Chapter 6

Continuous Probability Distributions

f (x)

Uniform Probability Distribution

Normal Probability Distribution
Exponential Probability Distribution
f (x) Exponential

Uniform
f (x) Normal

x
x
x
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Continuous Probability Distributions

A continuous random variable can assume any

value in an interval on the real line or in a
collection of intervals.
It is not possible to talk about the probability of
the random variable assuming a particular value.
Instead, we talk about the probability of the random
variable assuming a value within a given interval.

2006 Thomson/South-Western

Continuous Probability Distributions

f (x)

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.

f (x) Exponential

Uniform
f (x) Normal

x1 x2

x
x1
x1 x2

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xx12 x2

x
3

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.

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Normal Probability Distribution

It has been used in a wide variety of

applications:
Heights
Heights
of
of people
people
Scientific
Scientific
measurements
measurements

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Normal Probability Distribution

It has been used in a wide variety of

applications:
Test
Test
scores
scores
Amounts
Amounts
of
of rainfall
rainfall

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Normal Probability Distribution

Normal Probability Density Function

1 (x )2 / 2 2
f (x)
e
2
where:

=
=
=
=

mean
standard deviation
3.14159
2.71828

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Normal Probability Distribution

Characteristics
The
The distribution
distribution is
is symmetric
symmetric;; its
its skewness
skewness
measure
measure is
is zero.
zero.

2006 Thomson/South-Western

Normal Probability Distribution

Characteristics
The
The entire
entire family
family of
of normal
normal probability
probability
distributions
distributions is
is defined
defined by
by its
its mean
mean and
and its
its
standard
standard deviation
deviation ..
Standard Deviation

Mean
2006 Thomson/South-Western

Normal Probability Distribution

Characteristics
The
The highest
highest point
point on
on the
the normal
normal curve
curve is
is at
at the
the
mean
mean,, which
which is
is also
also the
the median
median and
and mode
mode..

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Normal Probability Distribution

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

x
-10

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20

11

Normal Probability Distribution

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

= 15

= 25
x
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Normal Probability Distribution

Characteristics
Probabilities
Probabilities for
for the
the normal
normal random
random variable
variable are
are
given
given by
by areas
areas under
under the
the curve
curve.. The
The total
total area
area
under
under the
the curve
curve is
is 11 (.5
(.5 to
to the
the left
left of
of the
the mean
mean and
and
.5
.5 to
to the
the right).
right).

.5

.5
x

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Normal Probability Distribution

Characteristics

68.26%
68.26% of
of values
values of
of aa normal
normal random
random variable
variable
are
of
+/- 1
1 standard
standard deviation
deviation
are within
within+/of its
its mea
me

95.44%
95.44% of
of values
values of
of aa normal
normal random
random variable
variable
are
of
+/- 2
2 standard
standard deviations
deviations
are within
within+/of its
its mea
me

99.72%
99.72% of
of values
values of
of aa normal
normal random
random variable
variable
are
of
+/- 3
3 standard
standard deviations
deviations
are within
within+/of its
its mea
me

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Normal Probability Distribution

Characteristics
99.72%
95.44%
68.26%

3
1
2
2006 Thomson/South-Western

+ 3
+ 1
+ 2

15

Standard Normal Probability Distribution

AA random
random variable
variable having
having aa normal
normal distribution
distribution
with
with aa mean
mean of
of 00 and
and aa standard
standard deviation
deviation of
of 11 is
is
said
said to
to have
have aa standard
standard normal
normal probability
probability
distribution
distribution..

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Standard Normal Probability Distribution

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

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Standard Normal Probability Distribution

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 .

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Standard Normal Probability Distribution

Standard Normal Density Function

1 z2 / 2
f (x)
e
2
where:
z

=
=
=

(x )/
3.14159
2.71828

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Standard Normal Probability Distribution

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
Pep
replenishment order is placed.

Zone
5w-20

Motor Oil

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20

Standard Normal Probability Distribution

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
Pep
replenishment lead-time is normally
Zone
distributed with a mean of 15 gallons and
5w-20
Motor Oil
a standard deviation of 6 gallons.
The manager would like to know the
probability of a stockout, P(x > 20). (Demand
exceeding 20 gallons)

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Standard Normal Probability Distribution

Pep
Zone

Solving for the Stockout Probability

5w-20
Motor Oil

Step
Step 1:
1: Convert
Convert xx to
to the
the standard
standard normal
normal distributio
distributio
zz =
= ((xx -- )/
)/
=
= (20
(20 -- 15)/6
15)/6
=
= .83
.83
Step
Step 2:
2: Find
Find the
the area
area under
under the
the standard
standard normal
normal
curve
curve to
to the
the left
left of
of zz =
= .83.
.83.
see
see next
next slide
slide
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Standard Normal Probability Distribution

Pep
Zone
5w-20
Motor Oil

Cumulative Probability Table for

the Standard Normal Distribution

z
.

.00
.

.01
.

.02
.

.03
.

.04
.

.5 .6915 .6950 .6985 .7019 .7054

.6 .7257 .7291 .7324 .7357 .7389
.7 .7580 .7611 .7642 .7673 .7704
.8 .7881 .7910 .7939 .7967 .7995

.05
.

.06
.

.07
.

.08
.

.09
.

.7088 .7123 .7157 .7190 .7224

.7422 .7454 .7486 .7517 .7549
.7734 .7764 .7794 .7823 .7852
.8023 .8051 .8078 .8106 .8133

.9 .8159 .8186 .8212 .8238 .8264 .8289 .8315 .8340 .8365 .8389
.
.
.
.
.
.
.
.
.
.
.

P(z < .
83)
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Standard Normal Probability Distribution

Pep
Zone

Solving for the Stockout Probability

5w-20
Motor Oil

Step
Step 3:
3: Compute
Compute the
the area
area under
under the
the standard
standard norm
norm
curve
curve to
to the
the right
right of
of zz =
= .83.
.83.
PP((zz >
> .83)
.83) =
= 11 PP((zz <
< .83)
.83)
=
= 11- .7967
.7967
=
= .2033
.2033
Probability
of a
stockout
2006 Thomson/South-Western

P(x >
20)
24

Standard Normal Probability Distribution

Pep
Zone

5w-20
Motor Oil

Solving for the Stockout Probability

Area = 1 - .7967

Area = .7967

= .2033

0 .83

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Standard Normal Probability Distribution

Pep
Zone

Standard Normal Probability Distribution

If the manager of Pep Zone wants the
probability of a stockout to be no more than .
05, what should the reorder point be?

2006 Thomson/South-Western

5w-20
Motor Oil

26

Standard Normal Probability Distribution

Pep
Zone

5w-20
Motor Oil

Solving for the Reorder Point

Area = .9500
Area = .0500

2006 Thomson/South-Western

z.05

27

Standard Normal Probability Distribution

Pep
Zone
5w-20
Motor Oil

Solving for the Reorder Point

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

.00
.00
..

.01
.01
..

.02
.02
..

.03
.03
..

.04
.04
..

.05
.05
..

.06
.06
..

.07
.07
..

.08
.08
..

.09
.09
..

1.5
1.5
1.6
1.6

.9332
.9332
.9452
.9452

.9345
.9345
.9463
.9463

.9357
.9357
.9474
.9474

.9370
.9370
.9484
.9484

.9382
.9382
.9495
.9495

.9394
.9394
.9505
.9505

.9406
.9406
.9515
.9515

.9418
.9418
.9525
.9525

.9429
.9429
.9535
.9535

.9441
.9441
.9545
.9545

1.7
1.7
1.8
1.8

.9554
.9554
.9641
.9641

.9564
.9564
.9649
.9649

.9573
.9573
.9656
.9656

.9582
.9582
.9664
.9664

.9591
.9591
.9671
.9671

.9599
.9599
.9678
.9678

.9608
.9608
.9686
.9686

.9616
.9616
.9693
.9693

.9625
.9625
.9699
.9699

.9633
.9633
.9706
.9706

1.9
.9750 .9756
1.9 .9713
.9713 .9719
.9719 .9726
.9726 .9732
.9732 .9738
.9738 .9744
.9756 .9761
.9761 .9767
.9767
We.9744
look.9750
up the
..
..
..
.. complement
..
..
..of the
.. tail..
..
..

area (1 - .05 = .95)

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Standard Normal Probability Distribution

Pep
Zone
5w-20
Motor Oil

Solving for the Reorder Point

Step
to the corresponding value of x.
Step 2:
2: Convert
Convert zz.05
.05 to the corresponding value of x
xx =

= +
+ zz.05
.05

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

A reorder point of 25 gallons will place the probabili

of a stockout during leadtime at (slightly less than)

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Standard Normal Probability Distribution

Pep
Zone
5w-20
Motor Oil

Solving for the Reorder Point

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 P
Zone will be out of stock and unable to meet a
customers desire to make a purchase.

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