MJNB1W05

Business Statistics

Hongyanto Setio, MBA

Introductory Statistics Review (1)
Type of
Variables

Quantitative Qualitative

Discrete Continuous

Level of
Measurement

Nominal Ordinal Interval Ratio

 Introductory Statistics Review (2)

Descriptive Statistics
Inferential Statistics
Population
Sample
Reasons to sample
Sampling Methods
Sampling error and non-sampling error
 Introductory Statistics Review (3)
Summarize data set (180 vehicles sale records)
• Age – the age of the buyer at the time of
purchase
• Profit – the amount earned of each vehicle.
• Location – the dealership
• Vehicle_type – SUV, Sedan, Compact, or Truck
• Previous – the number of vehicles previously
purchased at any of the dealerships
 Introductory Statistics Review (3.1)
Using R and R Commander

• Open the xls file

• Select the sheet
Introductory Statistics Review (3.2)
Introductory Statistics Review (3.3)
 Introductory Statistics Review (3.4)
Frequency table (for qualitative variables)
 Introductory Statistics Review (3.5)
Frequency distribution (for quantitative variables)
 Introductory Statistics Review (4)
Graphic Presentation
• Age – the age of the buyer at the time of
purchase
• Profit – the amount earned of each vehicle.
• Location – the dealership
• Vehicle_type – SUV, Sedan, Compact, or Truck
• Previous – the number of vehicles previously
purchased at any of the dealerships
 Introductory Statistics Review (4.1)
Bar Chart (qualitative variables)
 Introductory Statistics Review (4.1)
Pie Chart (qualitative variables)
Chapter Nine

Estimation and
Confidence Intervals
 Key Questions
Define a what is meant by a point estimate.
Define the term level of level of confidence.
Construct a confidence interval for the population mean
when the population standard deviation is known.
Construct a confidence interval for the population mean
when the population standard deviation is unknown
Construct a confidence interval for the population
proportion
Point Estimates
A point estimate is a single X  
value (point) derived from a
sample and used to estimate
a population value.
s  
s  
2 2

p  

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Confidence Interval Estimates
A confidence interval estimate is a range of values constructed
from sample data so that the population parameter is likely to
occur within that range at a specified probability. The specified
probability is called the level of confidence.

C.I. = point estimate ± margin of error

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Factors Affecting Confidence
Interval Estimates
The width of a confidence interval are determined
by:
1.The sample size, n.
2.The variability in the population, usually σ estimated
by s.
3.The desired level of confidence.

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Confidence Intervals for a Mean – σ Unknown
Assume the distribution of the population is normal.
Otherwise use n >= 30.

In most sampling situations the population standard deviation (σ) is not known.

tα/2,n-1 is determined by the level of confidence and degree of

freedom (n-1).

Example : level of confidence =95% and n = 10

 α = 5%  tα/2,9 = 2.262

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Characteristics of the t-distribution
1. It is, like the z distribution, a continuous distribution.
2. It is, like the z distribution, bell-shaped and symmetrical.
3. There is not one t distribution, but rather a family of t distributions. All t distributions
have a mean of 0, but their standard deviations differ according to the sample size, n.
4. The t distribution is more spread out and flatter at the center than the standard normal
distribution As the sample size increases, however, the t distribution approaches the
standard normal distribution

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Confidence Interval for the Mean –
Example using the t-distribution
A tire manufacturer wishes to
investigate the tread life of its tires.
A sample of 10 tires driven 50,000
miles revealed a sample mean of
0.32 inch of tread remaining with a
standard deviation of 0.09 inch.
Construct a 95 percent confidence
interval for the population mean.
Would it be reasonable for the
manufacturer to conclude that after
50,000 miles the population mean
amount of tread remaining is 0.30
inches?

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Confidence Interval for a Population
Proportion - Formula

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Confidence Interval for a Population
Proportion- Example
The union representing the Bottle First, compute the sample proportion :
Blowers of America (BBA) is x 1,600
considering a proposal to merge with p   0.80
the Teamsters Union. According to n 2000
BBA union bylaws, at least three-
fourths of the union membership Compute the 95% C.I.
must approve any merger. A random
sample of 2,000 current BBA members p (1  p)
C.I.  p  z / 2
reveals 1,600 plan to vote for the n
merger proposal. What is the estimate
of the population proportion? .80(1  .80)
 0.80  1.96  .80  .018
Develop a 95 percent confidence 2,000
interval for the population proportion.  (0.782, 0.818)
Basing your decision on this sample
information, can you conclude that
the necessary proportion of BBA Conclude : The merger proposal will likely pass
members favor the merger? Why?
because the interval estimate includes values greater
than 75 percent of the union membership .

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Sample Size for Estimating
the Population Mean

2
 z  
n 
 E 

 can be estimated by (range)/4

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 Sample Size Determination for a
Variable-Example
A student in public administration wants to
determine the mean amount members of 2
city councils in large cities earn per month as  z  
remuneration for being a council member. n 
The error in estimating the mean is to be  E 
less than $100 with a 95 percent level of
confidence. The student found a report by
2
the Department of Labor that estimated the
 (1.96)($ 1,000) 
standard deviation to be $1,000. What is the  
required sample size?  $100 
Given in the problem:
 (19.6) 2
 E, the maximum allowable error, is $100  384.16
 The value of z for a 95 percent level of
confidence is 1.96,  385
 The estimate of the standard deviation is
$1,000.
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Sample Size Determination for a
Variable- Another Example
A consumer group would like to estimate the mean monthly
electricity charge for a single family house in July within $5 using a
99 percent level of confidence. Based on similar studies the
standard deviation is estimated to be $20.00. How large a sample is
required?

2
 (2.58)( 20) 
n   107
 5 

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Sample Size for Estimating a
Population Proportion
2
Z
n   (1   ) 
E 

where:
n is the size of the sample
z is the standard normal value corresponding to
the desired level of confidence
E is the maximum allowable error

 can be estimated by 0.5 to give max n

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Sample Size Determination -
Example
The American Kennel Club wanted to estimate the
proportion of children that have a dog as a pet. If the club
wanted the estimate to be within 3% of the population
proportion, how many children would they need to contact?
Assume a 95% level of confidence and that the club
estimated that 30% of the children have a dog as a pet.

2
Z
n   (1   ) 
E 
2
 1.96 
n  (.30)(. 70)   897
 .03 
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Another Example
2
A study needs to estimate the
Z
proportion of cities that have n   (1   ) 
private refuse collectors. The E 
investigator wants the margin
of error to be within .10 of the
population proportion, the
2
desired level of confidence is 90  1.65 
percent, and no estimate is n  (.5)(1  .5)   68.0625
available for the population  .10 
proportion. What is the n  69 cities
required sample size?

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Finite-Population Correction Factor

 A population that has a fixed upper bound is said to be finite.

 For a finite population, where the total number of objects is N and the size of
the sample is n, the following adjustment is made to the standard errors of the
sample means and the proportion:
 However, if n/N < .05, the finite-population correction factor may be ignored.

Standard Error of the Mean Standard Error of the Proportion

 N n p(1  p) N  n
x  p 
n N 1 n N 1

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Confidence Interval Formulas for Estimating Means
and Proportions with Finite Population Correction

C.I. for the Mean () C.I. for the Mean ()

 N n s N n
X z X t
n N 1 n N 1

C.I. for the Proportion ()

p (1  p ) N n
pz
n N 1
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CI for Mean with FPC - Example
There are 250 families in Scandia,
Pennsylvania. A random sample of
40 of these families revealed the
mean annual church contribution
was $450 and the standard
deviation of this was $75.
Could the population mean be
$445 or $425?
1. What is the population mean?
What is the best estimate of the
population mean?
2. Discuss why the finite-
population correction factor should
be used.
Given in Problem:
N – 250
n – 40
s - $75
Since n/N = 40/250 = 0.16, the finite
population correction factor must be used.
The population standard deviation is not
known therefore use the t-distribution (may
use the z-dist since n>30)
Use the formula below to compute the
confidence interval:
s N n
X t
n N 1
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CI For Mean with FPC - Example

s N n
X t
n N 1

$75 250  40
 $450  t.10 / 2,401
40 250  1
$75 250  40
 $450  1.685
40 250  1
 $450  $19.98 .8434
 $450  $18.35
 ($431.65, $468.35)

It is likely that the population mean is more than $431.65 but less than $468.35.
To put it another way, could the population mean be $445? Yes, but it is not
likely that it is $425 because the value $445 is within the confidence
interval and $425 is not within the confidence interval.

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