Term 1: Business Statistics
Session 4: Continuous Probability Distributions
Rohit Gupta
Operations & SCM Area
Office: Faculty wing 5, Room No. 23
Email: [email protected]
[email protected]
Cumulative Distribution Function
• If X is a random variable (continuous or discrete), then its cdf is given
by
• F(x) = P(X ≤ x ), for all values of x
• When X is continuous random variable, then cdf has an important
property, which is
• f(x) = dF(x)/dx
• cdf is also useful in obtaining various probabilities
• P(a < X ≤ b) = P(X ≤ b) – P(X ≤ a) = F(b) – F(a)
Exponential Distribution
• Exponential distribution is used widely to model
Waiting time (interarrival time) in a queue;
Life time of some component of machine (mean time between failures); etc.
• A continuous random variable X is said to have Exponential Distribution with
mean 1/ if its probability density function is given by
e x , x 0, 0
f ( x)
0, otherwise
• We write X ~ Exp().
• is usually the average number of occurrences (or arrivals) per unit time.
E ( X ) xf ( x)dx x e x
dx 1/
0 0
E ( X ) x f ( x)dx x e
2 2 2 x
dx 2 / 2
0 0
Var( X ) E ( X ) [ E ( X )]
2 2
1/ 2
x x
F ( x) f (t )dt e dt 1 e
t x
0 0
Example:
A processing machine at Wiley Inc. breaks down on an average of once in four
weeks.
What is the probability that the next breakdown will not occur for at least six
weeks after the previous breakdown?
Assume that the time between breakdowns has an exponential distribution.
X ~ Exp (1/4)
P(X > 6) = ?
Ans: 0.7788
Example:
A teller at New York Industrial Bank serves, on average, 30 customers
per hour.
Assume that the service time for a customer has an exponential
probability distribution.
What is the probability that the next customer will take two to four
minutes to be served.
X ~ Exp (30)
P(2/60 < X < 4/60) = ?
Ans: 0.2325
Relationship between Poisson and Exponential Distributions
Let Xt be the number of events occurring during the time interval (0, t).
If is the number of occurrence of the event in the unit time interval, then
under some conditions Xt ~ Poisson(t). [Poisson Process]
Then the lapse of time between any two successive occurrences (or inter
arrival time) follows Exp().
Normal Distribution
Normal is the most widely used probability distribution.
Normal distribution is used to give approximated probabilities
underlying many other.
A continuous random variable X is said to have a Normal Distribution
with parameters μ and σ, if its pdf is
1 1 x 2
e 2 , x , , 0,
f ( x) 2
0, otherwise
We write X ~ N(μ, σ ).
Let X ~ N(μ, σ ).
μ and σ are called as the parameters of normal distribution.
Mean of Normal Distribution: E(X) = μ
Variance of Normal Distribution: Var(X) = σ2
Probability curve is ‘Bell Shaped’.
Location is characterized by μ
Spread is characterized by σ
It is extended from -∞ to ∞.
Peak is the highest at the center.
Curve is symmetric about x = μ σ
μ
= 10 = 10 = 10
=5 = 10 = 15
=5
= 10
= 15
=0
=5
= 15 = 10
= 15
=5
=0
Central limit theorem:
• Assume a population having “some” distribution (like binomial,
exponential, etc.)
• Select a sample of size n from the population.
• Obtain the sample mean
• The distribution of sample mean is normal when n is large enough.
Probabilities of many discrete as well as continuous distributions can be
approximated using normal distributions in large sample cases.
Let X~B(n, 1/4), following are the probability plots of X for various values of
n
n=4 n=10
n=25
n=20
For a N(, ) distribution
approximately 68% of all the values lie in (-, +)
approximately 95.5% of all the values lie in (-2, +2)
approximately 99.7% of all the values lie in (-3, +3)
16% of 16% of 2.25% of 2.25% of
area 68% area area 95.5% area
of area of area
σ σ 2σ 2σ
.15% of .15% of
area 99.7% area
of area
3σ 3σ
μ = 100
σ = 15
Area =0.4775
100 130
2σ = 30
μ = 60
σ = 35
Area = 0.34
60 95
σ = 35
Computing Normal Probabilities
a b
F(a) F(b)
b
P(a X b) f ( x) dx
a
• Alternatively, P(a x b) = F(b) – F(a)
• Values of F(x) can be used.
• What about the parameters and ?
• Do we need a separate table for each and combination?
• One table is enough for all.
Standard Normal Distribution
Given X ~ N(, ),
Define Z = (X- )/.
Then Z ~ N(0, 1)
P(X a) = P[X- a- ]
= P[(X- )/ (a- )/]
= P(Z (a- )/)
Table of F(z) = P(Z z) are available.
z value corresponding to a
N(0,1) N(,)
Za= (a-)/ a
Normal Probability Curve is symmetric about mean, i.e.,
Z ~ N(0,1), for any z > 0,
• P(-∞ < Z < z) = 0.5 + P (0 < Z < z)
• P( Z < -z) = P( Z > z)
• P(Z > -z ) = P( Z < z)
• P (0 < Z < z) = P (-z < Z < 0)
• P (|Z| < z) = P (-z < Z < z) = 2 P (0 < Z < z)
• P (|Z| > z) = 2 P (Z > z) = 2 {0.5 - P (0 < Z < z)}
• P (z1 < Z < z2) = P(Z < z2) - P(Z < z1)
Finding Probabilities of the Standard Normal Distribution
• Find the probability that the value of standard normal random variable
(Z) will be between 0 and 1.56.
Ans: 0.4406
• Find the probability that the value of standard normal random variable
(Z) will be less than -2.47.
Ans: 0.0068
• Find P(1<Z<2).
Ans: 0.1359
Finding Values of Z Given a Probability
• Find a value of z of the standard normal random variable such that the
probability that the random variable will have a value between 0 and z is
0.40.
Ans: 1.285
• Find the value of the standard normal random variable that cuts off an
area of 0.90 to its left.
Ans: 1.285
• Find a 0.99 probability interval, for the standard normal random variable.
Ans: 𝑧 = ±2.575
Example:
Daily cement production of a plant follows normal distribution
with mean of 50 tons and standard deviation of 3.5 tons.
On how many days in a year the production is expected to exceed
55 tons.
=50, =3.5
X ~ N(50,3.5)
z = (55-50)/3.5 = 1.43
P(X 55) = P[(X-50)/3.5 (55-50)/3.5)]
= P(Z 1.43)
= 0.0764
Ans = 365 x 0.0764 = 28 days
Example:
A group of achievement scores are normally distributed with a mean of
76 and a standard deviation of 4.
If one score is randomly selected what is the probability that it is at least
80.
4
76 80
Ans = 0.1587
Example:
Time required to finish an exam is known to be normally distributed
with a mean of 60 Min. and a Std Dev. of 12 minutes.
How much time should be allowed in order for 90% of the students to
finish?
.9 12
60 x
Ans: 75.36 ~ 76 Mins
Example:
A bank manager has learnt that the length of time the customers have to wait
for being attended by the teller is normally distributed with mean time of 5
minutes and standard deviation of 0.8 minutes.
Find the probabilities that a customer has to wait:
1. for less than 6 minutes
Ans: 0.8944
2. for more than 3.5 minutes
Ans: 0.9699
3. between 3.4 and 6.2 minutes
Ans: 0.9104
