Chapter - 2-Statistical Estimations

Business Statistics II
Chapter 2
Statistical Estimation
Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-1

Learning Objectives
In this chapter, you will be apple to:

 Explain the concept of estimation is statistics
 Make distinction between point and interval estimation
 Understand the concept of margin of error and calculate it
 Construct confidence interval for a population mean σ is known
 Construct confidence interval for a population mean σ is unknown
 Determine sample size for a population mean and population proportion

Basic Concepts of Estimation
 Estimation is a procedure of assigning numerical value(s) to a

population parameter based on information collected from a
corresponding sample statistic.
 In inferential statistics, μ is called the true population mean and p is
called the true population proportion. There are many other population
proportions such as the median, mode, variance, and standard
deviation.
 Value(s) assigned to a population parameter based on the value of a
sample statistics is called an estimate of the population parameter.
For example, the sample mean 𝑥ҧ is an estimator of the population mean
μ

Point & Interval Estimates
 Point Estimate is a single value of a sample information that is used

to estimate a population parameter. The value computed for the sample
mean 𝑥ҧ is point estimator of the corresponding population mean μ
Example 1:
Suppose a sample of 500 households is selected, the mean housing
expenditure per month for this sample is $450. then using 𝑥ҧ as a point
estimate of μ, we can state that the mean housing expenditure per month
for all households is about $450.
This procedure is called point estimation.

Point & Interval Estimates
 Whenever we use point estimation, we calculate margin of error

associate with that point estimation. So the margin of error is
calculated as follows
Margin of error = ±𝑧𝜎𝑥ҧ
 However, regardless of the population value being estimated, we
always expect sampling error.
 To overcome this problem with point estimate, the most common
procedure is to calculate an interval estimate known as a confidence
interval or interval estimate

Point & Confidence Interval Estimates
 Interval Estimate: instead of assigning a single value to the

population parameter, an interval is constructed around the point
estimate and that is likely to contain the corresponding population
parameter
 For example instead of saying that the mean housing expenditure per
month for all houses is $450, we obtain an interval by subtracting
from and adding to $450. Then we state that this interval contains the
population mean μ.
 Suppose we can subtract and add $50 to $450, then we obtain and
interval $450 - $500. The procedure is called interval estimation.

What number should be subtracted from and added to a point estimate to

obtain an interval estimate depends on two considerations
 The standard deviation of the sample: the larger the standard
deviation of the sample, the greater the number subtracted from and
added to the point estimate. Thus, if the sample standard deviation is
larger the interval constructed around the sample mean (𝑥ҧ ) must be
wider to include the μ.
 The confidence level attached to the interval: confidence level
associated with confidence interval states how much confidence we
have so that this interval contains the true population parameter

Confidence Level and Confidence Interval Each interval is constructed

with regard to a given confidence level and is called a confidence
interval. The confidence interval is given as
Point estimate ± (Margin of error)
 The confidence level associated with a confidence interval states how

much confidence we have that this interval contains the true
population parameter.

Confidence Interval Estimate for a Population Mean:
When σ is Known
 The sample is considered to be large when n ≥ 30. according to central

limit theorem, for a large sample, the sampling distribution of sample
mean 𝑥ҧ is approximately normal irrespective of the shape of the
population from which sample is drawn.
 Therefore when the sample size is 30 or larger, we will use the normal
distribution to construct a confidence interval for μ.

When σ is Known
0.95
Figure 2.1 critical Value for
a 95% Confidence Level
z
-z = -1.96 µ z = 1.96
Confidence Interval for μ: When σ is Known
𝜎
𝑥ҧ ± 𝑧𝛼/2
𝑛
Where:
z = Critical value from the standard normal table for specific confidence level
σ = Population standard deviation
n = Sample size

When σ is Known
Critical Values for Commonly

Used Confidence Levels
Confidence Critical Confidence Level is the percentage of all
Level Value possible confidence intervals the will
80% z = 1.28 contain the true population parameter
90% z = 1.645
95% z = 1.96
99% z = 2.575

When σ is Known
To calculate confidence interval for μ when the population distribution is normal

or sample size n ≥ 30 use the following steps
Step 1: Specify the confidence level
Step 2: Compute the sample mean
Step 3: Determine the standard error of sampling distribution
𝜎
𝜎𝑥ҧ =
𝑛
Step 4: Determine critical value, z, from the normal distribution table
Step 5: Compute the confidence interval estimate using
𝜎
𝑥ҧ ± 𝑧𝛼/2
𝑛

When σ is Known
Example 2:
A publishing company has published a new textbook. Before the company
decides the price at which to sell this textbook, it wants to know the
average price of all such books in the market.
The company took a sample of 36 such textbooks and collect information
on their prices. This information produced a mean price of $50 for this
sample. It is known that the standard deviation of the prices of all such
text books is $5
a. What is the point estimate of the mean price of all such textbooks?
b. Construct 90% confidence interval for the mean price of all such text
books.

When σ is Known
Solution 2:
a. The point estimate of the mean price of all such college textbooks is
$50
𝑷𝒐𝒊𝒏𝒕 𝒆𝒔𝒕𝒊𝒎𝒂𝒕𝒆 𝒐𝒇 𝝁 = 𝑥ҧ = $50
b. To construct 90% confidence interval use the following steps
The publishing company want to develop a 90% confidence level
The sample mean computed from 36 such text books is 𝒙 ഥ = $50
Step 3: Determine the Standard error of the sampling distribution
𝜎 5 5
𝜎𝑥ҧ = = = = $𝟎. 𝟖𝟑
𝑛 36 6
When σ is Known
Step 4: Determine the critical value, z, from the standard normal table
The sample size is larger than 30, the population distribution will normally
distribution. The company wants 90% confidence level, so z = 1.645.
Step 5: Compute the confidence interval estimate
The 90% confidence interval for the population mean μ is
𝜎
𝑥ҧ ± 𝑧𝛼/2 = 50 ± 1.645(0.83)
𝑛
= 50 ± 1.365
= 50 − 1.365 = 𝟒𝟖. 𝟔𝟒
= 50 + 1.365 = 𝟓𝟏. 𝟑𝟕
 We are 90% confident that the mean price for such a textbook is between
$48.64 and $51.37.
When σ is Known

The 90% confidence interval for the population mean is
𝜎
𝑥ҧ ± 𝑧 = 50 ± 1.645(0.83)
𝑛
= 50 ± 1.365
= 50 − 1.365 = 𝟒𝟖. 𝟔𝟒
= 50 + 1.365 = 𝟓𝟏. 𝟑𝟕
 We are 90% confident that the mean price for such a textbook is between
$48.64 and $51.37.

When σ is Known
Example 3:
According to a recent survey, the workers employed in manufacturing
industries earned an average of $200 per week. Assume that this is based
on a random sample of 1000 workers selected from the manufacturing
industries and the population standard deviation of weekly earning for all
employees is assumed to be $30.
Find a 99% confidence interval for the mean weekly earnings of all
workers employed in manufacturing industries

When σ is Known
Solution 3:
To construct 99% confidence interval use the following steps
The publishing company want to develop a 99% confidence level
The sample mean computed from 1000 such text books is 𝒙 ഥ = $200
Step 3: Determine the Standard error of the sampling distribution
𝜎 30 30
𝑠𝑥ҧ = = = = $𝟎. 𝟗𝟓
𝑛 1000 31.62
Step 4: Determine the critical value, z, from the standard normal table
The sample size is larger than 30, the population distribution will normally
distribution. The company wants 99% confidence level, so z = 2.575.
When σ is Known

The 99% confidence interval for the population mean μ is
𝜎
𝑥ҧ ± 𝑧𝛼/2 = 200 ± 2.575(0.95)
𝑛
= 200 ± 2.45
= 200 − 2.45 = $𝟏𝟗𝟕. 𝟓𝟓
= 200 + 2.45 = $𝟐𝟎𝟐. 𝟒𝟓
 with 99% confidence interval, the average weekly earnings of workers
employed in manufacturing industries is between $197.55 and $202.45.

When σ is Known
Exercise 1:
Property Tax City officials wish to know the mean amount of dollars that
home owners in a city pay annually for property tax on personal
residences. A simple random sample of 200 tax bills is selected. The
sample mean computed from 200 tax bills is $5,230 and past studies
indicated that the population standard deviation is $500.
Assume the officials specifies a 90% confidence interval estimate.
Calculate the confidence interval estimate for the true population mean for
dollars spent on property taxes.
ANSWER: $5171.83 - $5288.17

Margin of Error
Margin of error is a measure of how close we expect the point estimate

to be the population parameter with specified level of confidence
Margin of Error for Estimating μ, when σ is known

𝜎
𝑒 = 𝑧𝛼/2
𝑛
Where:
e = Margin of error
z = Critical value

Margin of Error
For example, the quantity 2.45, on the right of the ± sign in example 3 is
called margin of error. The margin of error defines the relationship
between the sample mean and the population mean.
 For equivalent samples from a population

1. If the confidence level is decreased, the margin or error is reduced
2. If the confidence level is increased, the margin of error is increased
 So, it is the decision maker who decides which is more important, a

higher confidence level or a lower margin of error

Confidence Interval Estimate for the Population Mean:
When σ is Unknown
If the sample size is small (n < 30), the normal distribution can still be
used to construct confidence interval estimate for μ if
 The population from which the sample is selected is normal and
 The population standard deviation σ is known. But more often we do
not know σ and, consequently, we have to use sample standard
deviation s as an estimator of σ.
Conditions under which the t-distribution is used to make a confidence
interval estimate about μ
 The population from the sample is drawn is approximately normal
 The sample size is small
 The population standard deviation σ is not known

When σ is Unknown
 The t-distribution is similar to the normal distribution in some respect.
Like the normal distribution curve, the t-distribution curve is symmetric
about the mean. However, the t-distribution is flatter than the standard
normal curve
 The shape of a particular t-distribution curve depends on the number of

degrees of freedom (df). The number of degree of freedom for a t-
distribution is equal to the sample size minus one
df = n – 1

When σ is Unknown
Confidence Interval Estimate for μ, σ Unknown

𝑠
𝑥ҧ ± 𝑡𝛼/2
𝑛
t = Critical value from the t-distribution with n-1 degree of freedom for
specific confidence level
s = Sample standard deviation
n = Sample size

When σ is Unknown
Example 4:
Find the value of t for 16 degree of freedom and 95% confidence level
Solution 4:
In t-distribution table, we locate 16 in the column of degrees of freedom
(labeled df ) and 0.95 in the row of the t-distribution curve at the top of the
table. The entry at the intersection of the row of 16 and the column of 0.95,
which is 2.1199, gives the required value of t. The relevant portion of t-
distrubition table is shown here.

When σ is Unknown
Determining t for 16 df and 95% Confidence Level
df 0.90 0.95 0.99 0.98
1 6.314 12.706 63.656 31.821
2 2.920 4.303 9.925 6.965
. ... ... ... ...
. ... ... ... ...
. ... ... ... ...
16 1.746 2.119 2.921 2.584
. ... ... ... ...
. ... ... ... ...
. ... ... ... ...
α 1,645 1.960 2.576 2.326
The required value of

t for 16 df and 95% Cl
When σ is Unknown
Example 5:
The mean base salary of the judges is $1800. Assume that this survey is
based on a random sample of 20 judges. Further assume that the current
base salaries of all judges have an approximate normal distribution, and the
sample standard deviation of all judges have an approximate normal
distribution, and the sample standard deviation is $500.
Construct a 99% confidence interval estimate for the population mean μ.

When σ is Unknown
Solution 5:
The team specifies a 99% confidence level
Step 2: Get the critical t-value from t-table, go to the top of the table to the
row labelled “Conf. Level.’ Locate the column headed “0.99.” Next go to
the row corresponding to
n – 1 = 20 – 1 = 19 degrees of freedom
The critical t-value for 0.99 confidence level and 19 degrees of freedom is
t = 2.86
Step 3: calculate the 99% confidence interval estimate

When σ is Unknown
𝑠
𝑛
500
1800 ± 2.86
20
1800 ± 2.86 111.81 = 1800 ± 319.78

1800 − 319.78 = $1480.22
1800 + 319.78 = $𝟐𝟏𝟏𝟗. 𝟕𝟖
INTERPRETATION
We can state with 99% confidence that based on this sample the mean base
salary of all judges is between $1480.22 - $2119.78.

When σ is Unknown
Example 6:
A simple random sample of n = 25 manufacturing employees has been
selected from those working throughout a region. The average number of
overtime hours worked last week was 𝒙 ഥ = 8.46 hours, with a sample
standard deviation of s = 3.61 hours. Using 95% confidence level,
calculate the confidence interval estimate for the true population mean.
Solution 6:
Given Information: n = 25. ഥ = 8.46 hours.
𝒙 s = 3.61 hours.
95% confidence level

When σ is Unknown
Conti...
The team specifies a 95% confidence level
Step 2: Get the critical t-value from t-table, go to the top of the table to the
row labelled “Conf. Level.’ Locate the column headed “0.95.” Next go to
the row corresponding to
n – 1 = 25 – 1 = 24 degrees of freedom
The critical t-value for 0.99 confidence level and 19 degrees of freedom is
t = 2.064
Step 3: calculate the 95% confidence interval estimate

When σ is Unknown
𝑠
𝑛
3.61
8.46 ± 2.064
25
8.46 ± 2.064 0.722 = 8.46 ± 1.49
8.46 − 1.49 = 6.97 minute
8.46 + 1.49 = 𝟗. 𝟗𝟓 𝐦𝐢𝐧𝐮𝐭𝐞
INTERPRETATION
Based on the random sample of 25 manufacturing employee & the 95%
confidence level, we can estimate the true average number of overtime hours
worked last week to be between 6.97 minutes and 9.95 minutes

Determining the Required Sample Size for Estimating μ:
When σ is Known
 The basic trade-offs that are present in all Statistical estimations is to

have a high confidence level, a low margin of error, and a small
sample size. The problem is that these three objectives conflict.
 For a given sample size, a high confidence level will tend to generate
a large margin of error.
 For a given confidence level, a small sample size will result in an

increased margin of error.
 Reducing the margin of error requires either reducing the

confidence level or increasing the sample size, or both

When σ is Known
 Given the confidence level and the standard deviation of the

population σ, the required sample size can be calculated as following
Sample Size Required for Estimating μ, When σ is Known

2
𝑧𝛼/2 𝜎2
𝑛=
𝑒2
Where:
z = Critical value for specified confidence level
e = Desired margin of error
σ = Population standard deviation

When σ is Known
Steps in calculating sample size

Step 1: Specify the desired margin of error
Step 2: Determine the population standard deviation
Step 3: Determine the critical value, z, for the desired level of confidence
Step 4: Compute the required sample size
Example 7:
An alumni association wants to estimate the mean debt of this year’s
college graduates. It is known that the population standard deviation of the
debts of this year’s college graduates is $11,800. How large a sample
should be selected so that the estimate with a 99% confidence level is
within $800 of the population mean?

When σ is Known
Solution 7:
Step 1: Specify the desired margin of error
The margin of error is within $800. therefore e = ±800
Step 2: Determine the population standard deviation
The population mean debt of this year’s college graduates is $11,800
σ = $11,800
Step 3: Determine the critical value, z, for the desired level of confidence
z-value from standard normal table for 99% confidence. z = 2.575
Step 4: Compute the required sample size
2
𝑧𝛼/2 𝜎2 (2.575)2 (11800)2
𝑛= = =≈ 𝟏𝟒𝟒𝟑
𝑒2 (800) 2

When σ is Known
The previous equation assumes you know the population standard
deviation. Although this may be the case in some situations, most likely
we won’t know the population standard deviation.
 If you do not known the population standard deviation, take a
preliminary sample and find the sample standard deviation s. then we
can use sample standard deviation for population standard deviation
in the formula
 Note: using sample standard deviation for population standard
deviation may give a sample size that eventually may produce an error
much larger or smaller than the predetermined maximum error (margin
of error)

When σ is Known
Exercise 2:
Sompower electric company has more than 6,000 residential customers, in
response to a request by the Ministry of Energy.
Sompower needs to estimate the average kilowatts of electricity used by
customers on February 1. the only way to get this number is to select a
random sample of customers and take a meter reading after 12:00 A.M. on
January 31 and again after 12:00 A.M. on February 1.
The Ministry of Energy specified that any estimate presented in the
Ministry’s report must be based on a 95% confidence level. Further, the
margin of error must not exceed ±30 kilowatts. By assuming that σ = 200
kilowatts and using these requirements, what sample size is needed.
ANSWER: 171 customers

Estimating a Population Proportion
In the previous parts we have seen the methods for developing confidence
interval estimates when the population value of interest is the mean.
However, you will encounter many situation in which the value of interest
is the proportion of items in the population that posses a particular
attributes
For example, you may wish to estimate the proportion of customers who
are satisfied the service provided by your company.

The Population Proportion, denoted by P, is obtained by taking the
ration of the number of elements in a population with specific
characteristic to the total number of elements in a population, the sample
proportion is denoted by 𝑝Ƹ (pronounced p hat).
Population and Sampling Proportions
𝑋 𝑥
𝑝= and 𝑝Ƹ =
𝑁 𝑛
p = Population proportion
N = Population size
n = Sample size
x = Number of items in the population having the attributes of interest

In the previous chapter, we introduced the sampling distribution for
proportions. We indicated that when the sample size is sufficiently large
[np ≥ 5 and n(1 – p) ≥ 5], the sampling distribution can be approximated
ෝ computed
by normal distribution centered at p, with a standard error for 𝒑
using the following equation
Standard Error of 𝒑 ෝ
𝑝(1−𝑝)
Standard error = 𝜎𝑝ො =
𝑛
Where:
p = Population Proportion
n = Sample size
In the previous equation, the population proportion, p, is required. But if we
already knew the value for p, we do not need to determine its estimate. If p is
unknown, we can estimate the value of the standard error by substituting 𝒑 ෝ
for p, as shown below, providing np ≥ 5 and n(1 – p) ≥ 5.
ෝ
Standard Error of 𝒑
ො
𝑝(1− ො
𝑝)
Standard error = 𝜎𝑝ො =
𝑛
Where:
𝑝Ƹ = Population Proportion
n = Sample size

Confidence Interval Estimate for a Population
Proportion
 The confidence interval estimate for a population proportion is formed
using the same general format that we used to estimate a population
mean.
Point estimate ± (critical value)(standard error)
Confidence Interval Estimate for p
𝑝(1
Ƹ − 𝑝)Ƹ
𝑝Ƹ ± 𝑧𝛼/2
𝑛
𝑝Ƹ = Sample Proportion
n = Sample size
z = Critical value from the standard normal distribution for desired
confidence level

Proportion
 The critical value for a confidence interval estimate of a population
proportion will always be z-value from the standard normal distribution
table.
The most commonly used critical values are
Confidence Critical
Level Value For the other confidence levels, you can
find the critical z-value in the standard
80% z = 1.28 normal distribution table
90% z = 1.645
95% z = 1.96
99% z = 2.575

Proportion
Here are the steps necessary to develop a confidence interval estimate for a
population proportion
Step 1: Determine the sample size
The sample size must be large enough, so that, np ≥ 5 and n(1 – p) ≥ 5
Step 2: Determine the desired level of confidence and the critical value from
the standard normal distribution.
Step 3: Calculate 𝑝,Ƹ the sample proportion
Step 4: Calculate the interval estimate

Proportion
Example 8:
Luba Company operates a chain of oil-change outlets. When the customer
comes in for service, the date of the service and mileage on the car are
recorded. After three month have almost passed, a reminder card is sent to
the customer.
The marketing manager is interested in estimating the proportion of
customers who return after getting card. Of a simple random sample of 100
customers, 62 returned within one month after the card was mailed.
Construct a confidence interval estimate for the true population proportion
by assuming that a 95% confidence level is desired.

Proportion
Solution 8:
Sample n = 100 of customers who received reminder card is selected.
A sample of 100 will meet the requirement that np ≥ 5 and n(1 – p) ≥ 5
Step 2: Determine the desired level of confidence and the critical value
from the standard normal distribution
95% confidence level is desired and the critical z-value from standard
normal distribution table is z = 1.96
Step 3: Calculate 𝑝,Ƹ the sample proportion
𝑥 62
𝑝Ƹ = = = 𝟎. 𝟔𝟐
𝑛 100

Proportion
Step 4: Calculate the interval estimate
𝑝(1
ො − 𝑝)ො 0.62 (1 − 0.62) 0.2356
𝑝ො ± 𝑧𝛼/2 = 0.62 ± 1.96 = 0.62 ± 1.96
𝑛 100 100
= 0.62 ± 1.96 0.002356 = 0.62 ± 0.095 = 0.525 and 0.715

 Using the sample data of 100 customers and a 95% confidence level, the
manager estimates that the true population percentage of customers who
will respond to the reminder card will be between 52.5% and 71.5%

Determine the Required Sample Size for Estimating
a Population Proportion
 An increase in sample size will reduce the standard error and reduce the
interval width. A decrease in sample size will have the opposite effect.
 For many application, decision makers would like to determine a
required sample size before doing the sampling. The required sample
size in a proportion application is based on the desired margin of error,
the desired confidence level, and the variation of the population.
Margin of Error for Estimating p
𝑝(1 − 𝑝)
𝑒 = 𝑧𝛼/2
𝑛
n = Sample size
z = Critical value from the standard nor. Dist. for desired confidence level
Sample Size for Estimating p
2
𝑧𝛼/2 𝑝(1 − 𝑝)
𝑛=
𝑒2
Where:
e = Desired margin of error
z = Critical value from the standard nor. Dist. for desired confidence
level

Example 9:
The manager of a marketing research company is interested in estimating
the proportion of client’s customers who like a new television commercial.
She wish to develop a 90% confidence level and would like to have the
estimate be within plus or minus 0.05 of the true population proportion. Use
p = 0.5. Determine the required sample size.
Solution 9:
Step 1: Determine the level of confidence and find the critical z-value
The desired confidence level is 90%, so, z = 1.645
Step 2: Determine the desired margin of error
The manager wishes the margin of error to be, e = ±0.05

Step 3: Arrive at a value to use p

Suppose the company has no idea what p is, but wants to make sure that the
sample is sufficiently large to meet the company’s estimation requirements.
The company will use p = 0.5
2
𝑧𝛼/2 𝑝(1 − 𝑝) 1.645 2(0.5)(1 − 0.5) (2.71)(0.5) (0.5)
𝑛= = =
𝑒2 0.05 2 0.0025
0.6778
𝑛= ≈ 𝟐𝟕𝟏
0.0025
 The marketing research company should randomly survey 271 people

Exercise 3:
XYZ Electronics Company has just installed a new machine that makes a
part that is used in clocks. The company wants to estimate the proportion of
these parts produced by this machine that are defective.
Assuming p = 0.5, the company manager wants this estimate to be within

0.02 of the population proportion for a 95% confidence level. What is the
required sample size that will limit the margin of error to within 0.02 of the
population proportion?
ANSWER: 2401 parts

Flow Diagram for Confidence Interval Estimation
Parameters
Proportions Means
𝜎
σ known 𝑥ҧ ± 𝑧𝛼/2
𝑛
𝑝(1
Ƹ − 𝑝)Ƹ 𝑠
𝑝Ƹ ± 𝑧𝛼/2 σ unknown 𝑥ҧ ± 𝑡𝛼/2
𝑛 𝑛

Chapter - 2-Statistical Estimations

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Business Statistics II

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-1

In this chapter, you will be apple to:

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-2

 Estimation is a procedure of assigning numerical value(s) to a

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-3

 Point Estimate is a single value of a sample information that is used

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-4

 Whenever we use point estimation, we calculate margin of error

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-5

 Interval Estimate: instead of assigning a single value to the

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-6

What number should be subtracted from and added to a point estimate to

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-7

Confidence Level and Confidence Interval Each interval is constructed

Point estimate ± (Margin of error)

 The confidence level associated with a confidence interval states how

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-8

 The sample is considered to be large when n ≥ 30. according to central

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-9

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-10

Critical Values for Commonly

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-11

To calculate confidence interval for μ when the population distribution is normal

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-12

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-13

Step 5: Compute the confidence interval estimate

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-16

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-17

Step 5: Compute the confidence interval estimate

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-19

ANSWER: $5171.83 - $5288.17

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-20

Margin of error is a measure of how close we expect the point estimate

Margin of Error for Estimating μ, when σ is known

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-21

 For equivalent samples from a population

 So, it is the decision maker who decides which is more important, a

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-22

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-23

 The shape of a particular t-distribution curve depends on the number of

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-24

Confidence Interval Estimate for μ, σ Unknown

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-25

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-26

The required value of

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-28

Step 3: calculate the 99% confidence interval estimate

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-29

1800 ± 2.86 111.81 = 1800 ± 319.78

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-30

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-31

Step 3: calculate the 95% confidence interval estimate

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-32

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-33

 The basic trade-offs that are present in all Statistical estimations is to

 For a given confidence level, a small sample size will result in an

 Reducing the margin of error requires either reducing the

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-34

 Given the confidence level and the standard deviation of the

Sample Size Required for Estimating μ, When σ is Known

Saed Jama A. MSc. in Applied Statistics. saedjamatr@gmail.com Chap 2-35

Steps in calculating sample size