A car dealership is buying a car for $10,500. They plan to sell it at $15,540. Calculate the percent increase.
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Answer:
0.7123 = 71.23% probability that a random sample of 75 detached houses in Franklin County had a mean price greater than $190,000 in 2009.
Step-by-step explanation:
To solve this question, we need to understand the normal probability distribution and the central limit theorem.
Normal Probability Distribution
Problems of normal distributions can be solved using the z-score formula.
In a set with mean and standard deviation
, the z-score of a measure X is given by:
The Z-score measures how many standard deviations the measure is from the mean. After finding the Z-score, we look at the z-score table and find the p-value associated with this z-score. This p-value is the probability that the value of the measure is smaller than X, that is, the percentile of X. Subtracting 1 by the p-value, we get the probability that the value of the measure is greater than X.
Central Limit Theorem
The Central Limit Theorem establishes that, for a normally distributed random variable X, with mean and standard deviation
, the sampling distribution of the sample means with size n can be approximated to a normal distribution with mean
and standard deviation
.
For a skewed variable, the Central Limit Theorem can also be applied, as long as n is at least 30.
The mean price for a detached house in Franklin County, OH in 2009 was $192,723. Suppose we know that the standard deviation was $42,000.
This means that
Sample of 75:
This means that
What is the probability that a random sample of 75 detached houses in Franklin County had a mean price greater than $190,000 in 2009?
1 subtracted by the p-value of Z when X = 190000. So
By the Central Limit Theorem
has a p-value of 0.2877
1 - 0.2877 = 0.7123
0.7123 = 71.23% probability that a random sample of 75 detached houses in Franklin County had a mean price greater than $190,000 in 2009.