BUSAN 220: Intro to Business Statistics
Chapter 6:
Continuous Probability Distributions
(Part 3)
Hyeonsik Shin
[email protected]
Remaining Schedule
Table of Content
6.1 Continuous Random Variables and the
Uniform Distribution
6.2 The Normal Distribution
6.3 Other Continuous Probability Distributions
Preview of Homework 6
Types of
Continuous Probability Distribution
Uniform Distribution
Uncountable
Continuous
Outcomes
Probability
(Continuous Random
Distribution
Variable)
Normal Distribution
Exponential Distribution
Lognormal Distribution
Quick Exercise 1
• As a sweatshirt manufacturer, you are tasked with
determining the proportion of each size (Small,
Medium, Large) to produce for an upcoming season.
Based on a survey of body sizes, the distribution of
chest measurements (in inches) among your target
customers is as follows.
Probability
Q. What proportion of each size would
be the best choice?
0.1
a. 33.3% small, 33.3% medium, and
33.3% large
b. 15% small, 70% medium, and 15%
large
Chest
34in 44in measurement
Quick Exercise 2
• As a sweatshirt manufacturer, you are tasked with
determining the proportion of each size (Small,
Medium, Large) to produce for an upcoming season.
Based on a survey of body sizes, the distribution of
chest measurements (in inches) among your target
customers is as follows.
Probability
Q. What proportion of each size would
be the best choice?
a. 33.3% small, 33.3% medium, and
33.3% large
b. 15% small, 70% medium, and 15%
large
Chest
34in 39in 44in measurement
6.3 Other Continuous Probability
Distributions
Events Occurring Continuously
at a Constant Rate
Receiving Customer Incoming Phone Calls
Emails Visits at a Customer Service
• Out interest
– What is the average time between events?
Events Occurring Continuously
at a Constant Rate
• = Time between email messages
2h 3h
1h 0.5h
Email 1 Email 2 Email 3 Email 4
• Will we get a symmetric or a non-symmetric
distribution of ?
Time
Time Time
Events Occurring Continuously
at a Constant Rate
• = Time between email messages
• Shorter intervals are more common
• Longer intervals are rare
• This is the exponential distribution
𝑓 ( 𝑥)
(Time between email messages)
Exponential Distribution
• Describes the time that has elapsed between
occurrences of an event
Exponential Distribution
• Described by one parameter
• : Rate parameter (pronounced LAM-duh)
• For example,
• 1 email per hour, 30 customers per day, 13.5 phone
calls per hour…
Summary Measures of the
Exponential Distribution
• = Time between events
• The mean of
• The standard deviation of
Calculating the Probability of the
Exponentially Distributed Random Variable
• We are interested in the probability that the
time between events is within an interval
– For example, the probability that you get an email
within 10 minutes is
𝑓 ( 𝑥)
Area under
the curve = 1
(Time between events)
Calculating the Probability of the
Exponentially Distributed Random Variable
• How can we calculate ?
• We need to know the rate parameter,
• Probability density function:
• We can use the Excel formula
=EXPON.DIST(True)
• Then Excel will use the probability density function
above to calculate the cumulative probability for
you!
Exercise
• The time between e-mail messages during
work hours is exponentially distributed with a
mean of 25 minutes.
1. Calculate the rate parameter 𝜆.
• . Therefore, 𝜆
Exercise
• The time between e-mail messages during
work hours is exponentially distributed with a
mean of 25 minutes. (𝜆
2. What is the probability that you get an e-mail
within 10 minutes?
𝑃 ( 𝑋 ≤10)=0.3297
Get this number in Excel
=EXPON.DIST() that is
=EXPON.DIST()
Exercise
• The time between e-mail messages during
work hours is exponentially distributed with a
mean of 25 minutes. (𝜆
3. What is the probability that you do not get an
e-mail for more than one hour?
1−𝑃(𝑋≤60)=1−0.9093=0. 907
Get this number in Excel
=EXPON.DIST() that is
=EXPON.DIST()
Events with Positively Skewed Distributions
Lognormal Distribution
• A probability distribution of a random variable
whose logarithm is normally distributed
• is lognormal if is normally distributed
(Normal) Mean = , SD =
Define or =
(Lognormal) Mean = ,
SD =
You don’t need to memorize or worry about these formulae!
Lognormal Distribution
• Described by two parameters
– Mean () and the standard deviation ()
Exercise
• Let X be a normal random variable with mean
and standard deviation . Let (Y is a
lognormal random variable).
1. Find P(Y ≤ 200)
First, let’s convert Y into X by applying logarithm on both sides.
P (Y 200) P(ln(Y ) ln(200)) P( X 5.3) Use Excel
=NORM.DIST()
5.3 − 5
Then, let’s find the z-score of 5.3 𝑧 = = 0.25
1.2
So, we can write it as P ( Z 0.25) 0.5987
Use a z-score table
Exercise
• Let X be a normal random variable with mean
and standard deviation Let (Y is a
lognormal random variable).
2. Find P(110 ≤ Y ≤ 300)
First, let’s convert Y into X by applying logarithm on both sides.
𝑃 ( 110 ≤ 𝑌 ≤ 300 )=𝑃 ( ln ( 110 ) ≤ ln ( 𝑌 ) ≤ ln ( 300 ) )= P( 4.7 ≤ 𝑋 ≤ 5.7)
4.7 − 5 Use Excel
Then, let’s find the z-score of 4.7 and 5.7 𝑧 = 1.2
=− 0.25 =NORM.DIST()
5.7 − 5
𝑧= = 0.58
1.2
So, we can write it asP ( −0.25 ≤ 𝑍 ≤ 0.58 )=0.7190 −0.4013=0.3177
Use a z-score table
Summary
• Two more continuous probability distributions
– Exponential Distribution
– Lognormal Distribution
Preview of Homework 6
Next Step
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