Statistical

Methods
IPM – Term I, September 2022

Dr. Landis Conrad Felix Michel

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel

• For a continuous numerical variable, we are no longer considering a table of discrete (specific) values,
but a continuous range of values, so we need to draw a continuous line and not just plot specific points.

• When you add information about the shape of the range of values, such as about 95% of the values are
between [a,b], you can visualize the plot of all values as an area under a curve. If that area under the
curve follows the well-known pattern of certain continuous distributions, you can use the continuous
probability distribution for that pattern to estimate the likelihood that a Value is within a specific range.

• The most commonly used continuous distribution, the normal distribution, plays an important
role in statistics and provides the basis for classical statistical inference. You can use the normal
distribution to approximate various discrete probability distribution.

• In the normal distribution, you can calculate the probability that values occur within certain ranges
or intervals.

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel

• A continuous probability distribution can be expressed mathematically as a probability
density function. A probability density function for a specific continuous probability
distribution defines the distribution of the values for a continuous variable and can be
used as the basis for calculations that determine the likelihood or probability that a value
will be within a certain range.

• The most commonly used continuous distribution, the normal distribution

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
Computing Normal Probabilities

• To compute normal probabilities, you first convert a normally distributed variable, X, to a

Standardized normal variable, Z, using the transformation formula.
• Z is distributed Normal with mean mu and standard deviation equal to 1.

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
Consider a variable : “load time” is normally distributed, with a mean mu = 7
seconds and a standard deviation sigma = 2 seconds.

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
• Calculate Cumulative Probabilities for each value of Z as the area below the distribution. We can
use Table E.2

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
Sampling Distribution of the Mean
In many applications, you want to make inferences that are based on statistics calculated
from samples to estimate the values of population parameters. We will learn about how the sample mean
(a statistic) is used to estimate the population mean (a parameter) and how the sample proportion (a
statistic) is used to estimate the population proportion (a parameter). Your main concern when making a
statistical inference is reaching conclusions about a population, not about a sample.

The sampling distribution of the mean is the distribution of all possible sample means if you
select all Possible samples of a given size.

The sample mean is unbiased because the mean of all the possible sample means (of a given
sample size, n) is equal to the population mean, m.

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
As the sample size increases, the sampling distribution of the mean still follows a normal distribution,
with muX = mu, but the standard error of the mean decreases so that a larger proportion of sample
means are closer to the population mean.

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
In general, the level of confidence is symbolized by (1-α)* 100%, where α is the proportion in the
tails of the distribution that is outside the confidence interval. The proportion in the upper tail of the
distribution is α/2, and the proportion in the lower tail of the distribution is α/2. You use Equation
(8.1) to construct a (1-α)* 100% confidence interval estimate for the mean with s known.

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
References – Additional Readings
• Chapters 6,7,8 “Statistics for Managers, Using Microsoft Excel”, 8th Edition, David M. Levine,
David Stephan, Kathryn A. Szabat.

•.

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel