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Continuous Distributions

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4 views

Continuous Distributions

Uploaded by

nitikesh31
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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- Normal (Continuous) Distribution

- Central limit theorem

Dr. Ramzan Tahir


Characteristics of Normal Distribution

Symmetry around the mean

Mean, Median, and Mode are Equal

Bell-shaped Curve
Properties of Normal Distribution

Empirical Rule (68-95-99.7 Rule)

Standard Deviation and Variance

Z-Scores and Standard Normal Distribution


The 68–95–99.7 Rule
Probability Density Function (PDF)

 Equation of Normal Distribution

 𝑓(𝑥) = probability density function


 µ = mean
 σ = standard deviation

 Area under the Curve Represents Probability


Applications of Normal Distribution

Quality Control in Manufacturing

Finance and Risk Management

Biostatistics and Population Studies


Normal Distribution

 Normal distributions are appropriate models for distributions whose shapes


are unimodal and roughly symmetric.

 The Normal distribution with mean 0 and standard deviation 1 is called the
standard Normal distribution (or the standard Normal model).
Example

 Family income ~ N($25000, $10000). If the poverty level is


$10,000, what percentage of the population lives in poverty?

 P(X ≤ $10,000)
Example

 A new tax law is expected to benefit “middle income” families,


those with incomes between $20,000 and $30,000. If Family
income ~ N($25000, $10000 ), what percentage of the
population will benefit from the law?

 P($20,000 ≤ X ≤ $30,000)
Exercise

 In the United States the ages 13 to 55+ of smartphone users approximately


follow a normal distribution with approximate mean and standard
deviation of 36.9 years and 13.9 years, respectively.

 a. Determine the probability that a random smartphone user in the age


range 13 to 55+ is between 23 and 64.7 years old.
 b. Determine the probability that a randomly selected smartphone user in
the age range 13 to 55+ is at most 50.8 years old.
 A survey of 500 seniors in the Price Business School yields the following
information. 75% go straight to work after graduation. 15% go on to work on their
MBA. 9% stay to get a minor in another program. 1% go on to get a Master's in
Finance.
 What is the probability that more than 2 seniors go to graduate school for their
Master's in finance?
The Central Limit Theorem

 The Central Limit Theorem (CLT)


 Let X1, X2, . . . , Xn be a random sample from a distribution with mean µ and
variance σ2.
 Then if n is “large enough”, has approximately a normal distribution with

 What is “large enough” It depends. In this class, we’ll say n >= 30 is large enough.
Central Limit Theorem
Example

 The amount of impurity in a batch of a chemical product is a


random variable with mean value 4.0 g and standard
deviation 1.5 g. (unknown distribution).
 If 50 batches are independently prepared, what is the
(approximate) probability that the average amount of impurity
in these 50 batches is between 3.5 and 3.8 g?
Normal Probability Plots

 If the distribution of the data is roughly Normal, the plot is roughly a


diagonal straight line. Deviations from a straight line indicate that the
distribution is not Normal.
The Normal Approximation
for the Binomial
 Suppose we send out 1000 flyers advertising a free cup of coffee at our
new cafe and we think that the probability that someone will come is
about 0.10. We might want to know the chance that at least 120 people
will come to claim their coffee. We could use the binomial to calculate that
with n = 1000 and p = 0.10.
The Uniform Distribution
Example
Mean and variance of Uniform
distribution
The Exponential Model

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