Probability and Statistics

LECTURE 6
INTERVAL ESTIMATION

Adapted from http://www.prenhall.com/mcclave

7-1

Outline

1. State What Is Estimated

2. Distinguish Point & Interval Estimates
3. Explain Interval Estimates
4. Compute Confidence Interval Estimates
for Population Mean & Proportion

7-2

Statistical Methods

7-3
 Estimation Process

Population Random Sample

I am 95%
Mean confident that
Mean, , is X= 50  is between
unknown
 40 & 60.
 
 
Sample


 

7-4

Parameter vs sample statistic

• Parameter is numerical descriptive

measure of population
• Sample statistic is a numerical
descriptive measure of sample
• Example

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Unknown Population
Parameters Are Estimated

Estimate Population with Sample

Parameter... Statistic
Mean  x
Proportion p ^
p
2 2
Variance  s
Differences 1 -  2 x1 -x2
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 Estimation Methods

Estimation

Point Interval
Estimation Estimation

7-7

Point Estimation

1. Provides Single Value

2. Example:
3. Disadvantage: Gives No Information
about How Close Value Is to the
Unknown Population Parameter

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Interval Estimation

1. Provides Range of Values

2. Gives Information about Closeness to
Unknown Population Parameter
 Stated in terms of Probability
 Knowing Exact Closeness Requires Knowing
Unknown Population Parameter

3. Example: Unknown Population Mean is

contained in the interval (50;70) with 95%
Confidence
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 Key Elements of
Interval Estimation
A probability that the interval contains the
population parameter.

Sample statistic
Confidence interval (point estimate)

Confidence Confidence
limit (lower) limit (upper)
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Confidence Interval (CI)

Estimates
Confidence
Intervals

Mean Proportion

Known  Unknown

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Confidence Interval for

Population Mean ( Known)
1. Assumptions
 Population Standard Deviation Is Known
 Population Is Normally Distributed
 If Population Is Not Normal, Large Sample
Size (so that the CLT holds) Is Required
(In This Case The Sampling Distribution
Of Is Approximately Normal)
2. Confidence Interval Estimate

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 Proof of the Confidence
Interval (CI) formula
This proof is optional
Start with sampling distribution of
sample mean. Recall that under some
conditions, this distribution is normal or
approx. normal
Convert to Z distribution

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Proof of the Confidence

Interval (CI) formula

α/2
1-α
x

α/2
1-α
Z
7 - 14

Proof of the Confidence

Interval (CI) formula
Let’s define a new notation:
• Zα/2 is the Z value such that the area to
its right is equal to α/2
• So we have figure:

7 - 15 -Zα/2 0 Zα/2
 Proof of the Confidence
Interval (CI) formula
P(-Zα/2 < Z < Zα/2) = ?

Replace

Rearranging the expression, we should

obtain an probability equation for the CI

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Confidence Level

1. Probability that the Interval contains

Unknown Population Parameter
2. Denoted 1 - 
 Is Probability That Interval does Not
contain Parameter
3. Typical Values Are 99%, 95%, 90%

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Z and 

/2 /2
1-

 0

As  is the probability that the interval does not

contain , we construct an interval that places
area /2 in each tail. is the z value such
that the area /2 lies to its right.
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 Z and 

/2 /2
1-

 0
If we know , we can find using Table 1 in
Appendix of your textbook.
Example:  = 0.1 → /2 = 0.05 → P(Z < ) = 0.95
Look up table 1, and we find = 1.645

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How to look up Table 1

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Z and 

Note that we actually find 2 values for

Z by looking up table 1:
With P = 0.9495, we have Z = 1.64
With P = 0.9505, we have Z = 1.65.
Taking the average of the two values,
we have = 1.645.

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 Factors Affecting
Interval Width
1. Data variability Intervals Extend from
measured by  X - ZX toX + ZX
2. Sample Size

3. Level of Confidence
(1 - )
 Affects Z
© 1984-1994 T/Maker Co.
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Intervals &
Confidence Level
Sampling
Distribution
of Mean

Intervals 100(1 - ) %
extend from of intervals
X - ZX to contain .
X + ZX 100 % do
Large number of intervals not.
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Estimation Example
Mean ( Known)
The mean of a random sample of n = 25
isX = 50. Set up a 95% confidence
interval estimate for  if  = 10. Assume
the population is normally distributed.

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 Estimation Example
Solution

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Confidence Interval for

Population Mean ( Unknown)

1. Assumptions
 Population Standard Deviation Is Unknown
 Population is Normally Distributed
2. Use Student’s t Distribution
3. Confidence Interval Estimate

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T statistic

If we are sampling from a normal distribution, the

t statistic has a sampling distribution very
much like that of the z statistic: mound-
shaped, symmetric, with mean 0.
The main difference between the sampling
distributions of t and z is that the t statistic is
more variable than the z.
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 Degrees of Freedom (df)

1. Number of Values that Are Free to Vary

when Calculating a Sample Statistic.
2. Degrees of freedom of the t statistic (for
one-sample case) is n1.
3. Example

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Degrees of Freedom (df)

Example

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Degrees of Freedom (df)

The smaller the number of degrees of

freedom associated with the t statistic,
the more spread out the sampling
distribution of T will be.

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 Student’s t Distribution

Standard
Normal
Bell-Shaped
t (df = 13)
Symmetric
‘Fatter’ Tails t (df = 5)

Z
t
0
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Student’s t Table (Table 2

in Appendix of textbook)
Assume:
/2 n=3
df = n - 1 = 2
 = .10
/2 =.05

.05

t values
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Student’s t Table

Assume:
/2 n=3
df = n - 1 = 2
 = .10
/2 =.05

.05

t values 2.920
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 Estimation Example
Mean ( Unknown)
A random sample of n = 25 hasx = 50 &
s = 8. Set up a 95% confidence interval
estimate for . Assume normal population.

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Estimation Example
Solution

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Confidence Interval Estimates

Confidence
Intervals

Mean Proportion

Known  Unknown

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 Confidence Interval
Proportion
1. Assumptions
 Two Categorical Outcomes
 Population Follows Binomial Distribution
 Normal Approximation To The Sampling
Distribution Of Can Be Used
 and

2. Confidence Interval Estimate

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Estimation Example
Proportion
A random sample of 400 graduates
showed 32 went to grad school. Set up a
95% confidence interval estimate for p.

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Estimation Example
Solution

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 Precision of estimate

• The smaller the width of CI, the higher the

precision of estimation.
• What are the ways to make the estimate
more precise?
• In practice, if we choose to increase
sample size to increase precision, we
should also take into account the costs of
study.

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CI for Finite populations

In cases where n/N > 0.05, the formulas

for CI must be adjusted (as the
standard error of estimate changes)
Please consult your textbook or
reference books if you are interested in
the adjusted formulas. Knowing these
formulas is not required for the
test/exam.

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Conclusion

1. State What Is Estimated

2. Distinguish Point & Interval Estimates
3. Explain Interval Estimates
4. Compute Confidence Interval Estimates
for Population Mean & Proportion

7 - 42