Chapter 6 :

Estimation
and
Hypothesis Testing
 Learning Objective
 Perform estimation and hypothesis testing
 Estimation
• Estimation =The assignment of value(s) to a
population parameter based on a value of the
corresponding sample statistic.
• estimate =The value(s) assigned to a
population parameter based on the value of a
sample statistic.
• Estimator = The sample statistic used to
estimate a population parameter.
 Estimation
• The estimation procedure involves the
following steps:
1.Select a sample.
2.Collect the required information from the
members of the sample.
3.Calculate the value of the sample statistic.
4.Assign value(s) to the corresponding
population parameter.
 Estimation
• A point estimate is a single value (or point)
used to approximate a population parameter.
For example,
i) 𝑝 estimate
 ^
the sample proportion, p̂ , is the best point
of the population proportion, p.
ii) the sample mean, X , is the best 𝑋 ´point estimate of
the population mean, .
iii) the sample variance, s2, is the best point estimate of
the population variance,  2 .  σ 2
 Estimation
• Interval estimate = an interval that constructed
around the point estimate, and it is stated that
this interval is likely to contain the true value of
a population parameter.

• confidence interval = Each interval is

constructed with regard to a given confidence
level ((1- α)100%). The confidence level
associated with a confidence interval states
how much confidence we have that this interval
contains the true population parameter.
Interval estimation
of
a population mean:
σ known
 Estimation
• Interval
  estimation of a population mean (σ known):
The (1-α)100% Confidence Interval for μ when the :
– population distribution is normal or approximately
normal
– σ is known:
n= sample size

  𝝈 𝝈
( ´𝒙 − 𝒁 α /2 , ´𝒙 + 𝒁 α /2 )
√𝒏 √𝒏
 Estimation
• Margin of error

The maximum error of estimate for , denoted by E, is the

quantity that is subtracted from and added to the value of x
to obtain a confidence interval for . Thus,
 s
E  z /2 or E  z /2 .
n n
 Estimation
Example 1
A research department took a sample of 36 textbooks
and collected information on their prices. This
information produced a mean price of RM54.40. It is
known that the population standard deviation of the
prices of all textbooks is RM4.50.
a) What is the point estimate of the mean price of
all textbooks? What is the margin of error for this
estimate with 95% confidence?
b) Construct a 90% confidence interval for the mean
price of all textbooks.
 Estimation
Solution:
 Estimation
• Sample Size
Sample size for estimating mean 
2
 z 2 
n 
 E 
where
z 2 = critical z score based on the desired
confidence interval
E = desired margin of error
 = population standard deviation
 When finding the sample size n, if the use of formula does
not result in a whole number, always increase the value of
n to the next larger whole number.
 Estimation
Example 2
If we want to estimate the mean IQ scores for
the population of statistics professors. Given
that the standard deviation of IQ scores for all
statistics professors is 15.
How many statistics professors must be
randomly selected for IQ tests if we want 99%
confidence that the sample mean is within 2 IQ
points of the population mean?
 5.8Estimation
Estimation
• Solution:
Interval estimation
of
a population mean:
σ not known
 Estimation
•Interval
  estimation of a population mean (σ not known):

The (1-α)100% Confidence Interval for μ when the :

σ is not known:
n= sample size

= t-distribution and the given confidence level

 Estimation
Student’s t-distribution is a continuous
distribution.
It is a (bell-shaped) symmetric distribution which is
flatter tail than the standard normal distribution
As the sample size becomes larger, the t
distribution approaches the standard normal
distribution.
The t distribution has only one parameter, called
the degrees of freedom (df), v = n-1 and it is
denoted by t (v).
A comparison of t-distribution with df=4 (blue
line) and the standard normal distribution
 Cumulative
df probability
 Estimation
Example 3
Find the t-value of the t-distribution for the following
a) Area in the right tail = 0.05 and v = 5
b) Area in the left tail = .025 and v = 20

• Solution:
Like the normal distribution curve,
The t-distribution curve is also
symmetric
What is the probability of
t-value 3.4 at 5 degree of
freedom?

Solution:
0.005 < p <0.01
 Estimation
Example 4
Find the area in the appropriate tail of the t-
distribution for the following,
a) t = 2.467, v = 28
b) t = – 2.878, v = 18

• Solution:
 Estimation
Example 5
 A doctor wanted to estimate the mean cholesterol
level for all adult men living in a town. He took a
sample of 25 adult men from the town and found
that the mean cholesterol level for this sample is 186
with a standard deviation of 12. Assume that the
cholesterol levels for all adult men in the town are
normally distributed.
 Construct a 95% confidence interval for the
population mean .
 Estimation
Solution:
n  25, X  186, s  12, v  n  1  24
  0.05, t 2 =2.064
s  12 
X  t 2  186  2.064   =186  4.9536
n  25 
The 95% CI for  is  181.05, 190.95 
 Interval estimation
of a
Population Proportion
 Estimation
Interval estimation of a Population Proportion
• Large sample?
In the case of a proportion, a sample is considered to be
large if np and nq are both greater than 5.
If p and q are unknown, then npˆ and nqˆ should each be
greater than 5 for the sample to be large.
 Estimation
The (1   )100% confidence interval for p for large
samples is
ˆˆ
pq
pˆ  z / 2
n
The value of z /2 used here is read from the standard
normal distribution table for the given confidence level.

The maximum error of estimate for p, denoted by E, is the

quantity that is subtracted from and added to the value of p̂
to obtain a confidence interval for p. Thus,
ˆˆ
pq
E  z /2 .
n
 Estimation
Example 6
In a survey, we found that 51% of 829 adults are
opposed to the use of photo-cop for issuing
traffic tickets.
a) Find the margin of error, E that corresponds
to a 95% confidence interval.
b) Construct a 95% confidence interval of the
population proportion, p.
 Estimation
Solution:
n  829, pˆ  0.51
ˆˆ
pq 0.51 0.49 
a ) z  1.96, E  z  1.96  0.0340
n 829
ˆˆ
pq
b)   0.05, z 2  1.96, pˆ  z 2  0.51  0.034
n
The 95% CI for p is  0.476, 0.544 
 Estimation
• Sample size for estimating proportion p,
z2 2 pq
ˆˆ
n 2
pˆ is known
E
z2 2 0.25
n 2
pˆ is not known
E

Note that 0.25 is the largest value of pqˆˆ .

 Estimation
•  
Example 7
Suppose a sociologist wants to determine the current
percentage of households using e-mail. How many
households must be surveyed in order to be 95%
confident that the sample percentage is in error of no
more than four percentage points?
a) Use this result from an earlier study: In 1997, 16.9%
of households used e-mail.
b) Assume that we have no prior information
p̂ value of .
suggesting a possible
 Estimation
Solution:
  0.05, z 2  1.96, E  0.04

 z 
2
 1.96   0.169   0.831
2
 2 pq
a ) p  0.169, n 
 0.04 
2
E2
 337.19  n  338
 1.96   0.25 
2

b) n  600.25,  n  601
 0.04 
2