The Normal Distribution: Business Statistics

COMPLETE 4-1 fourth edi tion
BUSINESS STATISTICS
4 The Normal Distribution


Using Statistics

The Normal Probability Distribution

The Standard Normal Distribution

The Transformation of Normal Random Variables

The Inverse Transformation

More Complex Problems

The Normal Distribution as an Approximation to
Other Probability Distributions

Using the Computer

Summary and Review of Terms
Irwin/McGraw-Hill Aczel © The McGraw-Hill Companies, Inc., 1999

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4-1 Introduction
As n increases, the binomial distribution approaches a ...
n=6 n = 10 n = 14
Binomial Distribution: n=6, p=.5 Binomial Distribution: n=10, p=.5 Binomial Distribution: n=14, p=.5
0.3 0.3 0.3
0.2 0.2 0.2

P(x)
P(x)
P(x)
0.1 0.1 0.1
0.0 0.0 0.0

0 1 2 3 4 5 6 0 1 2 3 4 5 6 7 8 9 10 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
x x x
Normal Probability Density 0.4

Normal Distribution:  = 0, = 1
Function: x 2  

  0.3
 
 
1 e 2 2 for    x  
f(x)
0.2
f ( x) 
2 2
0.1
0.0
where e  2.7182818... and   314159265

. ...
-5 0 5
x

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4-2 The Normal Probability Distribution
The normal probability density function: Normal Distribution:  = 0, = 1
0.4

x 2


  0.3
 
 
f ( x)  1 e 2 2 for    x  
f(x)
0.2
2 2 0.1
where e  2.7182818... and   314159265

. ... 0.0
-5 0 5
x

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The Normal Probability Distribution
• The normal is a family of

– Bell-shaped and symmetric distributions. because the
distribution is symmetric, one-half (.50 or 50%) lies on either
side of the mean.
– Each is characterized by a different pair of mean, , and
variance, . That is: [X~N()].
– Each is asymptotic to the horizontal axis.
– The area under any normal probability density function
within k of  is the same for any normal distribution,
regardless of the mean and variance.

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Normal Probability Distributions

All of these are normal probability density functions, though each has a different mean and variance.
Normal Distribution:  =40, =1 Normal Distribution:  =30, =5 Normal Distribution:  =50, =3
0.4 0.2 0.2
0.3
f(w)
f(x)
f(y)
0.2 0.1 0.1
0.1
0.0 0.0 0.0

35 40 45 0 10 20 30 40 50 60 35 45 50 55 65
w x y
W~N(40,1) X~N(30,25) Y~N(50,9)

Normal Distribution:  =0, =1
0.4 Consider:
0.3
The probability in each
P(39 W 41) case is an area under a
f(z)
0.2
0.1 P(25 X 35) normal probability density

0.0 P(47 Y 53) function.
P(-1 Z 1)
-5 0 5
z
Z~N(0,1)
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4-3 The Standard Normal Distribution

The standard normal random variable, Z, is the normal random
variable with mean = 0 and standard deviation = 1: Z~N(0,12).
Standard Normal Distribution
0 .4
0 .3
=1
f( z)
{
0 .2
0 .1
0 .0
-5 -4 -3 -2 -1 0 1 2 3 4 5
=0
Z

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Finding Probabilities of the Standard
Normal Distribution: P(0 < Z < 1.56)
Standard Normal Probabilities
Standard Normal Distribution z .00 .01 .02 .03 .04 .05 .06 .07 .08 .09
0.0 0.0000 0.0040 0.0080 0.0120 0.0160 0.0199 0.0239 0.0279 0.0319 0.0359
0.4 0.1 0.0398 0.0438 0.0478 0.0517 0.0557 0.0596 0.0636 0.0675 0.0714 0.0753
0.2 0.0793 0.0832 0.0871 0.0910 0.0948 0.0987 0.1026 0.1064 0.1103 0.1141
0.3 0.1179 0.1217 0.1255 0.1293 0.1331 0.1368 0.1406 0.1443 0.1480 0.1517
0.3 0.4 0.1554 0.1591 0.1628 0.1664 0.1700 0.1736 0.1772 0.1808 0.1844 0.1879
0.5 0.1915 0.1950 0.1985 0.2019 0.2054 0.2088 0.2123 0.2157 0.2190 0.2224
0.6 0.2257 0.2291 0.2324 0.2357 0.2389 0.2422 0.2454 0.2486 0.2517 0.2549
f(z)
0.2 0.7 0.2580 0.2611 0.2642 0.2673 0.2704 0.2734 0.2764 0.2794 0.2823 0.2852
0.8 0.2881 0.2910 0.2939 0.2967 0.2995 0.3023 0.3051 0.3078 0.3106 0.3133
0.9 0.3159 0.3186 0.3212 0.3238 0.3264 0.3289 0.3315 0.3340 0.3365 0.3389
0.1
1.56 1.0
1.1
0.3413
0.3643
0.3438
0.3665
0.3461
0.3686
0.3485
0.3708
0.3508
0.3729
0.3531
0.3749
0.3554
0.3770
0.3577
0.3790
0.3599
0.3810
0.3621
0.3830
{
1.2 0.3849 0.3869 0.3888 0.3907 0.3925 0.3944 0.3962 0.3980 0.3997 0.4015
0.0 1.3 0.4032 0.4049 0.4066 0.4082 0.4099 0.4115 0.4131 0.4147 0.4162 0.4177
-5 -4 -3 -2 -1 0 1 2 3 4 5 1.4 0.4192 0.4207 0.4222 0.4236 0.4251 0.4265 0.4279 0.4292 0.4306 0.4319
Z 1.5 0.4332 0.4345 0.4357 0.4370 0.4382 0.4394 0.4406 0.4418 0.4429 0.4441
1.6 0.4452 0.4463 0.4474 0.4484 0.4495 0.4505 0.4515 0.4525 0.4535 0.4545
1.7 0.4554 0.4564 0.4573 0.4582 0.4591 0.4599 0.4608 0.4616 0.4625 0.4633
1.8 0.4641 0.4649 0.4656 0.4664 0.4671 0.4678 0.4686 0.4693 0.4699 0.4706
1.9 0.4713 0.4719 0.4726 0.4732 0.4738 0.4744 0.4750 0.4756 0.4761 0.4767
2.0 0.4772 0.4778 0.4783 0.4788 0.4793 0.4798 0.4803 0.4808 0.4812 0.4817
Look in row labeled 1.5 2.1

2.2
0.4821
0.4861
0.4826
0.4864
0.4830
0.4868
0.4834
0.4871
0.4838
0.4875
0.4842
0.4878
0.4846
0.4881
0.4850
0.4884
0.4854
0.4887
0.4857
0.4890
2.3 0.4893 0.4896 0.4898 0.4901 0.4904 0.4906 0.4909 0.4911 0.4913 0.4916
and column labeled .06 2.4
2.5
0.4918
0.4938
0.4920
0.4940
0.4922
0.4941
0.4925
0.4943
0.4927
0.4945
0.4929
0.4946
0.4931
0.4948
0.4932
0.4949
0.4934
0.4951
0.4936
0.4952
to find 2.6
2.7
0.4953
0.4965
0.4955
0.4966
0.4956
0.4967
0.4957
0.4968
0.4959
0.4969
0.4960
0.4970
0.4961
0.4971
0.4962
0.4972
0.4963
0.4973
0.4964
0.4974
2.8 0.4974 0.4975 0.4976 0.4977 0.4977 0.4978 0.4979 0.4979 0.4980 0.4981
P(0 z 1.56) = .4406 2.9
3.0
0.4981
0.4987
0.4982
0.4987
0.4982
0.4987
0.4983
0.4988
0.4984
0.4988
0.4984
0.4989
0.4985
0.4989
0.4985
0.4989
0.4986
0.4990
0.4986
0.4990

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Normal Distribution: P(Z < -2.47)
z ... .06 .07 .08
To find P(Z<-2.47): . . . .
. . . .
Find table area for 2.47 . . . .
P(0 < Z < 2.47) = .4932 2.3 ... 0.4909 0.4911 0.4913
2.4 ... 0.4931 0.4932 0.4934
P(Z < -2.47) = .5 - P(0 < Z < 2.47) 2.5 ... 0.4948 0.4949 0.4951
.
= .5 - .4932 = 0.0068
.
.

Area to the left of -2.47
0.4
P(Z < -2.47) = .5 - 0.4932
= 0.0068 0.3 Table area for 2.47
P(0 < Z < 2.47) = 0.4932
f(z)
0.2
0.1
0.0
-5 -4 -3 -2 -1 0 1 2 3 4 5
Z

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Normal Distribution: P(1< Z < 2)
To find P(1 Z 2): z
.
.00
.
...
. .
1. Find table area for 2.00 .
0.9
.
0.3159 ...
1.0 0.3413 ...
F(2) = P(Z 2.00) = .5 + .4772 =.9772 1.1
.
0.3643
.
...
2. Find table area for 1.00 .

.
.
.
1.9 0.4713 ...
F(1) = P(Z 1.00) = .5 + .3413 = .8413 2.0
2.1
0.4772
0.4821
...
...
. .
3. P(1 Z 2.00) = P(Z 2.00) - P(Z 1.00) .
.
.
.
= .9772 - .8413 = .1359

0.4
0.3
Area between 1 and 2
P(1 Z 2) = .4772 - .8413 = 0.1359
f(z)
0.2
0.1
0.0
-5 -4 -3 -2 -1 0 1 2 3 4 5
Z

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Finding Values of the Standard Normal
Random Variable: P(0 < Z < z) = 0.40
z .00 .01 .02 .03 .04 .05 .06 .07 .08 .09
To find z such that 0.0
0.1
0.0000
0.0398
0.0040
0.0438
0.0080
0.0478
0.0120
0.0517
0.0160
0.0557
0.0199
0.0596
0.0239
0.0636
0.0279
0.0675
0.0319
0.0714
0.0359
0.0753
0.2 0.0793 0.0832 0.0871 0.0910 0.0948 0.0987 0.1026 0.1064 0.1103 0.1141
0.3 0.1179 0.1217 0.1255 0.1293 0.1331 0.1368 0.1406 0.1443 0.1480 0.1517
P(0 Z z) = .40: 0.4

0.5
0.1554
0.1915
0.1591
0.1950
0.1628
0.1985
0.1664
0.2019
0.1700
0.2054
0.1736
0.2088
0.1772
0.2123
0.1808
0.2157
0.1844
0.2190
0.1879
0.2224
0.6 0.2257 0.2291 0.2324 0.2357 0.2389 0.2422 0.2454 0.2486 0.2517 0.2549
0.7 0.2580 0.2611 0.2642 0.2673 0.2704 0.2734 0.2764 0.2794 0.2823 0.2852
0.8 0.2881 0.2910 0.2939 0.2967 0.2995 0.3023 0.3051 0.3078 0.3106 0.3133
1. Find a probability as close as 0.9
1.0
0.3159
0.3413
0.3186
0.3438
0.3212
0.3461
0.3238
0.3485
0.3264
0.3508
0.3289
0.3531
0.3315
0.3554
0.3340
0.3577
0.3365
0.3599
0.3389
0.3621
possible to .40 in the table of 1.1
1.2
0.3643
0.3849
0.3665
0.3869
0.3686
0.3888
0.3708
0.3907
0.3729
0.3925
0.3749
0.3944
0.3770
0.3962
0.3790
0.3980
0.3810
0.3997
0.3830
0.4015
standard normal probabilities. 1.3

.
0.4032
.
0.4049
.
0.4066
.
0.4082
.
0.4099
.
0.4115
.
0.4131
.
0.4147
.
0.4162
.
0.4177
.
. . . . . . . . . . .
. . . . . . . . . . .
2. Then determine the value of z Standard Normal Distribution

from the corresponding row
0.4
and column. Area to the left of 0 = .50 Area = .40 (.3997)
P(z 0) = .50 0.3
P(0 Z 1.28)  .40

f(z)
0.2
Also, since P(Z 0) = .50

0.1
0.0
-5 -4 -3 -2 -1 0 1 2 3 4 5
P(Z 1.28)  .90 Z
Z = 1.28

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99% Interval around the Mean:
P(-z.005< Z < z.005) = 0.99
To have .99 in the center of the distribution, there
z .04 .05 .06 .07 .08 .09
should be (1/2)(1-.99) = (1/2)(.01) = .005 in each . . . . . . .
. . . . . . .
tail of the distribution, and (1/2)(.99) = .495 in . . . . . . .
2.4 ... 0.4927 0.4929 0.4931 0.4932 0.4934 0.4936
each half of the .99 interval. That is: 2.5 ... 0.4945 0.4946 0.4948 0.4949 0.4951 0.4952
2.6 ... 0.4959 0.4960 0.4961 0.4962 0.4963 0.4964
. . . . . . .
P(0 Z z.005) = .495

. . . . . . .
. . . . . . .
Look to the table of standard normal probabilities

Area in center = .99
to find that: Area in center left = .495
0.4
z.005  Area in center right = .495

0.3
z.005 
f(z)
0.2
P(-.2575 Z ) = .99 0.1

Area in right tail = .005
Area in left tail = .005
0.0
-5 -4 -3 -2 -1 0 1 2 3 4 5
Z
-z.005 z.005
-2.575 2.575

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4-4 The Transformation of Normal
Random Variables
Thearea
The withinkk ofofthe
areawithin themean
meanisisthe
thesame
samefor forall
allnormal
normalrandom
randomvariables.
variables.SoSoananarea
area
underany
under anynormal
normaldistribution
distributionisisequivalent
equivalenttotoan
anarea
areaunder
underthe
thestandard
standardnormal.
normal. InInthis
this
example:P(40
example: XP(-1
P(40X P(-1ZZsinceand
sinceand
Thetransformation
The transformationof
ofXXtotoZ:Z:
X x Normal Distribution:  =50, =10
Z
x 0.07
0.06
Transformation 0.05
0.04
f(x)
(1) Subtraction: (X - x) 0.03
0.02 =10
{
Standard Normal Distribution 0.01
0.4 0.00
0 10 20 30 40 50 60 70 80 90 100
X
0.3
f(z)
0.2
(2) Division by x) Theinverse

inversetransformation
transformationof
ofZZtotoX:
X:
The
{
0.1 1.0
0.0
-5 -4 -3 -2 -1 0 1 2 3 4 5
X  x  Z x
Z

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Using the Normal Transformation
Example 4-1 Example 4-2

X~N(160,302) X~N(127,222)
P (100  X  180 ) P ( X  150)
 P
 100    X    180     X    150   
  P 
        
 100  160 180  160 
 P Z 
150  127 
 P Z  
 30 30   22 

 P 2  Z  .6667 
 P Z  1.045 
 0.4772  0.2475  0.7247  0.5  0.3520  0.8520

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Using the Normal Transformation -
Minitab Solutions for Examples 4-1 & 4-2
MTB>>cdf
MTB cdf100;
100;
SUBC>normal
normal160,30.
160,30. MTB>>cdf
MTB cdf150;
150;
SUBC> SUBC>normal
normal127,22.
127,22.
CumulativeDistribution
Cumulative DistributionFunction
Function SUBC>
Normalwith
Normal withmean
mean==160.000
160.000and
andstandard
standard
deviation==30.0000
30.0000 CumulativeDistribution
Function
deviation
Normal with==127.000
Normalwith and==22.0000
127.000and 22.0000
xx P(P(XX<=
<=x)x)
100.0000
100.0000 0.0228
0.0228
xx P(P(XX<=
<=x)x)
MTB>>cdfcdf180;
180; 150.0000
150.0000 0.8521
0.8521
MTB
SUBC>normal
SUBC> normal160,30.
160,30.
CumulativeDistribution
Function
Normalwith
Normal withmean
mean==160.000
160.000and
andstandard
standard
deviation==30.0000
deviation 30.0000
xx P(P(XX<=
<=x)x)
180.0000
180.0000 0.7475
0.7475

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Example 4-3
Normal Distribution:  = 383,  = 12
Example 4-3
0.05
X~N(383,122)
0.04
P ( 394  X  399 ) 0.03
 394   X   399   
f(X)
0.02
 P   
   
0.01
 Standard Normal Distribution

0.00
as
0.4 340 390 440
 394  383 399  383

alen
t ar
e X
 P Z  
0.3
iv
 12 12  Equ
f(z)
0.2

 P 0.9166  Z  1.333  0.1
0.0
 0.4088  0.3203  0.0885

-5 -4 -3 -2 -1 0 1 2 3 4 5
Z
MTB > cdf 394; MTB > cdf 399;

MTB > cdf 394; MTB > cdf 399;
SUBC> normal 383,12. SUBC> normal 383,12.
SUBC> normal 383,12. SUBC> normal 383,12.
Cumulative Distribution Function Cumulative Distribution Function
Normal with mean = 383.000 and standard deviation = 12.0000 Normal with mean = 383.000 and standard deviation = 12.0000
Normal with mean = 383.000 and standard deviation = 12.0000 Normal with mean = 383.000 and standard deviation = 12.0000
x P( X <= x) x P( X <= x)
x P( X <= x) x P( X <= x)
394.0000 0.8203 399.0000 0.9088
394.0000 0.8203 399.0000 0.9088

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Excel Solution for Example 4-3
Do the same with X = 394 and subtract the two values to get 0.088447.

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The Transformation of Normal Random
Variables
The transformation of X to Z: The inverse transformation of Z to X:
X  x X    Z
Z  x x
x
The transformation of X to Z, where a and b are numbers::

 a  
P( X  a)  P Z  
  
 b  
P( X  b)  P Z  
  
a  b  
P(a  X  b)  P Z 
   

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Normal Probabilities
S tan d ard N o rm a l D is trib utio n
• The probability that a normal 0 .4
random variable will be within 1
standard deviation from its mean 0 .3
(on either side) is 0.6826, or
f(z)
0 .2
approximately 0.68.
0 .1
• The probability that a normal

random variable will be within 2 0 .0
-5 -4 -3 -2 -1 0 1 2 3 4 5
standard deviations from its mean Z
is 0.9544, or approximately 0.95.

• The probability that a normal
random variable will be within 3
standard deviation from its mean
is 0.9974.

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4-5 The Inverse Transformation

Thearea
The withinkk ofofthe
areawithin themean
meanisisthe
thesame
sameforforall
allnormal
normalrandom
randomvariables.
variables.To
Tofind
findaa
probabilityassociated
probability associatedwith
withany
anyinterval
intervalofofvalues
valuesforforany
anynormal
normalrandom
randomvariable,
variable,all
allthat
that
isisneeded
neededisistotoexpress
expressthe
theinterval
intervalininterms
termsofofnumbers
numbersofofstandard
standarddeviations
deviationsfrom
fromthe
the
mean.That
mean. Thatisisthe
thepurpose
purposeofofthe
thestandard
standardnormal
normaltransformation.
transformation. IfIfX~N(50,10
X~N(50,102),
2
),
 x   70     70  50 
P( X  70 )  P    P Z    P( Z  2)
     10 
Thatis,
That is,P(X
P(X>70)
>70)can canbebefound
foundeasily
easilybecause
because70 70isis22standard
standarddeviations
deviationsabove
abovethe
themean
mean
ofofX: 70==++22. . P(X
X:70 P(X>>70)
70)isisequivalent
equivalenttotoP(Z
P(Z>>2),2),an
anarea
areaunder
underthe
thestandard
standardnormal
normal
distribution.
distribution.
Example 4-4 X~N(124,122) Normal Distribution:  = 124,  = 12
P(X > x) = 0.10 and P(Z > 1.28) 0.10 0.04
x = + z = 124 + (1.28)(12) = 139.36

0.03
z .07 .08 .09
. . . . .
f(x)
0.02
. . . . .
. . . . .
1.1 ... 0.3790 0.3810 0.3830 0.01
1.2 ... 0.3980 0.3997 0.4015
1.3 ... 0.4147 0.4162 0.4177
. . . . . 0.00
. . . . . 80 130 180
. . . . .
X

BUSINESS STATISTICS
The Inverse Transformation (2)

Example4-6
Example 4-6 X~N(2450,4002)2)
X~N(2450,400
Example4-5
Example 4-5 X~N(5.7,0.52)2)
X~N(5.7,0.5 P(a<X<b)=0.95 and
P(a<X<b)=0.95 P(-1.96<Z<1.96)0.95
andP(-1.96<Z<1.96) 0.95
P(X>>x)=0.01
P(X x)=0.01 and
andP(Z
P(Z>>2.33) 0.01
2.33) 0.01 z
xx== z==2450
2450±±(1.96)(400)
(1.96)(400)==2450
2450
xx==++zz==5.7
5.7++(2.33)(0.5)
(2.33)(0.5)==6.865
6.865 ±784=(1666,3234)
±784=(1666,3234)
P(1666<<XX<<3234)
P(1666 3234)== 0.95
0.95
z .02 .03 .04
. . . . .
z .05 .06 .07
. . . . .
. . . . .
. . . . .
. . . . .
2.2 ... 0.4868 0.4871 0.4875
. . . . .
2.3 ... 0.4898 0.4901 0.4904
1.8 ... 0.4678 0.4686 0.4693
2.4 ... 0.4922 0.4925 0.4927
1.9 ... 0.4744 0.4750 0.4756
. . . . .
2.0 ... 0.4798 0.4803 0.4808
. . . . .
. . . . .
. . . . .
. . . . .
Normal Distribution:  = 5.7  = 0.5 Normal Distribution:  = 2450  = 400

0.8
0.0015
Area = 0.49
0.7
0.6 .4750 .4750
0.5 0.0010
f(x)
0.4
f(x)
0.3 X.01 = +z = 5.7 + (2.33)(0.5) = 6.865
0.0005
0.2 .0250 .0250
0.1 Area = 0.01
0.0 0.0000
3.2 4.2 5.2 6.2 7.2 8.2 1000 2000 3000 4000
X X
-5 -4 -3 -2 -1 0 1 2 3 4 5 -5 -4 -3 -2 -1 0 1 2 3 4 5
z Z.01 = 2.33 -1.96 Z 1.96

BUSINESS STATISTICS
Finding Values of a Normal Random
Variable, Given a Probability
1.1. Draw
Drawpictures
picturesofof Normal Distribution:  = 2450,  = 400
thenormal
the normal 0.0012
.
distributioninin
distribution
0.0010
.
questionand
question andofofthe
the 0.0008
.
f(x)
0.0006
.
standardnormal
standard normal 0.0004
.
distribution.
distribution. 0.0002
.
0.0000
1000 2000 3000 4000
X
S tand ard Norm al D is trib utio n

0.4
0.3
f(z)
0.2
0.1
0.0
-5 -4 -3 -2 -1 0 1 2 3 4 5
Z

BUSINESS STATISTICS
1.1. Draw
Drawpictures
thenormal
the normal 0.0012
.
distributioninin
distribution
0.0010
. .4750 .4750
questionand
question andofofthe
the 0.0008
.
f(x)
0.0006
.
standardnormal
.
distribution.
distribution. 0.0002
. .9500
0.0000
1000 2000 3000 4000
X
2.2. Shade
Shadethe
thearea
area S tand ard Norm al D is trib utio n
correspondingtoto
corresponding 0.4
thedesired
the desired .4750 .4750
0.3
probability.
probability.
f(z)
0.2
0.1
.9500
0.0
-5 -4 -3 -2 -1 0 1 2 3 4 5
Z

BUSINESS STATISTICS
1.1. Draw
Drawpictures
thenormal
normal 0.0012
. 3.3. From
Fromthethetable
table
the ofthe
thestandard
standard
distributioninin
0.0010
. .4750 .4750
of
distribution 0.0008
.
normal
questionand
andofofthe
the normal
question
f(x)
0.0006
.
distribution,
distribution,
standardnormal
.
findthe
find thezzvalue
value
distribution.
distribution.
0.0002
. .9500
0.0000
1000 2000 3000 4000
orvalues.
or values.
X
2.2. Shade
Shadethe
thearea
area
S tand ard Norm al D is trib utio n
corresponding
corresponding
tothe
to thedesired
desired 0.4
.4750 .4750
probability.
probability.
0.3
f(z)
0.2
z .05 .06 .07

. . . . . 0.1
. . . . . .9500
. . . . .
1.8 ... 0.4678 0.4686 0.4693 0.0
1.9 ... 0.4744 0.4750 0.4756 -5 -4 -3 -2 -1 0 1 2 3 4 5
2.0 ... 0.4798 0.4803 0.4808 Z
. . . . .
. . . . .
-1.96 1.96

BUSINESS STATISTICS
1.1. Draw
Drawpictures
thenormal
normal 0.0012
. 3.3. From
Fromthethetable
table
the ofthe
thestandard
standard
distributioninin
0.0010
. .4750 .4750
of
distribution 0.0008
.
normal
questionand
andofofthe
the normal
question
f(x)
0.0006
.
distribution,
distribution,
standardnormal
.
findthe
find thezzvalue
value
distribution.
distribution.
0.0002
. .9500
0.0000
1000 2000 3000 4000
orvalues.
or values.
X
2.2. Shade
Shadethe
thearea
area
S tand ard Norm al D is trib utio n 4.4. Use
Usethe
the
corresponding
corresponding transformation
transformation
tothe
to thedesired
desired 0.4
.4750 .4750
fromzztotoxxtotoget
from get
probability. 0.3 value(s)ofofthe
value(s) the
probability.
originalrandom
original random
f(z)
0.2
z .05 .06 .07

variable.
variable.
. . . . . 0.1
. . . . . .9500
. . . . .
1.8 ... 0.4678 0.4686 0.4693 0.0
-5 -4 -3 -2 -1 0 1 2 3 4 5
zz==2450
x x== 2450±±(1.96)(400)
(1.96)(400)
1.9 ... 0.4744 0.4750 0.4756
2.0 ... 0.4798 0.4803 0.4808 Z = 2450 ±784=(1666,3234)
= 2450 ±784=(1666,3234)
. . . . .
. . . . .
-1.96 1.96

BUSINESS STATISTICS
Using EXCEL to help solve Example 4-4.

BUSINESS STATISTICS
Thenormal
The normaldistribution with==3.5
distributionwith and==1.323
3.5and 1.323isisaaclose
close
approximationto
approximation tothe
thebinomial
binomialwith
withnn==77and
andpp==0.50.
0.50.
P(x<4.5) = 0.7749 Normal Distribution:  = 3.5,  = 1.323 Binomial Distribution: n = 7, p = 0.50
0.3 0.3
P( x 4) = 0.7734
0.2 0.2
P(x)
f(x)
0.1 0.1
0.0 0.0
0 5 10 0 1 2 3 4 5 6 7
X X
MTB > cdf 4.5; MTB > cdf 4;

SUBC> normal 3.5 1.323. SUBC> binomial 7,.5.
Normal with mean = 3.50000 and standard deviation = 1.32300 Binomial with n = 7 and p = 0.500000
x P( X <= x) x P( X <= x)
x P( X <= x) x P( X <= x)
4.5000 0.7751 4.00 0.7734
4.5000 0.7751 4.00 0.7734

BUSINESS STATISTICS
The Normal Distribution as an Approximation to

Other Probability Distributions (2)
Thenormal
The normaldistribution with==5.5
distributionwith and==1.6583
5.5and 1.6583isisaacloser
closer
approximationto
approximation tothe
thebinomial
binomialwith
withnn==11
11and
andpp==0.50.
0.50.
P(x<4.5) = 0.2732
Binomial Distribution: n = 11, p = 0.50
Normal Distribution:  = 5.5,  = 1.6583
P(x4) = 0.2744
0.3
0.2
0.2
P(x)
f(x)
0.1
0.1
0.0
0.0
0 1 2 3 4 5 6 7 8 9 10 11
0 5 10
X
X
MTB > cdf 4;

MTB > cdf 4.5; SUBC> binomial 11,.5.
SUBC> normal 5.5 1.6583. Cumulative Distribution Function
Cumulative Distribution Function
Binomial with n = 11 and p = 0.500000
Normal with mean = 5.50000 and standard deviation = 1.65830
x P( X <= x)
x P( X <= x) x P( X <= x)
x P( X <= x) 4.00 0.2744
4.5000 0.2732 4.00 0.2744
4.5000 0.2732

BUSINESS STATISTICS
Approximating a Binomial Probability
Using the Normal Distribution
  aanp
np bbnp
np 
P ( a  X  b )  P  Z 
P ( a  X  b)  P np(1  p)  Z  np(1  p)
 np(1  p) np(1  p) 
fornnlarge
for (n50)
large (n 50)and
andppnot
nottoo
tooclose
closeto
to00or
or1.00
1.00
Or:
aa00.5.5np
np bb00.5.5np
np
P ( a  X  b )  P  Z 
P(a  X  b)  P np(1  p)  Z  np(1  p)
 np(1  p) np(1  p) 
fornnmoderately
for moderatelylarge (20 nn<<50).
large(20 50).
IfIfppisiseither
eithersmall
small(close
(closeto
to0)
0)or
orlarge
large(close
(closeto
to1),
1),use
usethe
thePoisson
Poisson
approximation.
approximation.

BUSINESS STATISTICS
4-7 Using the Computer
• In EXCEL, the command

NORMSDIST(number) will return
cumulative probability for a standard normal
random variable.
• The command NORMDIST(number,
mean, standard deviation) will return the
cumulative probability for a general random
variable.

BUSINESS STATISTICS
4-7 Using the Computer
• For example, NORMSDIST(1.0) = 0.8413.

• NORMDIST(10.0, 5, 2) = 0.9938.
• The inverse commands are
NORMSINV(number) and
NORMINV(number, mean, standard
deviation).
• NORMSINV(0.975) = 1.96.
• NORMINV(0.975, 20, 10) = 39.6.

The Normal Distribution: Business Statistics

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The Normal Distribution: Business Statistics

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COMPLETE 4-1 fourth edi tion

4 The Normal Distribution

Irwin/McGraw-Hill Aczel © The McGraw-Hill Companies, Inc., 1999

0.3 0.3 0.3

0.2 0.2 0.2

0.0 0.0 0.0

Normal Probability Density 0.4

where e  2.7182818... and   314159265

Irwin/McGraw-Hill Aczel © The McGraw-Hill Companies, Inc., 1999

4-2 The Normal Probability Distribution

The normal probability density function: Normal Distribution:  = 0, = 1

where e  2.7182818... and   314159265

Irwin/McGraw-Hill Aczel © The McGraw-Hill Companies, Inc., 1999

The Normal Probability Distribution

• The normal is a family of

Irwin/McGraw-Hill Aczel © The McGraw-Hill Companies, Inc., 1999

Normal Probability Distributions

0.0 0.0 0.0

W~N(40,1) X~N(30,25) Y~N(50,9)

0.1 P(25 X 35) normal probability density

4-3 The Standard Normal Distribution

Standard Normal Distribution

Irwin/McGraw-Hill Aczel © The McGraw-Hill Companies, Inc., 1999

Look in row labeled 1.5 2.1

Irwin/McGraw-Hill Aczel © The McGraw-Hill Companies, Inc., 1999

Standard Normal Distribution

Irwin/McGraw-Hill Aczel © The McGraw-Hill Companies, Inc., 1999

2. Find table area for 1.00 .

= .9772 - .8413 = .1359

Standard Normal Distribution

Irwin/McGraw-Hill Aczel © The McGraw-Hill Companies, Inc., 1999

P(0 Z z) = .40: 0.4

standard normal probabilities. 1.3

2. Then determine the value of z Standard Normal Distribution

P(0 Z 1.28)  .40

Also, since P(Z 0) = .50

Irwin/McGraw-Hill Aczel © The McGraw-Hill Companies, Inc., 1999

P(0 Z z.005) = .495

Look to the table of standard normal probabilities

z.005  Area in center right = .495

P(-.2575 Z ) = .99 0.1

Irwin/McGraw-Hill Aczel © The McGraw-Hill Companies, Inc., 1999

(2) Division by x) Theinverse

Irwin/McGraw-Hill Aczel © The McGraw-Hill Companies, Inc., 1999

Using the Normal Transformation

Example 4-1 Example 4-2

Irwin/McGraw-Hill Aczel © The McGraw-Hill Companies, Inc., 1999

Irwin/McGraw-Hill Aczel © The McGraw-Hill Companies, Inc., 1999

 Standard Normal Distribution

 394  383 399  383

 0.4088  0.3203  0.0885

MTB > cdf 394; MTB > cdf 399;

Irwin/McGraw-Hill Aczel © The McGraw-Hill Companies, Inc., 1999

Irwin/McGraw-Hill Aczel © The McGraw-Hill Companies, Inc., 1999

The transformation of X to Z, where a and b are numbers::

Irwin/McGraw-Hill Aczel © The McGraw-Hill Companies, Inc., 1999

(on either side) is 0.6826, or

• The probability that a normal

standard deviations from its mean Z

is 0.9544, or approximately 0.95.

Irwin/McGraw-Hill Aczel © The McGraw-Hill Companies, Inc., 1999

4-5 The Inverse Transformation

x = + z = 124 + (1.28)(12) = 139.36