Chapter 16

Introductory Mathematics
& Statistics for Business

Chapter 16
The Normal Distribution
Copyright 2010 McGraw-Hill Australia Pty
16-1
Learning Objectives
Identify the properties of the normal distribution and normal
curve
Identify the characteristics of the standard normal curve
Understand examples of normally distributed data
Read z-score tables and find areas under the normal curve
Find the z-score, given the area under the normal curve
Compute proportions
Check whether data follow a normal distribution
Understand and apply the Central Limit Theorem
Solve business problems that can be represented by a
normal distribution
Calculate estimates and their standard errors
Calculate confidence intervals for the population mean
Calculate confidence intervals for the population proportion
Copyright 2010 McGraw-Hill Australia Pty Ltd

PowerPoint slides to accompany Croucher, Introductory Mathematics and Statistics, 5e
16-2
16.1 Introduction
When the frequencies of observations for a large
population result in a frequency polygon that follows the
pattern of a smooth bell-shaped curve that population is
said to have a normal distribution.

16-3
Introduction (cont)
The normal curve
If the frequency polygon for a given set of observations that
have a normal distribution is made into a smooth curve, the
resulting curve is referred to as a normal curve.
A specific normal curve is characterised by its mean () and
standard deviation ().

16-4
Introduction (cont)
The main features of a normal distribution are:
It is bell-shaped.
It is symmetric about the mean.
It is asymptotic to the horizontal axis.
Approximately 68% of the distribution lies within 1 standard
deviation of the mean;
about 95% lies within 2 standard deviations of the mean;
about 99.7% lies within 3 standard deviations of the mean.
The location and dispersion will depend on the values of
and (see Figures 16.2 and 16.3).
The total area under any normal curve is 1.

16-5
16.2 An Example of Data that have an

Approximate Normal Distribution
As part of a study by the author, random samples of
200 males and 200 females were selected from the
students enrolled in a large introductory statistics
course at Macquarie University, Sydney.
Each student was asked to record his or her height, to
the nearest centimetre.
The male heights have a mean of 178.6 cm and a
standard deviation of 7.0 cm, and the female heights
have a mean of 164.5 cm and a standard deviation of
7.7 cm.
16-6
An Example of Data that have an

Approximate Normal Distribution (cont)
The histograms displaying the grouped frequency
distributions for the male and female heights

16-7
16.3 Areas Under The Normal Curve

The proportions of observations that take on certain
values are represented by areas under the distribution
curve
The proportion of observations that take on a value
between a and b is the area under the curve between
two vertical lines erected at a and b.
We could calculate these areas and thus obtain values
for the proportions.

16-8
Areas Under The Normal Curve (cont)

Standard Scores (z scores)
The z-score of a measurement is defined as the number of
standard deviations the measurement is away from the mean
If the measurement is above the mean, the corresponding zscore is positive; but if the measurement is below the mean,
the corresponding z-score is negative
Standard score z
observed value - mean

standard deviation
Thus, if a distribution has a mean of and a standard deviation

of , the corresponding z-score of an observation x is:
x
z

16-9
Areas Under The Normal Curve (cont)

Standard Scores (z scores)
The mean itself has a z-score of zero and that a value exactly
1 standard deviation from the mean has z = + 1 or 1.
The mean itself has a z-score of zero and that a value exactly
1 standard deviation from the mean has z = + 1 or 1. The
larger a positive z-value, the further the given x is above the
mean, while large negative z-values correspond to extreme
values below the mean
It is found in practice with most data sets that the vast majority
of observations have a z-score in the range roughly 2 to + 2.

16-10
16.4 Using the Table of the Standard

Normal Curve
Table 6 gives the area under the standard normal curve

between the mean (zero) and any positive number z.
Example
Using Table 6, determine the area under the standard

normal curve:
(a) between z = 0 and z = 1.50
(b) between z = 2.10 and z = 0
(c) between z = 0.60 and z = 1.80
(d) between z = 0.30 and z = 2.25
(e) to the right of z = 1.95

16-11
Using the Table of the Standard Normal

Curve (cont)
Solution
(a) From Table 6, the area between z = 0 and z = 1.50 is
0.4332
(b) In order to find the area to the left of z = 0, the symmetry of
the normal curve can be used. In this case, the area
between z = 2.10 and z = 0 is the same as the area
between z = 0 and z = + 2.10. From Table 6, this area is
0.4821.
(c) The area between z = 0.60 and z = 1.80 may be found by
subtracting the area between z = 0 and z = 0.60 from the
area between z = 0 and z = 1.80. From Table 6:
The area between z = 0 and z = 1.80 is 0.4641.
Therefore, the required area is 0.4641 0.2257 = 0.2384.
16-12

Curve (cont)
Solution (cont)
(d) The area between z = 0.30 and z = 2.25 may be found by
adding the area between z = 0.30 and z = 0 to the area
between z = 0 and z = 2.25. The area between z = 0.30
and z = 0 equals the area between z = 0 and z = + 0.30 (by
symmetry). From Table 6:
Therefore, the required area is 0.1179 + 0.4878 = 0.6057.
(e) From the facts that the normal curve is symmetrical about
the mean and the total area under the curve is 1, it follows
that the area to the right of z = 0 is 0.5 and that the area to
the left of z = 0 is also 0.5. Thus, to find the area to the right
of z = 1.95, we subtract the area between z = 0 and z = 1.95
from 0.5. From Table 6:
Therefore, the required area is 0.5000 0.4744 = 0.0256.
16-13

Curve (cont)
Conversion to raw scores
In order to determine appropriate areas under any
normal curve, the z-score (or standard score) may be
calculated.
The z-scores express the given problem in standard
form so that the standard normal curve can be used.
To convert a raw score of x (from a distribution with
mean and standard deviation ) to a z-score,
subtract the mean from x and divide by the standard
deviation.
To convert a z-score to a raw score x, multiply the zscore by the standard deviation and add this product
to the mean.
In equation form:

16-14
16.5 Computation of Proportions
A proportion within a given interval

If a set of data has a normal distribution, the proportion of
observations that lie in a particular interval can be found
using the following procedure:
1. Determine the z-score for each end point of the interval.
2. Find the area (from Table 6) for each z-value. (If the zvalue is negative, ignore the sign.)
3. lf the end points of the interval lie on opposite sides of
the mean, add the two areas found in Step 2. If the two
end points lie on the same side of the mean, subtract
the smaller area from the larger one.

16-15
Computation of Proportions (cont)

A proportion greater or less than a given value
Table 6 can also be used to determine what proportion of a
normal population is greater than a certain value or less than
a certain value
To determine the proportion of a normal distribution
greater than a value of x, calculate the z-score
corresponding to x and find the area to the right of this
score.
To determine the proportion of a normal distribution less
than a value of x, calculate the z-score corresponding to
x and find the area to the left of this score.

16-16
Computation of Proportions (cont)

A value corresponding to a given proportion
For some problems it is necessary to find the z-score for a given area
rather than the other way around.
Example : Suppose that a particular MBA entrance exam is

designed so that the marks will be normally distributed with a
mean of 300 and a standard deviation of 60. The policy is that
the top 35% gain admission to the program. What is the lowest
mark that would gain admission?
Solution
From Table 6, z = 0.38 gives an area of 0.1480 while z = 0.39
gives an area of 0.1517. Thus, the z-score required is
somewhere between 0.38 and 0.39, say 0.385. this z-score
can be converted to a raw score:
x z
300 60 0.385
323.1
16-17
16.6 Checking Whether Data are

Normally Distributed
Even if the distribution is believed to be normal, it is rare for

the mean and standard deviation s to be known precisely
much of statistical testing depends on whether or not the
data are normally distributed
A wrong assumption can lead to an incorrect statistical test
being used on the data, which in turn can lead to a doubtful
conclusion
The construction of a histogram and corresponding
frequency polygon of the data can give a rough idea of its
shape
If the frequency polygon for a large sample clearly does not
have a normal shape, it is unlikely that the population does
either.

16-18
16.7 The Central Limit Theorem

Definition
If random samples of size n are selected from a population
with mean and standard deviation , the means of the
samples are approximately normally distributed with mean
and standard deviation

even if the population itself is not
n
normally distributed, provided that n is not too small. The
approximation becomes more and more accurate as the
sample size n is increased.
The Central Limit Theorem also says that any unusual
shapes of populations are suppressed. That is, even if
individual values come from a very non-normal population
(such as one that is skewed or bimodal), the sample means
tend to have a normal distribution.

16-19
The Central Limit Theorem (cont)

Conversion of a sample mean to a z-score
The formula for converting a mean of to a z-score is given by:
x
z
n
Where
thepopulationmean
the population stantard deviation
n the size of the sample
x the mean of the sample
16-20
16.8 Confidence Intervals for an

Unknown Population Mean
Point estimates
A single estimate of an unknown population mean can be
obtained from a random sample
Different random samples give different values of the mean
A single estimate is referred to as a point estimate
Accuracy depends on:
variability of data in the population

size of the random sample

16-21
Confidence Intervals for an Unknown

Population Mean (cont)
The Standard error of the mean
Standard error of the mean provides the precise measure of
accuracy of a point estimate of the mean
Standard error of the mean
where:
= population standard deviation
n = size of random sample
the value of can be replaced by the sample standard
deviation, s.
Standard error of the mean
s
n

16-22

The meaning of confidence intervals for
Instead of providing a single point estimate for , we
consider a range of values or an interval within which the
value of may lie.
Be able to provide a probability or level of confidence that
this interval does indeed contain the true value of .
Common probabilities to use are 0.90, 0.95 and 0.99
Confidence intervals for are based on the values from
random samples

16-23

Construction of confidence intervals for
Suppose that we have the following information:
The population has a normal distribution.
The population standard deviation () is known.
The sample size (n) can be of any size.
Then a 95% confidence interval for is:
x 1.96
, x 1.96
x = the mean of the sample

= the population standard deviation
n = the size of the sample

16-24
16.9 Confidence Intervals for an

Unknown Population Proportion
Point estimates
To give a single estimate of an unknown population
proportion (), use the value of the proportion (p) obtained
from a random sample taken from that population.
A single estimate of is referred to as a point estimate.
Point estimates are particularly important in survey work, for
example, to get an idea of how the population sampled feels
about a certain issue.
How accurate a point estimate is depends on two factors:
how variable the data are in the population
the size of the random sample used to make the
estimate

16-25

Population Proportion (cont)
The standard error of the proportion
The precise measure of accuracy of a point estimate (p) of a
population proportion is provided by the standard error of the
proportion
The formal definition is
standard error of the proportion
1
n
Where
= the population proportion
n = the size of the random sample
the value of can be replaced by the sample standard proportion, p
standard error of the proportion
p 1 p
n

16-26

The meaning of confidence intervals for
Instead of providing a single point estimate for , we
consider a range of values or an interval within which the
value of may lie.
Be able to provide a probability or level of confidence that
this interval does indeed contain the true value of .
Common probabilities to use are 0.90, 0.95 and 0.99,
although any probability could be used.
Confidence intervals for are based on the values from
random samples

16-27

Construction of confidence intervals for
We are able to construct an interval estimate for the
true value of an unknown population proportion .
The confidence interval for is of the form
p z p 1 p , p z p 1 p
n
n
where the value of z is chosen as follows:

z = 1.645 for a 90% confidence interval

16-28
Conclusion
Look at identifying the properties of the normal distribution and

normal curve
Also identified the characteristics of the standard normal curve
Understood examples of normally distributed data
Read z-score tables and find areas under the normal curve
Found the z-score, given the area under the normal curve
Computed proportions
Checked whether data follow a normal distribution
Understood and applied the Central Limit Theorem
Solved business problems that can be represented by a normal
distribution
Calculated estimates and their standard errors
Calculated confidence intervals for the population mean
Calculated confidence intervals for the population proportion
16-29

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Chapter 16

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Introductory Mathematics

& Statistics for Business

Copyright 2010 McGraw-Hill Australia Pty

Copyright 2010 McGraw-Hill Australia Pty Ltd

Copyright 2010 McGraw-Hill Australia Pty Ltd

Copyright 2010 McGraw-Hill Australia Pty Ltd

Copyright 2010 McGraw-Hill Australia Pty Ltd

16.2 An Example of Data that have an

An Example of Data that have an

Copyright 2010 McGraw-Hill Australia Pty Ltd

16.3 Areas Under The Normal Curve

Copyright 2010 McGraw-Hill Australia Pty Ltd

Areas Under The Normal Curve (cont)

observed value - mean

Thus, if a distribution has a mean of and a standard deviation

Copyright 2010 McGraw-Hill Australia Pty Ltd

Areas Under The Normal Curve (cont)

Copyright 2010 McGraw-Hill Australia Pty Ltd

16.4 Using the Table of the Standard

Table 6 gives the area under the standard normal curve

Using Table 6, determine the area under the standard

Copyright 2010 McGraw-Hill Australia Pty Ltd

Using the Table of the Standard Normal

Using the Table of the Standard Normal

Using the Table of the Standard Normal

Copyright 2010 McGraw-Hill Australia Pty Ltd

16.5 Computation of Proportions

A proportion within a given interval

Copyright 2010 McGraw-Hill Australia Pty Ltd

Computation of Proportions (cont)

Copyright 2010 McGraw-Hill Australia Pty Ltd

Computation of Proportions (cont)

Example : Suppose that a particular MBA entrance exam is

16.6 Checking Whether Data are

Even if the distribution is believed to be normal, it is rare for

Copyright 2010 McGraw-Hill Australia Pty Ltd

16.7 The Central Limit Theorem

and standard deviation

Copyright 2010 McGraw-Hill Australia Pty Ltd

The Central Limit Theorem (cont)

16.8 Confidence Intervals for an

variability of data in the population

Copyright 2010 McGraw-Hill Australia Pty Ltd

Confidence Intervals for an Unknown

Standard error of the mean

Copyright 2010 McGraw-Hill Australia Pty Ltd

Confidence Intervals for an Unknown

Copyright 2010 McGraw-Hill Australia Pty Ltd

Confidence Intervals for an Unknown

x = the mean of the sample

Copyright 2010 McGraw-Hill Australia Pty Ltd

16.9 Confidence Intervals for an

Copyright 2010 McGraw-Hill Australia Pty Ltd

Confidence Intervals for an Unknown

Copyright 2010 McGraw-Hill Australia Pty Ltd

Confidence Intervals for an Unknown

Copyright 2010 McGraw-Hill Australia Pty Ltd

Confidence Intervals for an Unknown

where the value of z is chosen as follows:

Copyright 2010 McGraw-Hill Australia Pty Ltd

Look at identifying the properties of the normal distribution and

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