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Lecture 02
Lecture 02
2
ESTIMATION: AN
INTRODUCTION cont.
Definition
The value(s) assigned to a population
parameter based on the value of a sample
statistic is called an estimate.
The sample statistic used to estimate a
population parameter is called an
estimator.
3
ESTIMATION: AN
INTRODUCTION cont.
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.
4
POINT AND INTERVAL
ESTIMATES
A Point Estimate
An Interval Estimate
5
A Point Estimate
Definition
The value of a sample statistic that is used
to estimate a population parameter is
called a point estimate.
6
A Point Estimate cont.
Usually, whenever we use point estimation, we
calculate the margin of error associated with that
point estimation.
The margin of error is calculated as follows:
7
An Interval Estimation
Definition
In interval estimation, an interval is
constructed around the point estimate,
and it is stated that this interval is likely to
contain the corresponding population
parameter.
8
Figure 8.1 Interval estimation.
x x $1370
$1130 $1610
9
An Interval Estimation cont.
Definition
Each interval is constructed with regard to a given
confidence level and is called a confidence
interval. The confidence level associated with a
confidence interval states how much confidence we
have that this interval contains the true population
parameter. The confidence level is denoted by
(1 – α)100%.
10
INTERVAL ESTIMATION OF A
POPULATION MEAN: LARGE SAMPLES
Confidence Interval for μ for Large Samples
The (1 – α)100% confidence interval for μ is
x z x if is known
x zs x if is not known
where x / n and s x s / n
The value of z used here is read from the
standard normal distribution table for the given
confidence level.
11
INTERVAL ESTIMATION OF A
POPULATION MEAN: LARGE SAMPLES
cont.
Definition
The maximum error of estimate for μ,
denoted by E, is the quantity that is
subtracted from and added to the value of
x to obtain a confidence interval for μ.
Thus,
E z x or zs x
12
Figure 8.2 Finding z for a 95% confidence level.
.4750 .4750
μ x
-1.96 0 1.96 z
13
Figure 8.3 Area in the tails.
2 2
(1 – α)
-z 0 z z
14
Example 8-1
A publishing company has just published a new
college textbook. Before the company decides the
price at which to sell this textbook, it wants to
know the average price of all such textbooks in
the market. The research department at the
company took a sample of 36 comparable
textbooks and collected information on their
prices. This information produces a mean price of
$70.50 for this sample. It is known that the
standard deviation of the prices of all such
textbooks is $4.50.
15
Example 8-1
(a) What is the point estimate of the mean
price of all such textbooks? What is the
margin of error for the estimate?
(b) Construct a 90% confidence interval for
the mean price of all such college
textbooks.
16
Solution 8-1
a)
n = 36, x = $70.50, and σ = $4.5
4.50
x $.75
n 36
18
Solution 8-1
We can say that we are 90% confident that
the mean price of all such college textbooks
is between $69.26 and $71.74.
19
Figure 8.4 Confidence intervals.
x3 x2 x1 x
x1 1.65 x x1 x1 1.65 x
x 2 1.65 x x2 x 2 1.65 x
x3 1.65 x x3 x3 1.65 x
20
Example 8-2
According to a report by the Consumer
Federation of America, National Credit Union
Foundation, and the Credit Union National
Association, households with negative assets
carried an average of $15,528 in debt in 2002
(CBS.MarketWatch.com, May 14, 2002). Assume
that this mean was based on a random sample of
400 households and that the standard deviation
of debts for households in this sample was
$4200. Make a 99% confidence interval for the
2002 mean debt for all such households.
21
Solution 8-2
Confidence level 99% or .99
s 4200
sx $210
n 400
22
Solution 8-2
x zs x 15,528 2.58(210) 15,528 541.80
$14,986.20 to $16,069.80
23
INTERVAL ESTIMATION OF A
POPULATION MEAN: SMALL SAMPLES
The t Distribution
Confidence Interval for μ Using the t
Distribution
24
The t Distribution
Conditions Under Which the t Distribution Is Used to Make a
Confidence Interval About μ
The t distribution is used to make a
confidence interval about μ if
1. The population from which the sample is drawn
is (approximately) normally distributed
2. The sample size is small (that is, n < 30)
3. The population standard deviation , σ , is not
known
25
The t Distribution cont.
The t distribution is a specific type of bell-
shaped distribution with a lower height and a
wider spread 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).
The mean of the t distribution is equal to 0 and
its standard deviation is df /( df 2) .
26
Figure 8.5 The t distribution for df = 9 and the
standard normal distribution.
μ=0
27
Example 8-3
Find the value of t for 16 degrees of
freedom and .05 area in the right tail of a
t distribution curve.
28
Table 8.1 Determining t for 16 df and .05 Area in the
Right Tail
.05
df = 16
0 1.746 t
This is the required
value of t
30
Figure 8.7 The value of t for 16 df and .05 area in the
left tail.
.05 df = 16
-1.746 0 t
31
Confidence Interval for μ Using
the t Distribution
The (1 – α)100% confidence interval
for μ is
s
x ts x where s x
n
33
Solution 8-4
Confidence level is 95% or .95
s 12
sx 2.40
n 25
df = n – 1 = 25 – 1 = 24
Area in each tail = .5 – (.95/2)
= .5 - .4750 = .025
The value of t in the right tail is 2.064
34
Figure 8.8 The value of t.
df = 24
.025
.025
.4750 .4750
-2.064 0 2.064 t
35
Solution 8-4
37
Solution 8-5
Confidence level is 99% or .99
s 300
sx $60
n 25
df = n – 1 = 25 – 1 = 24
Area in each tail = .5 – (.99/2)
= .5 - .4950 = .005
The values of t are 2.797 and -2.797
38
Solution 8-5
The 99% confidence interval for μ is
x ts x $1450 2.797(60)
$1450 $167.82
$1282.18 to $1617.82
39
INTERVAL ESTIMATION OF A
POPULATION PROPORTION: LARGE
SAMPLES
pˆ qˆ
s pˆ
n
40
INTERVAL ESTIMATION OF A
POPULATION PROPORTION: LARGE
SAMPLES cont.
43
Solution 8-6
n = 1000, p̂ = .20, and, q̂ = .80
pˆ qˆ (.20)(.80)
s pˆ .01264911
n 1000
Note that npˆ and nqˆ are both greater
than 5.
44
Solution 8-6
a)
Point estimate of p = p̂ = .20
Margin of error = ±1.96 s pˆ
= ±1.96(.01264911)
=
± .025 or ±2.5%
45
Solution 8-6
b)
The confidence level is 99%, or .99.
The z value for .4950 is approximately 2.58.
46
Example 8-7
According to the analysis of a CNN–USA TODAY–Gallup
poll conducted in October 2002, “Stress has become a
common part of everyday life in the United States. The
demands of work, family, and home place an increasing
burden on the average American.” According to this poll,
40% of Americans included in the survey indicated that
they had a limited amount of time to relax (Gallup.com,
November 8, 2002). The poll was based on a randomly
selected national sample of 1502 adults aged 18 and
older. Construct a 95% confidence interval for the
corresponding population proportion.
47
Solution 8-7
Confidence level = 95% or .95
pˆ qˆ (.40)(.60)
s pˆ .01264069
n 1502
The value of z for .95 / 2 = .4750 is 1.96.
48
Solution 8-7
pˆ zs pˆ .40 1.96(.01264069)
.40 .025
.375 to .425 or 37.5% to 42.5%
49
DETERMINING THE SAMPLE SIZE FOR
THE ESTIMATION OF THE MEAN
z
2 2 2
(2.58) (11,800) 2
n 2
2
E (800)
1448.18 1449
52
DETERMINING THE SAMPLE SIZE FOR
THE ESTIMATION OF PROPORTION
pq
E z pˆ z
n 53
DETERMINING THE SAMPLE SIZE FOR
THE ESTIMATION OF PROPORTION cont.
55
Example 8-9
Lombard 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. The company
manager wants this estimate to be within .02 of
the population proportion for a 95% confidence
level. What is the most conservative estimate of
the sample size that will limit the maximum error
to within .02 of the population proportion?
56
Solution 8-9
The value of z for a 95% confidence level is
1.96.
p = .50 and q = .50
z 2 pq (1.96) 2 (.50)(.50)
n 2
2
2401
E (.02)
58
Solution 8-10
p̂ = .07 and q̂ = .93
2 2
z pˆ qˆ (1.96) (.07)(.93)
n 2
2
E (.02)
(3.8416)(.07)(.93)
625.22 626
.0004
59