Continuous Probability Distributions

Continuous
Probability
Distributions
DIVINA ESTACIO, MScM, LPT
NATIONAL UNIVERSITY
DASMARINAS
Uniform Probability Distribution
Normal Probability Distribution

Exponential Probability Distribution
Uniform
f (x)
f (x)
Normal
f (x) Exponential
x
x
Continuous Probability Distributions
 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.
Continuous Probability Distributions
 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)
f (x)
Normal
f (x) Exponential
x
x11 x22
x
x11 x22
x
x11 xx1122 x22
 A random variable is uniformly distributed
whenever the probability is proportional to the
interval’s length.
 The uniform probability density function is:
ff (x)
(x) == 1/(b
1/(b –– a)
a) for
for aa << xx << bb
== 00 elsewhere
elsewhere
where: a = smallest value the variable can assume

b = largest value the variable can assume
 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.
 Expected Value of x
E(x)
E(x) == (a
(a ++ b)/2
b)/2
 Variance of x
Var(x)
Var(x) == (b
(b -- a)
a)22/12
/12
 Uniform Probability Density Function
f(x) == 1/10
f(x) 1/10 for
for 55 << xx << 15
15
== 00 elsewhere
elsewhere
where:
x = salad plate filling weight
 Expected Value of x
E(x) = (a + b)/2
= (5 + 15)/2
= 10
 Variance of x
Var(x) = (b - a)22/12
= (15 – 5)22/12
= 8.33
■ Uniform Probability Distribution
for Salad Plate Filling Weight
f(x)
1/10
x
0 5 10 15
Salad Weight (oz.)
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
0 5 10 12 15
Salad Weight (oz.)
■ The normal probability distribution is
the most important distribution for
describing a continuous random
variable.
 It is widely used in statistical inference.
 It has been used in a wide variety of
applications
including:
• Heights of people
• Test scores
• Rainfall amounts
• Scientific measurements
 Normal Probability Density Function
1  ( x   )2 /2 2
f (x)  e
 2
where:
 = mean
 = standard deviation
 = 3.14159 = PI() (Excel)
e = 2.71828 = EXP(1) (Excel)
© 2009 Thomson South-Western. All Rights Reserved Slide

13
 Characteristics
The distribution is symmetric; its skewness

measure is zero.
x
 Characteristics
The highest point on the normal curve is at the

mean, which is also the median and mode.
x
 Characteristics
The entire family of normal probability

distributions is defined by its mean m and its
standard deviation s .
Standard Deviation s
x
Mean m
 Characteristics
The mean can be any numerical value: negative,

zero, or positive.
x
-10 0 25
 Characteristics
The standard deviation determines the width of the

curve: larger values result in wider, flatter curves.
s = 15
s = 25
x
 Characteristics
Probabilities for the normal random variable are

given by areas under the curve. The total area
under the curve is 1 (.5 to the left of the mean and
.5 to the right).
.5 .5
x
 Characteristics
68.26% of values of a normal random variable

are within +/- 1 standard deviation of its mean.

are within +/- 2 standard deviations of its mean.

are within +/- 3 standard deviations of its mean.
Standard Normal Probability Distribution
 Characteristics
A
A random
random variable
variable having
having aa normal
normal distribution
distribution
with
with aa mean
mean of
of 00 and
and aa standard
standard deviation
deviation of
of 11 is
is
said
said to
to have
have aa standard
standard normal
normal probability
probability
distribution.
distribution.
 Characteristics
99.72%
95.44%
68.26%
m
x
m – 3s m – 1s m + 1s m + 3s
m – 2s m + 2s
 Characteristics
The letter z is used to designate the standard

normal random variable.
s=1
z
0
 Converting to the Standard Normal Distribution
x
z

We can think of z as a measure of the number of

standard deviations x is from .
Using Excel to Compute
Standard Normal Probabilities
 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.
 Excel Formula Worksheet
A B
1 Probabilities: Standard Normal Distribution
2
3 P (z < 1.00) =NORMSDIST(1)
4 P (0.00 < z < 1.00) =NORMSDIST(1)-NORMSDIST(0)
5 P (0.00 < z < 1.25) =NORMSDIST(1.25)-NORMSDIST(0)
6 P (-1.00 < z < 1.00) =NORMSDIST(1)-NORMSDIST(-1)
7 P (z > 1.58) =1-NORMSDIST(1.58)
8 P (z < -0.50) =NORMSDIST(-0.5)
9
 Excel Value Worksheet
A B
1 Probabilities: Standard Normal Distribution
2
3 P (z < 1.00) 0.8413
4 P (0.00 < z < 1.00) 0.3413
5 P (0.00 < z < 1.25) 0.3944
6 P (-1.00 < z < 1.00) 0.6827
7 P (z > 1.58) 0.0571
8 P (z < -0.50) 0.3085
9
A B
1 Finding z Values, Given Probabilities
2
3 z value with .10 in upper tail =NORMSINV(0.9)
4 z value with .025 in upper tail =NORMSINV(0.975)
5 z value with .025 in lower tail =NORMSINV(0.025)
6
A B
1 Finding z Values, Given Probabilities
2
3 z value with .10 in upper tail 1.28
4 z value with .025 in upper tail 1.96
5 z value with .025 in lower tail -1.96
6
 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.
The store manager is concerned that sales are

being lost due to stockouts while waiting for a
replenishment order.
 Example: Pep Zone

It has been determined that demand during
replenishment lead-time is normally distributed
with a mean of 15 gallons and a standard deviation
of 6 gallons.
The manager would like to know the probability

of a stockout during replenishment lead-time. In
other words, what is the probability that demand
during lead-time will exceed 20 gallons?
P(x > 20) = ?

 Solving for the Stockout Probability
Step 1: Convert x to the standard normal distribution.
z = (x - )/
= (20 - 15)/6
= .83
Step 2: Find the area under the standard normal

curve to the left of z = 0.83.
see next slide

 Cumulative Probability Table for

the Standard Normal Distribution
z .00 .01 .02 .03 .04 .05 .06 .07 .08 .09
. . . . . . . . . . .
.5 .6915 .6950 .6985 .7019 .7054 .7088 .7123 .7157 .7190 .7224
.6 .7257 .7291 .7324 .7357 .7389 .7422 .7454 .7486 .7517 .7549
.7 .7580 .7611 .7642 .7673 .7704 .7734 .7764 .7794 .7823 .7852
.8 .7881 .7910 .7939 .7967 .7995 .8023 .8051 .8078 .8106 .8133
.9 .8159 .8186 .8212 .8238 .8264 .8289 .8315 .8340 .8365 .8389
. . . . . . . . . . .
P(z < .83)

Area = 1 - .7967
Area = .7967
= .2033
z
0 .83
Step
Step 3:
3: Compute
Compute the
the area
area under
under the the standard
standard normal
normal
curve
curve to
to the
the right
right of
of zz == .83.
.83.
P(z > .83) = 1 – P(z < .83)

= 1- .7967
= .2033
Probability
of a stockout P(x > 20)
■ Standard Normal Probability Distribution
If the manager of Pep Zone wants the probability

of a stockout during replenishment lead-time to
be no more than .05, what should the reorder
point be?
 Solving for the Reorder Point
Area = .9500
Area = .0500
z
0 z.05
Step
Step 1:
1: Find
Find the z-value that
the z-value that cuts
cuts off
off an
an area
area of
of .05
.05
in
in the
the right
right tail
tail of
of the
the standard
standard normal
normal
distribution.
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 We
.9693look up.9706
.9699
the.9756
1.9 .9713 .9719 .9726 .9732 .9738 .9744 .9750 complement
.9761 .9767
. . . . . . . . of the. tail. area .
(1 - .05 = .95)
Step
Step 2:
2: Convert
Convert zz.05 to the corresponding value of x.
.05 to the corresponding value of x.
z = (x - )/ x =  + z.05 
.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.

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
customer’s desire to make a purchase.
EXAMPLE 1
Normal Probabilities
 Excel has two functions for computing cumulative
probabilities and x values for any normal
distribution:
NORMDIST
NORMDIST is is used
used to
to compute
compute the
the cumulative
cumulative
probability
probability given
given anan xx value.
value.
NORMINV
NORMINV is is used
used to
to compute
compute the
the xx value
value given
given
aa cumulative
cumulative probability.
probability.
A B
1 Probabilities: Normal Distribution
2
3 P (x > 20) 0.2023
4
5 Finding x Values, Given Probabilities
6
7 x value with .05 in upper tail 24.87
8
Note: P(x > 20) = .2023 here using Excel, while our
previous manual approach using the z table yielded
.2033 due to our rounding of the z value.
 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:
• Time between vehicle arrivals at a toll booth
• Time required to complete a questionnaire
• Distance between major defects in a highway
■ Density Function
1
f ( x )  e xx// for x > 0,  > 0

where:  = mean
e = 2.71828
A B
1 Probabilities: Normal Distribution
2
3 P (x > 20) =1-NORMDIST(20,15,6,TRUE)
4
5 Finding x Values, Given Probabilities
6
7 x value with .05 in upper tail =NORMINV(0.95,15,6)
8
■ Cumulative Probabilities
P ( x  x00 )  1  e xxoo//
where:
x0 = some specific value of x
Exponential Probabilities
The EXPONDIST function can be used to compute

exponential probabilities.
The EXPONDIST function has three arguments:

1stst The value of the random variable x
nd 1/m
2nd the inverse of the mean
number of occurrences
3rdrd “TRUE” or “FALSE” in an interval
We will always enter

“TRUE” because we’re seeking a
cumulative probability.
A B
1 Probabilities: Exponential Distribution
2
3 P (x < 18) =EXPONDIST(18,1/15,TRUE)
4 P (6 < x < 18) =EXPONDIST(18,1/15,TRUE)-EXPONDIST(6,1/15,TRUE)
5 P (x > 8) =1-EXPONDIST(8,1/15,TRUE)
6
A B
2
3 P (x < 18) 0.6988
4 P (6 < x < 18) 0.3691
5 P (x > 8) 0.5866
6
 Example: Al’s Full-Service Pump
The time between arrivals of cars at Al’s 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.
 Example: Al’s Full-Service Pump
f(x)
.4 P(x < 2) = 1 - 2.71828-2/3

-2/3 = 1 - .5134 = .4866
.3
.2
.1
x
0 1 2 3 4 5 6 7 8 9 10
Time Between Successive Arrivals (mins.)
A B
2
3 P (x < 2) =EXPONDIST(2,1/3,TRUE)
4
A B
2
3 P (x < 2) 0.4866
4
Relationship between the Poisson and Exponential
Distributions
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

Continuous Probability Distributions

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Continuous Probability Distributions

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Continuous

Normal Probability Distribution

 A continuous random variable can assume any value

 It is not possible to talk about the probability of the

 Instead, we talk about the probability of the random

 The probability of the random variable assuming a

where: a = smallest value the variable can assume

 Uniform Probability Density Function

What is the probability that a customer

P(12 < x < 15) = 1/10(3) = .3

 Normal Probability Density Function

© 2009 Thomson South-Western. All Rights Reserved Slide

The distribution is symmetric; its skewness

The highest point on the normal curve is at the

The entire family of normal probability

The mean can be any numerical value: negative,

The standard deviation determines the width of the

Probabilities for the normal random variable are

68.26% of values of a normal random variable

95.44% of values of a normal random variable

99.72% of values of a normal random variable

The letter z is used to designate the standard

 Converting to the Standard Normal Distribution

We can think of z as a measure of the number of

NORM S DIST is used to compute the cumulative

The “S” in the function names reminds

 Example: Pep Zone

The store manager is concerned that sales are

 Example: Pep Zone

The manager would like to know the probability

P(x > 20) = ?

 Solving for the Stockout Probability

Step 1: Convert x to the standard normal distribution.

Step 2: Find the area under the standard normal

see next slide

 Cumulative Probability Table for

P(z < .83)

 Solving for the Stockout Probability

 Solving for the Stockout Probability

P(z > .83) = 1 – P(z < .83)

■ Standard Normal Probability Distribution

If the manager of Pep Zone wants the probability

 Solving for the Reorder Point

 Solving for the Reorder Point

 Solving for the Reorder Point

A reorder point of 25 gallons will place the probability

 Solving for the Reorder Point

 The exponential probability distribution is useful in

The EXPONDIST function can be used to compute

The EXPONDIST function has three arguments:

We will always enter

.4 P(x < 2) = 1 - 2.71828-2/3

The Poisson distribution

The exponential distribution

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