Statistics with Economics and

Business Applications

Chapter 5 The Normal and Other Continuous

Probability Distributions
Normal Probability Distribution
Note 7 of 5E

Review
I. Whats in last lecture?
Binomial, Poisson and Hypergeometric
Probability Distributions.
Chapter 4.
II. What's in this lecture?
Normal Probability Distribution.
Read Chapter 5
Note 7 of 5E

Continuous Random Variables

A random variable is continuous if it can
assume the infinitely many values
corresponding to points on a line interval.
Examples:
Heights, weights
length of life of a particular product
experimental laboratory error
Note 7 of 5E

Continuous Probability Distribution

Suppose we measure height of students in this class. If we
discretize by rounding to the nearest feet, the discrete
probability histogram is shown on the left. Now if height is
measured to the nearest inch, a possible probability histogram is
shown in the middle. We get more bins and much smoother
appearance. Imagine we continue in this way to measure height
more and more finely, the resulting probability histograms
approach a smooth curve shown on the right.

Note 7 of 5E

Probability Distribution for a Continuous

Random Variable
Probability distribution describes how the probabilities are
distributed over all possible values. A probability distribution
for a continuous random variable x is specified by a
mathematical function denoted by f(x) which is called the density
function. The graph of a density function is a smooth curve.

Note 7 of 5E

Properties of Continuous Probability

Distributions
f(x) 0
The area under the curve is equal to 1.
P(a x b) = area under the curve between a and b.

Note 7 of 5E

Some Illustrations

a
P(x<a)

b
P(x>b)

Notice that for a continuous random variable x,

P(x = a) = 0
for any specific value a because the area above a point under
the curve is a line segment and hence has 0 area. Specifically
this means
P(x<a) = P(x a)
P(a<x<b) = P(ax<b) = P(a<xb) = P(a xb)Note 7 of 5E

Method of Probability Calculation

The probability that a continuous random variable x
lies between a lower limit a and an upper limit b is
P(a<x<b) = (cumulative area to the left of b)
(cumulative area to the left of a)
= P(x < b) P(x < a)

=
a

a Note 7 of 5E

Continuous Probability
Distributions

There are many different types of continuous

random variables
We try to pick a model that
Fits the data well
Allows us to make the best possible
inferences using the data.
One important continuous random variable is
the normal random variable.
variable
Note 7 of 5E

The Normal Distribution

The formula that generates the
normal probability distribution is:
1 x
1 x
22

11
ff((xx))
ee
for
for
xx

22
ee22..7183
7183 33..1416
1416

and
and are
arethe
thepopulation
populationmean
meanand
andstandard
standarddeviation.
deviation.

Two parameters, mean and standard deviation,

completely determine the Normal distribution. The
shape and location of the normal curve changes as
the mean and standard deviation change.
Note 7 of 5E

Normal Distributions: =1
0.50
0.50

0.40
0.40

0.30
0.30

0.20
0.20

0.10
0.10

0.00
0.00
-5.0
-5.0

-4.0
-4.0

-3.0
-3.0

-2.0

-1.0

0.0

1.0
1.0

2.0
2.0

3.0
3.0

4.0
4.0

5.0
5.0

6.0
6.0

Note 7 of 5E

Normal Distributions: =0
1.80

=0, =1
=0, =2

1.60
1.40

=0, =3
=0, =0.5

1.20
1.00

=0, =0.25

0.80
0.60
0.40
0.20
0.00
-5.0 -4.0 -3.0 -2.0 -1.0

0.0

1.0

2.0

3.0

4.0

Note
7 of 5E6.0
5.0

The Standard Normal

Distribution
To find P(a < x < b), we need to find the area
under the appropriate normal curve.
To simplify the tabulation of these areas, we
standardize each value of x by expressing it
as a z-score, the number of standard deviations
it lies from the mean .

xx
zz

Note 7 of 5E

The Standard
Normal (z)
Distribution

Mean = 0; Standard deviation = 1

When x = , z = 0
Symmetric about z = 0
Values of z to the left of center are negative
Values of z to the right of center are positive
Total area under the curve is 1.
Areas on both sides of center equal .5
Note 7 of 5E

Using Table 3
The four digit probability in a particular row and column
of Table 3 gives the area under the standard normal
curve between 0 and a positive value z. This is enough
because the standard normal curve is symmetric.

Note 7 of 5E

Using Table 3

To
Tofind
find an
an area
area between
between 00 and
and aa positive
positive z-value,
z-value, read
read
directly
directly from
fromthe
the table
table

Use
Use properties
properties of
of standard
standard normal
normal curve
curve and
and other
other
probability
probability rules
rules to
to find
find other
otherareas
areas
P(0<z<1.96) = .4750
P(-1.96<z<0)= P(0<z<1.96)=.4750
P(z<1.96)=P(z<0)+ P(0<z<1.96)=.5+.4750=.9750
P(z<-1.96)=P(z>1.96)=.5-.4750=.0250
P(-1.96<z<1.96)=P(z<1.96)-P(z<-1.96)
=.9750-.0250=.9500
Note 7 of 5E

Working Backwards
Often we know the area and want to find the z-value
that gives the area.
Example: Find the value of a positive z that has area .
4750 between 0 and z.
1.1. Look
Lookfor
forthe
thefour
fourdigit
digitarea
areaclosest
closestto
to.4750
.4750in
inTable
Table3.3.
2.2. What
Whatrow
rowand
andcolumn
columndoes
doesthis
thisvalue
valuecorrespond
correspondto?
to?
3. z = 1.96
Note 7 of 5E

Example
P(z<?) = .75
P(z<?)=P(z<0)+P(0<z<?)=.5+P(0<z<?)=.75
P(0<z<?)=.25
z = .67
What
What percentile
percentile does
doesthis
this value
valuerepresent?
represent?
th
75
75th percentile,
percentile, or
or the
the third
third quartile.
quartile.

Note 7 of 5E

Working Backwards
Find the value of z that has area .05 to its right.
1.1. The
Thearea
areato
toits
itsleft
leftwill
willbe
be11--.05
.05==..
95
95
2.2. The
Thearea
areato
toits
itsleft
leftand
andright
rightto
to00will
will
be
be.95-.5=.45
.95-.5=.45
3.3. Look
Lookfor
forthe
thefour
fourdigit
digitarea
areaclosest
closest
to
to.4500
.4500in
inTable
Table3.3.
4.4. Since
Sincethe
thevalue
value.4500
.4500isishalfway
halfway
between
between.4495
.4495and
and.4505,
.4505,we
wechoose
choosezz
halfway
halfwaybetween
between1.64
1.64and
and1.65.
1.65.
z=1.645
z=1.645
Note 7 of 5E

Finding Probabilities for the

General Normal Random Variable

To
Tofind
find an
an area
area for
for aa normal
normal random
randomvariable
variable xx with
with
mean
mean and
and standard
standard deviation
deviation
standardize
standardize or
or rescale
rescale
the
the interval
interval in
in terms
terms of
of z.z.

Find
Find the
the appropriate
appropriate area
area using
usingTable
Table 3.
3.
Example: x has a normal distribution with mean = 5
and sd = 2. Find P(x > 7).
7 5
P( x 7) P( z
) P ( z 1) 1 P ( z 1)
2
1 P ( z 0 ) P ( 0 z 1) 1 .5 .3413 .1587
Note 7 of 5E

Example
The weights of packages of ground beef are normally
distributed with mean 1 pound and standard deviation .
10. What is the probability that a randomly selected
package weighs between 0.80 and 0.85 pounds?

.80 1
.85 1
P(.80 x .85) P (
z
)
.1
.1
P(2 z 1.5) P (1.5 z 2)
P(0 z 2) P (0 z 1.5)
.4772 .4332 .0440

Note 7 of 5E

Example
What is the weight of a package such
that only 5% of all packages exceed
this weight?

PP((xx ?)
?) ..05
05
??11
PP((zz
)) ..05
05
..11
??11
PP((00 zz
)) ..95
95..50
50 ..45
45
..11
??11
From
11..645
FromTable
Table 3,
3,
645
..11
?? 11..645
645(.(.11))1111..16
16

Note 7 of 5E

Example
A Company produces 20 ounce jars of a picante
sauce. The true amounts of sauce in the jars of this
brand sauce follow a normal distribution.
Suppose the companies 20 ounce jars follow a normally
distribution with a mean =20.2 ounces with a standard
deviation =0.125 ounces.

Note 7 of 5E

Example
What proportion of the jars are under-filled (i.e., have
less than 20 ounces of sauce)?

x
z

20 20.2

1.60
0.125

P(z<-1.60) = P(z>1.60) = P(z>0)-P(0<z<1.60) = .5-.4452

= .0548. The proportion of the sauce jars that are underNote 7 of 5E
filled is .0548

Example
What proportion of the sauce jars contain between 20
and 20.3 ounces of sauce.

20.3 20.2
20 20.2
0.80
1.60 Z
0.125
0.125

P(-1.60<z<.80) = P(-1.60<z<0)+P(0<z<.80) =
P(0<z<1.60)+P(0<z<.80)=.4452+.2881=.7333
P(-1.60<z<.80) = P(z<.80)-P(z<-1.60)=.5+P(0<z<.80)[.5-P(0<z<1.60)]=P(0<z<1.60)+P(0<z<.80)=.7333Note 7 of 5E

Example
99% of the jars of this brand
of picante sauce will contain
more than what amount of
sauce?
??20
..22
20
..99
))
99 PP((xx ?)
?) PP((zz
..125
125
??20
..22
20
..22??
20
..22??
20
20
20
..01
)) PP((zz
))..55PP((00 zz
))
01 PP((zz
..125
..125
..125
125
125
125
20.2 ?
PP((00 zz 20.2 ?))..49
49
..125
125
20
..22??
20
From
22..33
FromTable
Table3,
3,
33
..125
125
Note 7 of 5E
??20
20..2222..33
33(.(.125
125))19
19..91
91

How Probabilities Are Distributed

The
The interval
interval
contains
contains approximately
approximately 68%
68% of
of the
the
measurements.
measurements.
The
The interval
interval 2
2 contains
contains approximately
approximately 95%
95%of
ofthe
the
measurements.
measurements.
The
The interval
interval 3
3 contains
contains approximately
approximately 99.7%
99.7% of
of
the
the measurements.
measurements.

Note 7 of 5E

The Normal Approximation to the

Binomial
We can calculate binomial probabilities using
The binomial formula
The cumulative binomial tables
When n is large, and p is not too close to zero or one,
areas under the normal curve with mean np and
variance npq can be used to approximate binomial
probabilities.
SticiGui

Note 7 of 5E

Approximating the Binomial

Make sure to include the entire rectangle for the
values of x in the interval of interest. This is called the
continuity correction.
Standardize the values of x using

xx
zz
,
, np,
np, npq
npq

Make sure that np and nq are both greater than 5

to avoid inaccurate approximations! Or
n is large and 2 falls between 0 and n (book)
Note 7 of 5E

Correction for Continuity

Add or subtract .5 to include the entire rectangle. For
illustration, suppose x is a Binomial random variable with
n=6, p=.5. We want to compute P(x 2). Using 2 directly
will miss the green area. P(x 2)=P(x 2.5) and use 2.5.

Note 7 of 5E

Example
Suppose x is a binomial random variable with
n = 30 and p = .4. Using the normal
approximation to find P(x 10).
n = 30
np = 12

p = .4

q = .6
nq = 18
The normal
approximation
is ok!

Calculate
Calculate
np
np 30
30(.(.44)) 12
12

npq
npq 30
30(.(.44)(.
)(.66)) 22..683
683

Note 7 of 5E

Example

10.5 12
P ( x 10) P ( z
)
2.683
P ( z .56) .2877
Note 7 of 5E

Example
P(x 10 ) P ( x 9.5)
P(x 5 ) P ( x 4.5 )
P(x 5 ) P(x 5.5)
P( 5 x 10 ) P( 5.5 x 9.5 )
P( 5 x 10 ) P( 4.5 x 9.5 )
Note 7 of 5E

Example
A production line produces AA batteries with a
reliability rate of 95%. A sample of n = 200 batteries
is selected. Find the probability that at least 195 of the
batteries work.
Success = working battery n = 200
p = .95

np = 190

nq = 10

The normal
approximation
is ok!

194.5 190
P ( x 195) P ( z
)
200(.95)(.05)

P ( z 1.46) 1 .9278 .0722

Note 7 of 5E

Key Concepts
I. Continuous Probability Distributions
1. Continuous random variables
2. Probability distributions or probability density functions
a. Curves are smooth.
b. The area under the curve between a and b represents
the probability that x falls between a and b.
c. P (x a) 0 for continuous random variables.
II. The Normal Probability Distribution
1. Symmetric about its mean .

2. Shape determined by its standard deviation .

Note 7 of 5E

Key Concepts
III. The Standard Normal Distribution
1. The normal random variable z has mean 0 and standard
deviation 1.
2. Any normal random variable x can be transformed to a
standard normal random variable using
x
zz x

3. Convert necessary values of x to z.

4. Use Table 3 in Appendix I to compute standard normal
probabilities.
5. Several important z-values have tail areas as follows:
Tail Area:

.005

.01

.025

.05

.10

z-Value:

2.58

2.33

1.96

1.645

1.28
Note 7 of 5E