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Lecture Statistical techniques in business and economics - Chapter 7: The normal probability distribution

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When you have completed this chapter, you will be able to: Explain how probabilities are assigned to a continuous random variable, explain the characteristics of a normal probability distribution, define and calculate z value corresponding to any observation on a normal distribution, determine the probability a random observation is in a given interval on a normal distribution using the standard normal distribution, use the normal probability distribution to approximate the binomial probability distribution.

7 ­ 1 THE Normal PROBABILITY DISTRIBUTION Copyright © 2004 by The McGraw­Hill Companies, Inc.  All rights reserved.  7 ­ 2 When you have completed this chapter, you will be able to:  Explain how probabilities are assigned                                      to a continuous random variable  Explain the characteristics of a normal  probability distribution Define and calculate z value corresponding to  any observation on a normal distribution Copyright © 2004 by The McGraw­Hill Companies, Inc.  All rights reserved.  7 ­ 3  Determine the probability a random observation is                                 in a given interval on a normal distribution                                                               using the standard  normal distribution.  Use the normal probability distribution to approximate                      the binomial probability distribution Copyright © 2004 by The McGraw­Hill Companies, Inc.  All rights reserved.  7 ­ 4 Continuous Random Variable Continuous Random Variable …the set of                                                                  all the values                                                  in  any interval                                                                     is                                                                          ….we will now study the class of  uncountable or infinite! ….we will now study the class of  continuous probability distributions continuous probability distributions Recall… Recall… Copyright © 2004 by The McGraw­Hill Companies, Inc.  All rights reserved.  Variables 7 ­ 5 Quantitative … can be classified as either  Discrete or Continuous Numerical Observations Continuous Continuous Characteristics Characteristics … can assume  any any  value value              … can assume            within a specified  within a specified              range! range! e.g. ­  Pressure in a tire        ­  Weight of a pork chop        ­  Height of students in a class Also Recall that… Also Recall that… Copyright © 2004 by The McGraw­Hill Companies, Inc.  All rights reserved.  Continuous Random Variable 7 ­ 6 Continuous Random Variable …the Total sum of probabilities              …the Total sum of probabilities                                         should always be 1!                            should always be 1! When dealing with a                                                                                                        When dealing with a Continuous Random Variable                                      Continuous Random Variable we assume that                                                       we assume that                                                                          the probability that the variable                           the probability that the variable                                   will take on any particular                             will take on any particular  value is 0! is 0! value  Instead,                                                                    Instead,                                                                    Probabilities are assigned to intervals of values! Probabilities are assigned to intervals of values! Copyright © 2004 by The McGraw­Hill Companies, Inc.  All rights reserved.  Continuous Probability  7 ­ 7 Distributions Range of Values  Range of Values  f(x) P(a

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