Quantitative Methods for Management (STAT 5002)

Chapter 8: Continuous Probability Distributions

(Part I)
Chapter 9: Sampling Distributions
(Central Limit Theorem)

Prepared by: M. Reza Peyghami

Humber College
 Random Variables
➢ A random variable is a function or rule that assigns a number to each
outcome of an experiment.
o In flipping a coin three times, the random variable 𝑋 is the number of
heads
o In rolling two dice, the random variable 𝑌 is the sum of two outcomes
o The random variable 𝑉 is the height of students in the class
➢ There are two types of random variables: discrete and continuous.
➢ A discrete random variable is one that can take on a countable number of
values.
➢ A continuous random variable is one whose values are uncountable.
o As an example, let 𝑋 = time to write a statistics exam in a
university where the time limit is 3 hours and students cannot leave
before 30 minutes.
 Probability distribution
• A Probability distribution is a table, formula, or graph that describes the
values of a random variable and the probability associated with these values.
• It is analogous to relative frequency distribution. Instead of relative
frequency, we use theoretical probability.
➢ In discrete case, we have probability distribution table

➢ In continuous case, we have probability density function (pdf) with some

characteristics – a curve like histogram curve – the area under the curve
defines probabilities.

Note. Here we study the continuous probability distributions

 Uniform probability distribution
➢ A density curve or probability density function is a graph of a continuous
probability distribution. It satisfies the following properties:
1. The total area under the curve must be 1.
2. Every point on the curve must have a vertical height that is 0 or
greater.

➢ The uniform distribution (rectangular distribution) is described by the

function
1 To calculate the probability of any
𝑓 𝑥 = , 𝑎≤𝑥≤𝑏
𝑏−𝑎 interval, simply find the area under
the curve.
 Uniform probability distribution
Example. A careful examination of boat records shows that the time it takes to reach a
randomly selected dive site in an island has a uniform distribution between 5 and 25 minutes.
Suppose a dive site is selected at random.
a. Carefully sketch a graph of the probability density function.
b. Find the probability that it takes at most 10 minutes to reach the dive site.
c. Find the probability that it takes between 10 and 20 minutes to reach the dive site.
 Normal Curve – Normal Distribution
➢ The probability density function of a normal random variable is fully
identified by two parameters 𝝁 and 𝝈
1 (𝑥−𝜇)2
−
𝑓 𝑥 = 𝑒 2𝜎2 , where 𝑒 ≅ 2.71828 … is the Euler number
𝜎 2𝜋
➢ The random variable 𝑋 with parameters 𝝁 and 𝝈 is denoted by:
𝑋~𝑁 𝜇, 𝜎

➢ A normal curve is a smooth, symmetrical (mean ≈

median ≈ mode) curve that is bell-shaped and
unimodal.

Recall: Empirical rule applies

• 68% within one SD about mean
• 95% within two SD about mean
• 99.7% within three SD about mean
 Normal Curve
Normal distribution curve characteristics:
• Symmetric and bell-shaped curve
• The point in the middle is mean, median
and mode
• Extends to +/- infinity
• Area under the curve = 1
 Standard Normal distribution
Standard Normal distribution is a normal distribution with 𝜇 = 0 and 𝜎 = 1.
The random variable for standard normal distribution is denoted by 𝑍
𝒁~𝑁(0,1)
 Calculating Probabilities in Normal Distribution

➢For standard normal distribution:

Use the 𝑍-table

➢For (non-standard) normal distribution:

Find the 𝑧-score first and then use 𝑍-table

 Calculating Probabilities using 𝑍-table
• The 𝑍-table can ONLY be used for finding the probability of standard normal
distribution
• For the standard normal distribution 𝑍,

𝑃 𝑍 ≤ 𝑧 = the area under the curve to the left of 𝑧

This number is
called 𝑧-score

Note. 𝑧-score can be negative,

but the probability 𝑃 𝑍 ≤ 𝑧 is
always a number between 0 and
1, inclusive
Cumulative
probability
 The Structure of 𝑍-table

𝐄𝐱𝐚𝐦𝐩𝐥𝐞. Compute 𝑃(𝑍 ≤ 𝟏. 𝟐𝟑)

𝐄𝐱𝐚𝐦𝐩𝐥𝐞. Compute 𝑃(𝑍 ≤ 𝟏. 𝟒𝟕)

Handling three possible cases using 𝑍-table
 Example
𝑃(𝑍 ≤ −𝟐. 𝟎𝟔)
 Example
𝑃(𝑍 ≤ 𝟐. 𝟎𝟔)
 Example
𝑃 𝑍 > −𝟏. 𝟎𝟎 = 1 − 𝑃(𝑍 ≤ −𝟏. 𝟎𝟎)
 Example
𝑃 𝑍 > +𝟏. 𝟖𝟎 = 1 − 𝑃(𝑍 ≤ +𝟏. 𝟖𝟎)
 Example
𝑃 −𝟐. 𝟏𝟓 ≤ 𝑍 ≤ −𝟏. 𝟎𝟐 =

First step
Second step
 Example
𝑃 −𝟏. 𝟎𝟎 ≤ 𝑍 ≤ +𝟏. 𝟖𝟎 =

First step
Second step
 Example – Practice at home
Use the 𝑍-table to find:

𝐚) 𝑃 𝑍 ≤ 𝟎 =
b) 𝑃 𝟎 < 𝑍 ≤ 𝟏. 𝟕𝟓 =
Calculating probabilities under normal distribution

➢ Let 𝑋 be a (non-standard) normal distribution with the parameters 𝜇 and 𝜎.

➢ For any value 𝑥 in this distribution, the 𝑧-score is defined by

𝑥−𝜇
𝑧=
𝜎

➢ Use this formula to convert the value 𝑥 in the normal distribution to a value
in the standard normal distribution and then use 𝑍-table for probability
 Example
The distribution of annual income for guards in a large security company in which the
mean annual income is $30,000 and the standard deviation is $1,800. Assuming that the
distribution of annual income is normally distributed. What is the probability of selecting
a security guard with an annual income between $30,000 and $33,000?

Solution. Let 𝑋 be the annual income. So, 𝑋 has normal distribution with
𝜇 = 30,000 and 𝜎 = 1,800

Goal: 𝑃 30,000 ≤ 𝑋 ≤ 33,000 =?

Step 1: Calculate 𝑧-scores for 30,000 and 33,000, and convert the probability to a
probability in 𝑍-space

Step 2: Use 𝑍-table to compute the probability

 Example
Step 1: for 𝑥 = 30,000, the 𝑧-score is:
𝑥−𝜇 30,000−30,000
𝑧= = =0
𝜎 1800
for 𝑥 = 30,000, the 𝑧-score is:
𝑥−𝜇 33,000−30,000
𝑧= = = 1.67
𝜎 1800

𝑃 30,000 ≤ 𝑋 ≤ 33,000 = 𝑃(𝟎. 𝟎𝟎 ≤ 𝒁 ≤ 𝟏. 𝟔𝟕)

Step 2: Use the 𝑍-table

𝑃(𝟎. 𝟎𝟎 ≤ 𝒁 ≤ 𝟏. 𝟔𝟕)
 Example
Suppose that a particular police department has data showing that the 911 response time
from receiving the call to police arrival is normally distributed with a mean of 8.5
minutes and a standard deviation of 1.8. What is the probability of a response time from
receiving the call to police arrival is less than 6 minutes?

Solution. Let 𝑋 be the police arrival time. So, 𝑋 has normal distribution with
𝜇 = 8.5 and 𝜎 = 1.8

Goal: 𝑃 𝑋 ≤ 6 =?

Step 1: Calculate 𝑧-scores for 6, and convert the probability to a probability in 𝑍-

space

Step 2: Use 𝑍-table to compute the probability

Example
 Finding z-score using given probability
1. Draw a bell-shaped curve, draw the centerline, and identify the region under the
curve that corresponds to the given probability.

2. Using the probability representing the area under the curve, locate the closest
probability in the body of Table and identify the corresponding 𝑧-score.

3. If the distribution is non-standard normal distribution, translate the 𝑧-score to

the corresponding 𝑥 value in the original distribution using the formula:

𝒙 = 𝝁 + (𝒛 × 𝝈)
 Example
Example. Given a bottom 2.5% → find 𝑍 = ?
 Example
Example. The distribution of annual income for guards in a large security company in which the
mean annual income is $30,000 and the standard deviation is $1,800. Assuming that the distribution
of annual income is normally distributed. What is the salary level that defines the bottom 5% of
earners?
 Example
Example. The distribution of annual income for guards in a large security company in which the
mean annual income is $30,000 and the standard deviation is $1,800. Assuming that the distribution
of annual income is normally distributed. What is the salary level that defines the top 10% of
earners?
 Example
Example. Suppose that a particular police department has data showing that the 911 response time
from receiving the call to police arrival is normally distributed with a mean of 8.5 minutes and a
standard deviation of 1.8. The chief wants to know how much time is required for three quarters
(75%) of calls to be handled, that is, the value below which 75% of response times fall.
 The Central Limit Theorem

➢ Assume that 𝝁 and 𝝈 are the mean and standard deviation of the population,
respectively.
➢ Randomly draw samples of size 𝒏 from the population and compute their means.
➢ The sample means have a distribution which is called sampling distribution of
sample means (𝑥).
ҧ

The Central Limit Theorem:

As the sample size 𝑛 increases, the sampling distribution of
sample means approaches a normal distribution. Its mean (𝜇𝑥ҧ )
is the same as the population mean 𝝁 and its standard
𝝈
deviation (𝜎𝑥ҧ ) is
𝒏
 The Central Limit Theorem
Remember: The central limit theorem involves two different
distributions:
o The distribution of the original population (mean = 𝝁 and SD =
𝝈)
𝝈
o The distribution of sample mean (mean = 𝝁 and SD = )
𝒏

𝝈
Note. 𝜎error = 𝜎𝑥ҧ = is called the standard error of sample mean.
𝒏
 Example
Example. Contents of 500 mL bottles are normally distributed with 𝜇 = 500 mL and 𝜎 = 4.5 mL.
a) If a customer buys one bottle, what is the probability that the bottle will contain more than
497 mL?
 Example
Example. Contents of 500 mL bottles are normally distributed with 𝜇 = 500 mL and 𝜎 = 4.5 mL.
b) If a customer buys a case of 6 bottles, what is the probability that the mean amount of the 6
bottles will be greater than 497 ml?
Reading Materials.
Please study Chapter 8 – Continuous Probability Distributions – Sections 8.1
and 8.2 and Chapter 9 – Sampling Distributions (Section 9.1) from the official
textbook

You may wish to practice the following suggested problems in Chapter 8 and 9

Chapter 8: Questions 8.20, 8.22, 8.26, 8.28, 8.30, 8.38, 8.40, 8.42, 8.56, 8.62
Chapter 9: Questions 9.15, 9.26, 9.30, 9.40