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Yu 2013

Continuous Random Variable A random variable that may assume any numerical value in

Experiment Random Variable (x) Possible Values for the Random Variable x0 0 x 12.1 0 x 100 150 x 212

Operate a bank Fill a soft drink can Construct a new library Test a new chemical process

Time between customer arrivals in minutes # of ounces Percentage of project complete after six months Temperature when the desired reaction takes place

Exponential Probability Distribution

Uniform Normal

f (x)

f (x) Exponential

f (x)

x x

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.

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.

Uniform

f (x)

Normal

x1 x2

x x1 x2 x

x1 x x 12 x2

A random variable is uniformly distributed whenever the probability is proportional to the intervals length.

f (x) = 1/(b a) for a < x < b =0 elsewhere where: a = smallest value the variable can assume b = largest value the variable can assume

Expected Value of x

E(x) = (a + b)/2

Example: Slater's Buffet Slater customers are charged for the amount of salad they take. Sampling suggests that the amount of salad taken is uniformly distributed between 5 ounces and 15 ounces.

f(x) = 1/10 for 5 < x < 15 =0 elsewhere where: x = salad plate filling weight

Expected Value of x

E(x) = (a + b)/2 = (5 + 15)/2 = 10

f(x)

1/10 x

What is the probability that a customer will take between 12 and 15 ounces of salad? f(x) P(12 < x < 15) = 1/10(3) = .3 1/10 x

important distribution for describing a continuous random variable. It is widely used in statistical inference.

Scientific measurements

Amounts of rainfall

Excel has two functions for computing probabilities and z values for a standard normal distribution: NORM S DIST is used to compute the cumulative NORMSDIST probability given a z value. NORMSINV NORM S INV is used to compute the z value given a cumulative probability. (The S in the function names reminds us that they relate to the 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 replenishment order is placed.

Pep Zone

5w-20

Motor Oil

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

Pep Zone

Step 2: Find the area under the standard normal curve to the left of z = .83.

Pep Zone

z . .5 .6 .7 .8 .9 . .00 . .01 . .02 . .03 . .04 . .05 . .06 . .07 . .08 .

.09 .

.6915 .6950 .6985 .7019 .7054 .7088 .7123 .7157 .7190 .7224 .7257 .7291 .7324 .7357 .7389 .7422 .7454 .7486 .7517 .7549 .7580 .7611 .7642 .7673 .7704 .7734 .7764 .7794 .7823 .7852 .7881 .7910 .7939 .7967 .7995 .8023 .8051 .8078 .8106 .8133 .8159 .8186 .8212 .8238 .8264 .8289 .8315 .8340 .8365 .8389 . . . . . . . . . .

Source: Table 1 page 939-940

Pep Zone

Step 3: Compute the area under the standard normal curve to the right of z = .83. P(z > .83) = 1 P(z < .83) = 1- .7967 = .2033

Probability of a stockout P(x > 20)

Pep Zone

Area = 1 - .7967 = .2033

Area = .7967

.83

Pep Zone

5w-20 Motor Oil

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

Pep Zone

5w-20 Motor Oil

Area = .9500

Area = .0500

z.05

Pep Zone

Solving for the Reorder Point Step 1: Find the z-value that cuts off an area of .05 in the right tail of the standard normal distribution.

z . .00 . .01 . .02 . .03 . .04 . .05 . .06 . .07 . .08 .

.09 .

1.5 .9332 .9345 .9357 .9370 .9382 .9394 .9406 .9418 .9429 .9441 1.6 .9452 .9463 .9474 .9484 .9495 .9505 .9515 .9525 .9535 .9545 1.7 .9554 .9564 .9573 .9582 .9591 .9599 .9608 .9616 .9625 .9633 1.8 .9641 .9649 .9656 .9664 .9671 .9678 .9686 .9693 .9699 .9706 1.9 .9713 .9719 .9726 .9732 .9738 .9750 .9756 .9761 .9767 We look up.9744 the complement of the . . . . .tail area . (1 - .05 . = .95) . . . .

Pep Zone

x = + z.05 = 15 + 1.645(6) = 24.87 or 25

A reorder point of 25 gallons will place the probability of a stockout during leadtime at (slightly less than) .05.

Pep Zone

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

The exponential probability distribution is useful in describing the time it takes to complete a task. The exponential random variables can be used to describe:

Density Function

f ( x)

where:

= mean

e = 2.71828

Cumulative Probabilities

P( x x0 ) 1 e xo /

where: x0 = some specific value of x

Example: Als Full-Service Pump The time between arrivals of cars at Als full-service gas pump follows an exponential probability distribution with a mean time between arrivals of 3 minutes. Al would like to know the probability that the time between two successive arrivals will be 2 minutes or less.

.2

.1 x 1 2 3 4 5 6 7 8 9 10

Time Between Successive Arrivals (mins.)

The Poisson distribution provides an appropriate description of the number of occurrences per interval

The exponential distribution provides an appropriate description of the length of the interval between occurrences

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