Business Statistics I

Chapter 6

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Calendar
10/18 10/23 10/25 10/30 Chapter 6 Finish Chapter 6 Homework Chapter 5 - DELAYED Homework Chapter 6 Review Chapter 4-6 Mid-Term 2 on Chapters 4-6

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Continuous Variables
Chapter 5 introduced Discrete variables: a finite number of values or an infinite sequence of values

Chapter 6 covers Continuous variables: any number in an interval or collection of intervals

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Probability Distributions
Discrete Distributions provide the probability for any particular value Probability Density Functions, also denoted by f(x), do not directly provide the probability at that point, but the area under its curve provides the probability

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Uniform Probability Distribution

Similar to the discrete uniform probability distribution function: =
1

= 0

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Area as a Measure of Probability

Ex: Uniform flight times from 120 to 140 minutes - Fig 6.1 (p 235)

For the probability that the flight is between 120 and 130 minutes, thats half of the rectangle: HxW = (1/20) x (130-120) = 0.50
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Area as a Measure of Probability

Ex: Same flight time distribution Q: What is the probability that the flight takes 128 to 136 minutes?

A: HxW = (1/20) x (136-128) = 0.40

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Area as a Measure of Probability

Just like the discrete probability distributions, two rules:

f(x) 0 Total area under the graph = 1.0

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Normal Probability Distribution

The normal curve, or bell-shaped curve, describes many naturally occurring events Notice that its symmetric

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Normal Probability Distribution

Formula is on p 239 Two parameters describe a normal distribution: = mean (see bottom p 239) = standard deviation (see p 240)
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Normal Probability Distribution

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Standard Normal Probability Distribution

=0 =1

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Example 1
P 242: What is the probability that z 1.00 ? See the problem as a picture See the solution from the table See Table 1, pp 978-979

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Example 2
P 243: What is the probability that -0.50 z 1.25 ? See the problem as a picture Find the solution from the tables f(-0.50) = 0.3085 f(1.25) = 0.8944

Answer: 0.8944 0.3085 = 0.5859

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Transformation of Data into a Standard Normal Curve

z =

= +
Then use Table 1, pp 978-979

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Example 3
P 246: What is the probability that tires will last 40,000 miles? P(x 40,000) = ? Process: See the problem as a picture Transform to a standard normal dist Find the solution from the tables Solution: =

40,000 36,500 5,000

= 0.70

Table p 979: P(0.70) = 0.7580 P(x 40,000) = 1 0.7580 = 0.2420

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Example 4
P 247: How many miles represent 10% or less? P(x) 10% ? Process: See the problem as a picture Find the solution from the tables Transform to a standard normal dist Solution: Table p 978: P(x) 0.1000; x = -1.28 = + = 5,000 1.28 + 36,500 = 30,100

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Chapter 6 Exclusions

We do not cover Sections 6.3 or 6.4

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Questions?

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