Confidence Interval Estimation

for the Variance

7.5

Confidence
Intervals

Population Population Population

Mean Proportion Variance
(From a normally
distributed population)

σ2 Known σ2 Unknown

Copyright © 2013 Pearson Education Ch. 7-45

 Confidence Intervals for the
Population Variance (母體變異數)

 Goal: Form a confidence interval for the

population variance, σ2

 The confidence interval is based on the

sample variance, s2

 Assumed: the population is normally

distributed

Copyright © 2013 Pearson Education Ch. 7-46

 Confidence Intervals for the
Population Variance
(continued)

The random variable

2
(n − 1)s
χ 2
n −1 =
σ2
follows a chi-square distribution (卡方分配)
with (n – 1) degrees of freedom

Where the chi-square value χ n−1, α denotes the number for which
2

P( χ n2−1 > χ n2−1, α ) = α

Copyright © 2013 Pearson Education Ch. 7-47

 Notes: Chi-Square Distribution
 Let Zi , i=1,2,…m, be independent, each
distributed as standard normal
 Define a new variable as the sum of the
squares of the Zi
m
W = ∑ Z i2
i =1

 W has a chi-square distribution with m degrees

of freedom; 2
W ~ χm

Copyright © 2013 Pearson Education Ch. 7-48

 Notes: Chi-Square Distribution

Source: Wikipedia

Copyright © 2013 Pearson Education Ch. 7-49

 Confidence Intervals for the
Population Variance
(continued)

The 100(1 - α)% confidence interval for the

population variance is given by
2
(n − 1)s
LCL = 2
χ n−1, α/2
2
(n − 1)s
UCL = 2
χ n−1, 1 - α/2
Copyright © 2013 Pearson Education Ch. 7-50
 Example

You are testing the speed of a batch of computer

processors. You collect the following data (in Mhz):

Sample size 17
Sample mean 3004
Sample std dev 74

Assume the population is normal.

Determine the 95% confidence interval for σx2

Copyright © 2013 Pearson Education Ch. 7-51

 Finding the Chi-square Values
 n = 17 so the chi-square distribution has (n – 1) = 16
degrees of freedom
 α = 0.05, so use the the chi-square values with area
0.025 in each tail:
χ n2−1, α/2 = χ16
2
, 0.025 = 28.85

2
χ n2−1, 1 - α/2 = χ16 , 0.975 = 6.91

probability probability
α/2 = .025 α/2 = .025

χ216
χ216 = 6.91 χ216 = 28.85
Copyright © 2013 Pearson Education Ch. 7-52
 Calculating the Confidence Limits
 The 95% confidence interval is
(n − 1)s2 2 (n − 1)s 2

2
< σ < 2
χ n−1, α/2 χ n−1, 1 - α/2

(17 − 1)(74)2 (17 − 1)(74) 2

< σ2 <
28.85 6.91
3037 < σ 2 < 12680

Converting to standard deviation, we are 95%

confident that the population standard deviation of
CPU speed is between 55.1 and 112.6 Mhz
Copyright © 2013 Pearson Education Ch. 7-53
 Confidence Interval Estimation:
7.6
Finite Populations (有限母體)

 If the sample size is more than 5% of the

population size (and sampling is without
replacement) then a finite population
correction factor must be used when
calculating the standard error

Copyright © 2013 Pearson Education Ch. 7-54

 Finite Population
Correction Factor
(有限母體修正因子)
 Suppose sampling is without replacement and
the sample size is large relative to the
population size
 Assume the population size is large enough to
apply the central limit theorem
 Apply the finite population correction factor
when estimating the population variance
N−n
finite population correction factor =
N −1

Copyright © 2013 Pearson Education Ch. 7-55

 Estimating the Population Mean
 Let a simple random sample of size n be
taken from a population of N members with
mean μ
 The sample mean is an unbiased estimator of
the population mean μ
 The point estimate is:
1 n
x = ∑ xi
n i=1

Copyright © 2013 Pearson Education Ch. 7-56

 Finite Populations: Mean
 If the sample size is more than 5% of the
population size, an unbiased estimator for
the variance of the sample mean is
2
ˆ 2x = s N−n
σ  
n  N −1 

 So the 100(1-α)% confidence interval for the

population mean is
ˆx
x ± t n-1,α/2σ
Copyright © 2013 Pearson Education Ch. 7-57
 Estimating the Population Total

 Consider a simple random sample of size

n from a population of size N
 The quantity to be estimated is the
population total Nμ
 An unbiased estimation procedure for the
population total Nμ yields the point
estimate Nx

Copyright © 2013 Pearson Education Ch. 7-58

 Estimating the Population Total

 An unbiased estimator of the variance of the

population total is
2
ˆ
2 2 2 s  N − n 
N σx = N  
n  N -1 

 A 100(1 - α)% confidence interval for the population

total is

Nx ± t n-1,α/2Nσˆ x

Copyright © 2013 Pearson Education Ch. 7-59

 Confidence Interval for
Population Total: Example

A firm has a population of 1000 accounts and

wishes to estimate the value of the total population
balance

A sample of 80 accounts is selected with average

balance of $87.60 and standard deviation of $22.30

Find the 95% confidence interval estimate of the

total balance

Copyright © 2013 Pearson Education Ch. 7-60

 Example Solution
N = 1000, n = 80, x = 87.6, s = 22.3
2 2
s (N − n) 2 (22.3) 920
N σˆ = N
2 2
x
2
= (1000) = 5724559.6
n N -1 80 999
Nσˆ x = 5724559.6 = 2392.6

Nx ± t 79,0.025N σˆ x = (1000)(87.6) ± (1.9905)(2392.6)

82837.53 < Nμ < 92362.47

The 95% confidence interval for the population total

balance is $82,837.53 to $92,362.47
Copyright © 2013 Pearson Education Ch. 7-61
 Estimating the Population
Proportion: Finite Population

 Let the true population proportion be P

 Let p̂ be the sample proportion from n
observations from a simple random sample
 The sample proportion, p̂ , is an unbiased
estimator of the population proportion, P

Copyright © 2013 Pearson Education Ch. 7-62

Confidence Intervals for Population
Proportion: Finite Population
 If the sample size is more than 5% of the
population size, an unbiased estimator for
the variance of the population proportion is
ˆ (1- pˆ )  N − n 
p
ˆ =
σ 2
pˆ  
n  N −1 

 So the 100(1-α)% confidence interval for the

population proportion is

pˆ ± z α/2σ
ˆ pˆ
Copyright © 2013 Pearson Education Ch. 7-63
 Sample-Size Determination

Determining
Sample Size

7.7 Large Finite 7.8

Populations Populations

For the For the For the For the

Mean Proportion Mean Proportion

Copyright © 2013 Pearson Education Ch. 7-64

 Sample-Size Determination:
Large Populations
Large
Populations

For the
Mean
(Known population
variance)
Margin of Error
(sampling error)
σ σ
x ± z α/2 ME = z α/2
n n
Copyright © 2013 Pearson Education Ch. 7-65
 Sample-Size Determination:
Large Populations
(continued)
Large
Populations

For the
Mean
(Known population
variance)
2 2
σ Now solve z σ
ME = z α/2
n for n to get n= α/2
2
ME

Copyright © 2013 Pearson Education Ch. 7-66

 Sample-Size Determination
(continued)

 To determine the required sample size for the

mean, you must know:

 The desired level of confidence (1 - α), which

determines the zα/2 value
 The acceptable margin of error (sampling error), ME
 The population standard deviation, σ

Copyright © 2013 Pearson Education Ch. 7-67

 Required Sample Size Example

If σ = 45, what sample size is needed to

estimate the mean within ± 5 with 90%
confidence?

2 2 2 2
z σ (1.645) (45)
n= 2
= α/2
2
= 219.19
ME 5

So the required sample size is n = 220

(Always round up)

Copyright © 2013 Pearson Education Ch. 7-68

 Sample Size Determination:
Population Proportion
Large
Populations

For the
Proportion

pˆ (1− pˆ ) pˆ (1− pˆ )
pˆ ± z α/2 ME = z α/2
n n
Margin of Error
(sampling error)
Copyright © 2013 Pearson Education Ch. 7-69
 Sample Size Determination:
Population Proportion
(continued)
Large
Populations

For the
Proportion

pˆ (1− pˆ )
ME = z α/2
n
pˆ (1− pˆ ) cannot Substitute 2
be larger than 0.25 for pˆ (1− pˆ ) 0.25 z
0.25, when p̂ = and solve for n= 2
α/2

0.5 n to get
ME
Copyright © 2013 Pearson Education Ch. 7-70
 Sample Size Determination:
Population Proportion
(continued)
 The sample and population proportions, p̂ and P, are
generally not known (since no sample has been taken
yet)
 P(1 – P) = 0.25 generates the largest possible margin
of error (so guarantees that the resulting sample size
will meet the desired level of confidence)
 To determine the required sample size for the
proportion, you must know:
 The desired level of confidence (1 - α), which determines the
critical zα/2 value
 The acceptable sampling error (margin of error), ME
 Estimate P(1 – P) = 0.25
Copyright © 2013 Pearson Education Ch. 7-71
 Required Sample Size Example:
Population Proportion

How large a sample would be necessary

to estimate the true proportion defective in
a large population within ±3%, with 95%
confidence?

Copyright © 2013 Pearson Education Ch. 7-72

 Required Sample Size Example
(continued)

Solution:
For 95% confidence, use z0.025 = 1.96
ME = 0.03
Estimate P(1 – P) = 0.25
2 2
0.25 z (0.25)(1.96)
n= 2
α/2
= 2
= 1067.11
ME (0.03)
So use n = 1068

Copyright © 2013 Pearson Education Ch. 7-73

 Sample-Size Determination:
Finite Populations
7.8

Finite
Populations 1. Calculate the required
sample size n0 using the
For the prior formula:
Mean z 2α/2 σ 2
n0 =
ME2
A finite population
2. Then adjust for the finite
correction factor is added: population:
n0N
Var(X) =
σ N−n
 
2
n=
n  N −1  n0 + (N - 1)

Copyright © 2013 Pearson Education Ch. 7-74

 Example
 Suppose that in 2016, 1,118 mortgages were taken.
Suppose that the standard deviation of mortgage is
$20,000. A 95% confidence interval must extend $4,000
on each side of the sample mean. How many sample
observations are needed?

𝑁𝑁 = 1,118, 𝜎𝜎 = 20,000, 𝑀𝑀𝑀𝑀 = 1.96𝜎𝜎𝑋𝑋� = 4,000

𝑁𝑁𝜎𝜎 2 (1,118)(20,000)2
𝑛𝑛 = 2 2 = = 88.5 ≈ 89
𝑁𝑁−1 𝜎𝜎𝑋𝑋
� +𝜎𝜎 1,117 2,041 2 +(20,000)2

Copyright © 2013 Pearson Education Ch. 7-75

 Sample-Size Determination:
Finite Populations
Finite 1. Solve for n:
Populations NP(1− P)
n=
(N − 1)σ p2ˆ + P(1− P)
For the 2. The largest possible value
Proportion for this expression
(if P(1-P) = 0.25) is:
A finite population 0.25N
correction factor is added: n=
(N − 1)σ 2p̂ + 0.25

ˆ P(1- P)  N − n 
Var(p) =   3. A 95% confidence interval
n  N −1 
will extend ±1.96 σ pˆ from
the sample proportion
Copyright © 2013 Pearson Education Ch. 7-76
 Example: Sample Size to
Estimate Population Proportion

How large a sample would be necessary to

estimate within ±5% the true proportion of
college graduates in a population of 850
people with 95% confidence?

Copyright © 2013 Pearson Education Ch. 7-77

 Required Sample Size Example
(continued)

Solution:
 For 95% confidence, use z0.025 = 1.96
 ME = 0.05
1.96 σ pˆ = 0.05 ⇒ σ pˆ = 0.02551

0.25N (0.25)(850)
nmax = 2
= 2
= 264.8
(N − 1)σ pˆ + 0.25 (849)(0.02551) + 0.25

So use n = 265

Copyright © 2013 Pearson Education Ch. 7-78

 Chapter Summary
 Introduced the concept of confidence
intervals
 Discussed point estimates
 Developed confidence interval estimates
 Created confidence interval estimates for the
mean (σ2 known)
 Introduced the Student’s t distribution
 Determined confidence interval estimates for
the mean (σ2 unknown)

Copyright © 2013 Pearson Education Ch. 7-79

 Chapter Summary
(continued)
 Created confidence interval estimates for the
proportion
 Created confidence interval estimates for the
variance of a normal population
 Applied the finite population correction factor
to form confidence intervals when the
sample size is not small relative to the
population size
 Determined required sample size to meet
confidence and margin of error requirements

Copyright © 2013 Pearson Education Ch. 7-80

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Copyright © 2013 Pearson Education Ch. 7-81