑋 ≤ 𝑥)
e.g.
𝐹 3 =𝑃 𝑋≤3
𝐹 −1 = 𝑃(𝑋 ≤ −1)
and so on…

CDF: Discrete vs. Continuous
 The cumulative distribution function, F(x) for a discrete random

variable X is defined for every number x by:
𝐹 x =𝑃 𝑋≤x = 𝑓(𝑥𝑖 ) = 𝑃(𝑋 = 𝑥𝑖 )

𝑥𝑖 ≤𝑥 𝑥𝑖 <𝑥
 The cumulative distribution function, F(x) for a continuous random
variable X is defined for every number x by:
x
𝐹 x =𝑃 𝑋≤x = 𝑓 𝑥 𝑑𝑥
−∞

CDF Properties
 A CDF is never decreasing (i.e. as x increases, the CDF will never

decrease)
 A CDF is always between 0 and 1
 For a continuous random variable, the CDF, F(x), can also be used as
follows:
𝑃 𝑥 ≥𝑎 =1−P x≤𝑎 =1−𝐹 𝑎
𝑃 𝑎 ≤ 𝑥 ≤ 𝑏 = 𝐹 𝑏 − 𝐹(𝑎)
 How the above relations change if the distribution is discrete?

Important continuous distributions…
THE UNIFORM AND NORMAL

DISTRIBUTIONS

Uniform Probability Distribution
 A random variable is uniformly distributed

whenever the probability is proportional to the
interval’s length.
 The uniform probability density function is:
f (x) = 1/(b – a) for a < x < b

=0 elsewhere
where: a = smallest value the variable can assume

b = largest value the variable can assume

 Expected Value of x
E(x) = (a + b)/2
 Variance of x
Var(x) = (b - a)2/12

 Example: Slater's Buffet

Slater customers are charged
for the amount of salad they take.
Sampling suggests that the
amount of salad taken is
uniformly distributed
between 5 ounces and 15 ounces.

 Uniform Probability Density Function
f(x) = 1/10 for 5 < x < 15

=0 elsewhere
where:
x = salad plate filling weight

 Expected Value of x
E(x) = (a + b)/2
= (5 + 15)/2
= 10
 Variance of x
Var(x) = (b - a)2/12
= (15 – 5)2/12
= 8.33

 Uniform Probability Distribution

for Salad Plate Filling Weight
f(x)
1/10
x
5 10 15
Salad Weight (oz.)

What is the probability that a customer

will take between 12 and 15 ounces of salad?
f(x)
P(12 < x < 15) = 1/10(3) = .3

1/10
x
5 10 12 15
Salad Weight (oz.)

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:
Heights
of people
Scientific
measurements

 It has been used in a wide variety of applications:
Test
scores
Amounts
of rainfall

 Normal Probability Density Function
1 2 2
f (x)  e ( x   ) /2
 2
where:
 = mean
 = standard deviation
 = 3.14159
e = 2.71828

 Characteristics
The distribution is symmetric; its skewness

measure is zero.

 Characteristics
The entire family of normal probability

distributions is defined by its mean  and its
standard deviation  .
Standard Deviation 
x
Mean 

 Characteristics
The highest point on the normal curve is at the

mean, which is also the median and mode.

 Characteristics
The mean can be any numerical value: negative,

zero, or positive.
x
-10 0 20

 Characteristics
The standard deviation determines the width of the

curve: larger values result in wider, flatter curves.
 = 15
 = 25

 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).
.5 .5
x

 Characteristics
68.26% of values of a normal random variable

are within +/- 1 standard deviation of its mean.

are within +/- 2 standard deviations of its mean.

are within +/- 3 standard deviations of its mean.

 Characteristics
99.72%
95.44%
68.26%

x
 – 3  – 1  + 1  + 3
 – 2  + 2

Standard Normal Probability Distribution
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.

The letter z is used to designate the standard

normal random variable.
1
z
0

 Converting to the Standard Normal Distribution
x
z

We can think of z as a measure of the number of

standard deviations x is from .

 Example: Pep Zone

Pep Zone sells auto parts and supplies including
a popular multi-grade motor oil. When the
stock of this oil drops to 20 gallons, a
replenishment order is placed.
Pep
Zone
5w-20
Motor Oil

 Example: Pep Zone

The store manager is concerned that sales are being
lost due to stockouts while waiting for an order.
It has been determined that demand during
replenishment lead-time is normally
Pep
distributed with a mean of 15 gallons and Zone
a standard deviation of 6 gallons. 5w-20
Motor Oil
The manager would like to know the

probability of a stockout, P(x > 20).

Pep
Zone
5w-20
Motor Oil
 Solving for the Stockout Probability
Step 1: Convert x to the standard normal distribution.
z = (x - )/
= (20 - 15)/6
= .83
Step 2: Find the area under the standard normal

curve to the left of z = .83.
see next slide

Pep
Zone
5w-20
Motor Oil
 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 < .83)

Pep
Zone
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
of a stockout P(x > 20)

Pep
Zone
5w-20
Motor Oil
Area = 1 - .7967
Area = .7967
= .2033
z
0 .83

Inverse of the Standard Normal Probability
Distribution Pep
Zone
5w-20
Motor Oil
 If the manager of Pep Zone wants the probability of

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

Pep
Zone
5w-20
Motor Oil
 Solving for the Reorder Point
Area = .9500
Area = .0500
z
0 z.05

Pep
Zone
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 .9738up.9744
We look .9750 .9756
the complement .9761 .9767
of the
. . . . . tail area
. (1 - .05
. = .95). . . .

Pep
Zone
5w-20
Motor Oil
Step 2: Convert z.05 to the corresponding value of x.
x =  + z.05
= 15 + 1.645(6)
= 24.87 or 25
A reorder point of 25 gallons will place the probability

of a stockout during leadtime at (slightly less than) .05.

Pep
Zone
5w-20
Motor Oil

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

Other Common Continuous distributions
 Student’s t
• Hypothesis testing, confidence intervals, prediction intervals,
modelling errors that have “heavier” tails than normal.
 F
• ANOVA (Analysis of Variance), multiple hypothesis testing
 Chi-square
• Hypothesis testing and ANOVA (variance estimation)
 Logistic distributions
• Logistic regression
 Lognormal Distribution
• Describing prices (economics) and stock market prices
 Exponential Probability Distribution
• Describing the time it takes to complete a task

End of distributions review (Chapter 5 & 6)

CHapter 5and6 LectureNotes

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

CHapter 5and6 LectureNotes

Uploaded by

Copyright:

Available Formats

Review on Probability Distributions

© 2007 Thomson South-Western. All Rights Reserved Slide 1

© 2007 Thomson South-Western. All Rights Reserved Slide 2

A random variable is a numerical description of the

A discrete random variable may assume either a

A continuous random variable may assume any

© 2007 Thomson South-Western. All Rights Reserved Slide 3

Question Random Variable x Type

© 2007 Thomson South-Western. All Rights Reserved Slide 4

The probability distribution for a random variable

© 2007 Thomson South-Western. All Rights Reserved Slide 5

© 2007 Thomson South-Western. All Rights Reserved Slide 6

 Using past data on TV sales, …

© 2007 Thomson South-Western. All Rights Reserved Slide 7

 The probability of the random variable assuming a

© 2007 Thomson South-Western. All Rights Reserved Slide 8

The probability distribution of a random variable, if

© 2007 Thomson South-Western. All Rights Reserved Slide 9

 Standard deviation  Standard deviation

© 2007 Thomson South-Western. All Rights Reserved Slide 10

© 2007 Thomson South-Western. All Rights Reserved Slide 11

 The cumulative distribution function, F(x) for a random variable X is

© 2007 Thomson South-Western. All Rights Reserved Slide 12

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

𝐹 x =𝑃 𝑋≤x = 𝑓(𝑥𝑖 ) = 𝑃(𝑋 = 𝑥𝑖 )

© 2007 Thomson South-Western. All Rights Reserved Slide 13

 A CDF is never decreasing (i.e. as x increases, the CDF will never

 A CDF is always between 0 and 1

𝑃 𝑥 ≥𝑎 =1−P x≤𝑎 =1−𝐹 𝑎

 How the above relations change if the distribution is discrete?

© 2007 Thomson South-Western. All Rights Reserved Slide 14

THE UNIFORM AND NORMAL

© 2007 Thomson South-Western. All Rights Reserved Slide 15

 A random variable is uniformly distributed

f (x) = 1/(b – a) for a < x < b

where: a = smallest value the variable can assume

© 2007 Thomson South-Western. All Rights Reserved Slide 16

© 2007 Thomson South-Western. All Rights Reserved Slide 17

 Example: Slater's Buffet

© 2007 Thomson South-Western. All Rights Reserved Slide 18

 Uniform Probability Density Function

f(x) = 1/10 for 5 < x < 15

© 2007 Thomson South-Western. All Rights Reserved Slide 19

© 2007 Thomson South-Western. All Rights Reserved Slide 20

 Uniform Probability Distribution

© 2007 Thomson South-Western. All Rights Reserved Slide 21

What is the probability that a customer

P(12 < x < 15) = 1/10(3) = .3

© 2007 Thomson South-Western. All Rights Reserved Slide 22

 The normal probability distribution is the most

© 2007 Thomson South-Western. All Rights Reserved Slide 23

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

© 2007 Thomson South-Western. All Rights Reserved Slide 24

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

© 2007 Thomson South-Western. All Rights Reserved Slide 25

 Normal Probability Density Function

© 2007 Thomson South-Western. All Rights Reserved Slide 26

The distribution is symmetric; its skewness

© 2007 Thomson South-Western. All Rights Reserved Slide 27

The entire family of normal probability

© 2007 Thomson South-Western. All Rights Reserved Slide 28

The highest point on the normal curve is at the

© 2007 Thomson South-Western. All Rights Reserved Slide 29

The mean can be any numerical value: negative,