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Ft Mba Section 4b Probability Sva

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Ft Mba Section 4b Probability Sva

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You are on page 1of 26

Continuous Probability

Distributions

Section 4b

Reading: Silver pp.150-154, 163-180.

1

Discrete vs. Continuous Probability

Distributions

A series of coin flipping experiments focus on # of heads

0.35 0.3

0.3 0.25

0.25

Probability

Probability

0.2

0.2

0.15

0.15

0.1

0.1

0.05 0.05

0 0

0 1 2 3 4 5 0 1 2 3 4 5 6 7 8 9 10

# of heads # of heads

0.2

As the number of coins (trials) increases,

0.15 charts become less like a staircase and

Probability

0.05

0

Ultimately, we have a probability density

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

# of heads

function for a continuous random variable.

2

The Normal Distribution

N(, )

X

Sometimes called the Gaussian Distribution or Normal curve.

It describes many real life situations

Height, weight, intelligence of people

Lifetime of car tyres, speed of machine operators, and production output.

There are many Normal distributions each with a different mean

() and a different standard deviation ().

Notation: N(, ); for instance N(10,5).

3

Properties of the Normal Distribution

N(, )

1 x 2

1

f ( x) exp 2

2

X

Is a continuous probability distribution (density function).

On the horizontal axis, any value in that interval of X can occur. In

contrast, the Binomial is a discrete distribution with only integer values.

The mean () determines the position of the distribution.

The larger the standard deviation (), wider / flatter the curve.

With information on the mean and SD, we have everything we

need to know about a specific Normally distributed variable.

4

Applying the Normal Distribution

as the Binomial.

see hypothesis testing and confidence intervals later).

5

Standard Normal Distribution (Z)

Standard Normal has a mean = 0 and standard deviation = 1.

N(0,1) is denoted as Z.

f(x) corresponding to an given interval.

We cant take the height of the curve as the probability because

it is a continuous variable with many, many, possible values.

Probability of any value is zero very thin vertical slice of graph.

Example: P(X = 100), why not 99.99 or 100.001?

But the area (probability) in each half of the Normal distribution is

0.50 because 50% of values lie above or below the mean.

6

Standard Normal Tables:

A Simple Introduction

For more information on the Standard Normal, we use tables.

From the table, we can read off the probability (area) and so

determine how unusual a particular value of Z is.

Z scores can be interpreted as how many standard deviations

a value is above or below the mean.

1. 2.0 standard deviations or more above the mean?

2. Within +/- 0.5 standard deviations of the mean?

3. Between 0.5 and 1.5 standard deviations from the mean?

7

Reading the Standard Normal Table

N(0,1)

Z2

Our tables report the area in the distributions tail, the area

to the right of the Z value. This area is denoted by alpha ().

Part 1. Z = 2, corresponds to an area of 0.0228.

There is a 2.28% chance of getting a Z value equal to or

greater than 2. A relatively rare event.

Recall, the Empirical Rule? (Check Z = +/- 1.96)

8

Reading the Standard Normal Table (Z)

N(0,1) N(0,1)

Part 2: Z = 0.5 corresponds to an area of 0.3085.

Subtracting 0.3085 from 0.5 gives the area between Z = 0 and Z

= 0.1915; curve is symmetrical, so multiple by 2 = 0.3830

38% of values lie within a standard deviation of the mean.

9

Reading the Standard Normal Tables (Z)

N(0,1) N(0,1)

Part 2: Z = 0.5 corresponds to an area of 0.3085.

Subtracting this from 0.5 gives the area between Z = 0 and Z =

+0.5 (0.5 - 0.3085 =0.1915); symmetry - multiple by 2 = 0.3830.

38% of values lie within a standard deviation of the mean.

Part 3: Z between +0.5 and +1.5.

Subtract 0.3085 0.0668 to get the area from Z = 0.5 to 1.5. 10

Mapping Onto the Standard

Normal Distribution

Why all this fuss about the Standard Normal? When will we

find a problem that can be described by N(0,1)?

In practice, there are many Normal distributions each with a

different mean and a different standard deviation.

So, wont each problem need a different table of values and

associated probabilities? Yes

many standard deviations each value is from its mean, and

then find the probability from the Standard Normal Tables.

11

Mapping Onto the Standard

Normal Distribution

that is Normally distributed with a mean of 20 and a standard

deviation of 5. We can convert values of X into values of Z.

Questions:

1. Whereabouts in the distribution is a value of 10 located?

2. How many standard deviations is 10 away from the mean?

3. What is the Z value corresponding to a value of 22?

12

Mapping Any Normal Distribution Onto

the Standard Normal Distribution (Z)

X 10 20 N(20,5)

Z 2

5

N(0,1)

10 20 X

0 20

1 5

Z=? 0 Z

13

Mapping Any Normal Distribution Onto

the Standard Normal Distribution (Z)

X 22 20 N(20,5)

Z 0.4

5

N(0,1)

20 22 X

0 Z=?

14

Motor Vehicle Recovery Problem

A motor vehicle breakdown companys customer survey reveals

that the average time taken to reach a vehicle is 50 minutes with

a standard deviation of 15 minutes. What proportion of callouts

will take 70 minutes or longer to reach the vehicle?

Must assume times are (1) Normally distributed (2) continuously

measured. Next convert the X value into its equivalent Z value.

70 50 N(50,15)

Z 1.33

15

P(X 70) = P(Z 1.33) = 0.0918

15

Mobile Phone Manufacturing

A firm makes plastic casings for mobile phones. A large sample of

casings are found to be Normally distributed with a mean depth of

18 mm. and standard deviation of 0.8 mm.

1. If casings with a depth of 17 mm. or less are too shallow to hold the

phones components, what % of casings are currently rejected?

depth of the manufacturing process while maintaining its standard

deviation (0.8mm). What should the new mean depth be set to?

3. If the extra plastic needed to press the casings costs 15.00 per

thousand, and the cost of wasting each casing is 0.75, what is

the financial implication of this change to the firm? 16

Mobile Phone Manufacturing Pt.1

Q1: What proportion of casings are currently rejected?

N(18,0.8) N(0,1)

Wasted

casings 10.6%

17 18 X -1.25 0 Z

17 18

Z 0.8 1.25 P(X 17) = P(Z -1.25) = 0.1057

This is 1.25 standard deviations below the mean. The table gives

only areas to the right but because of symmetry, we use Z = +1.25.

phone components: 106 per 1000 produced are wasted. 17

Mobile Phone Manufacturing Pt. 2

To reduce wastage from 10.6% to 5%, we must increase the

depth of the typical casing shift the Normal curve to the right.

Work backwards: specify the N(?,0.8)

probability, then find the mean. Wasted

casings

From the Table, 5% of the area

lies 1.64 standard deviations

from the mean (Z = -1.64 approx).

17 =? X

17 Rearrange &

1.64 17 (1.64 * 0.8) 18.31

0.8 solve for

18.00mm. to 18.31mm. to reduce wastage from 10.6% to 5%.

18

Mobile Phone Manufacturing Pt.3

If the extra plastic required to press the casings will cost the

firm 15 per thousand, and the cost of wasting each casing

is 0.75, what is the financial implication of this change?

Wastage falls from 10.6% to 5%

Throw away 50 instead of 106 casings for every 1000 made.

If cost of wastage is 0.75, we save (56 x 0.75) = 42.00

Net gain = 42.00 - 15.00 = 27.00.

19

The Normal Approximation to the

Binomial Distribution

Useful for determining the chance that X takes on a range of

values when n is large & probability of success (p) is near 0.5.

To calculate P(20 heads) requires large factorials.

50! 30

P( X 20) ?

20

To calculate cumulative probabilities is even more difficult.

P(less than 5 heads) = P(0 heads) + P(1 head) + P(4 heads).

20

Some Bell-Shaped Binomial Distributions

n = 5, p = 0.3 n = 25, p = 0.3

0.4 0.2

0.3 0.15

0.2 0.1

0.1 0.05

0 0

0 1 2 3 4 5

looks like the Normal distribution (smooth / symmetrical).

Binomial looks like the Normal even when we move away

from p = 0.5, as long as the number of trials is large (n).

(i) np > 5 and (ii) n(1 p) > 5

21

Normal Approx. to Binomial Distribution

To describe any Normal distribution, we require information on:

Mean () = np

Standard deviation () = np(1 p)

Then, we can map any Normal distribution onto the Standard

Normal (Z) and determine the probability of the event occurring.

Example Airline Catering

Imagine a plane with 200 seats. If the probability of selecting the

vegetarian (chicken) meal is 0.3 (0.7), what is the chance that 50

or fewer passengers 1st choice is the vegetarian meal (full flight)?

Mean = np = 200 x 0.30 = 60;

Standard deviation = np(1 p) 200 * 0.3 * 0.7 6.48

22

Continuity Correction Factor

To use a continuous probability distribution to calculate discrete

probabilities, we must apply a Continuity Correction factor.

The Binomial only takes on integer values {0, 1, 2 etc.}, but the

Normal can take on fractions.

etc. bars of the histogram to find the

correct probability.

If we use 50 for X we would miss

half the 50 bar, so we use X = 50.5.

Triangles between the Normal curve 48 49 50 51

and bars will cancel each other out.

Think of this as rounding up / down. 50.5

23

Airline Catering Cont.

So the probability that 50 or fewer passengers 1st choice is the

vegetarian meal becomes P(X < 50.5).

Next, we transform X to its equivalent Z value:

N(60,6.48) N(0,1) 50.5 60

Z

6.48

Z 1.47

50.5 60 X -1.47 0 Z

Using the Tables and symmetry, we find P(Z > 1.47) = 0.071.

This would be an unusual but not impossible event. If 50 or

fewer people want vegetarian, it implies 150+ want chicken!

24

Exactly 50 Vegetarian Meals

Part 2: Probability of exactly 50 vegetarian meals P(X = 50).

P(49.5 < X < 50.5).

We know the P(X < 50.5) from before.

P(X < 49.5), Z = (49.5 60) / 6.48 = -1.62

From tables and symmetry, we find

P(Z > 1.62) = 0.0526

P(Z < -1.47) - P(Z < -1.62) = 48 49 50 51

P(exactly 50) = 0.071 - 0.053 = 0.018.

1.8% chance of exactly 50 veg meals. 49.5 50.5

25

Summary: Probability Distributions

Binomial and Poisson distributions are discrete distributions

which only take on whole (integer) values.

can take on many, many, many values including fractions.

two parameters (B: n and p; N: and ), while the Poisson

requires only one (mu ).

the Normal curve, e.g. Binomial when n is large, p is near 0.5.

26

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