Chapter 5
Inferences about Population Central
Values Interval Estimation
Population Mean: Known
Population Mean: Unknown
Determining the Sample Size
1
Margin of Error and the Interval
Estimate
A point estimator cannot be expected to provide the
exact value of the population parameter.
An interval estimate can be computed by adding and
subtracting a margin of error to the point estimate.
Point Estimate +/ Margin of Error
The purpose of an interval estimate is to provide
information about how close the point estimate is to
the value of the parameter.
2
Margin of Error and the Interval
Estimate
3
Interval Estimation of a Population
Mean:
Known
In order to develop an interval estimate of a
population mean, the margin of error must be
computed using either:
the population standard deviation , or
the sample standard deviation s
is rarely known exactly, but often a good
estimate can be obtained based on historical
data or other information.
We refer to such cases as the known case.
4
Interval Estimation of a Population
Mean:
Known
There is a 1 probability that the value of a
sample mean will provide a margin of error of
z /2 x
or less.
Sampling
distribution
of x
/2 1 - of all /2
x values
x
z /2 x z /2 x
5
Interval Estimate of a Population Mean:
Known
Sampling
distribution interval
of x includes
1 - of all
/2 /2
x values
interval
does not x
include interval
z /2 x z /2 x
includes
[------------------------- x -------------------------]
[------------------------- x -------------------------]
[------------------------- x -------------------------] 6
Interval Estimate of a Population
Mean:
Known
Interval Estimate of
x z /2
n
where: x is the sample mean
1 - is the confidence coefficient
z/2 is the z value providing an area of
/2 in the upper tail of the standard
normal probability distribution
is the population standard deviation
n is the sample size
7
Interval Estimate of a Population
Mean:
Known
Adequate Sample Size
In most applications, a sample size of n = 30 is adequ
If the population distribution is highly skewed or
contains outliers, a sample size of 50 or more is
recommended.
If the population is not normally distributed but is roug
symmetric, a sample size as small as 15 will suffice.
If the population is believed to be at least approximat
normal, a sample size of less than 15 can be used.
8
Interval Estimate of Population
Mean:
Known
Example: Discount Sounds
Discount Sounds has 260 retail outlets throughout
the United States. The firm is evaluating a potential
location for a new outlet, based in part, on the mean
annual income of the individuals in the marketing
area of the new location.
A sample of size n = 36 was taken; the sample
mean income is $31,100. The population is not
believed to be highly skewed. The population
standard deviation is estimated to be $4,500,
and the confidence coefficient to be used in the
interval estimate is .95.
9
Interval Estimate of Population
Mean:
Known
95% of the sample means that can be observed
x
are within + 1.96 of the population mean .
The margin of error is:
4,500
z / 2 1.96 1,470
n 36
Thus, at 95% confidence, the margin of error
is $1,470.
10
Interval Estimate of Population Mean:
Known
Interval estimate of is:
$31,100 + $1,470
or
$29,630 to $32,570
We are 95% confident that the interval contains the
population mean.
11
12
Interval Estimation of a Population
Mean:
Unknown
If an estimate of the population standard
deviation cannot be developed prior to
sampling, we use the sample standard
deviation
This is thestounknown .
estimate case.
In this case, the interval estimate for is based
on the t distribution.
(We’ll assume for now that the population is
normally distributed.)
13
t Distribution
The t distribution is a family of similar probability
distributions.
A specific t distribution depends on a parameter
known as the degrees of freedom.
Degrees of freedom refer to the number of independe
pieces of information that go into the computation of s
A t distribution with more degrees of freedom has
less dispersion.
As the number of degrees of freedom increases, the
difference between the t distribution and the standard
normal probability distribution becomes smaller and sm
14
t Distribution
Standard
normal
distribution
t
distribution
(10 degrees
of
freedom)
z, t
0 15
t Distribution
For more than 100 degrees of freedom, the standard
normal z value provides a good approximation to
the t value.
The standard normal z values can be found in the
infinite degrees( ) row of the t distribution table.
16
t Distribution
Degrees Area in Upper Tail
of Freedom .20 .10 .05 .025 .01 .005
. . . . . . .
50 .849 1.299 1.676 2.009 2.403 2.678
60 .848 1.296 1.671 2.000 2.390 2.660
80 .846 1.292 1.664 1.990 2.374 2.639
100 .845 1.290 1.660 1.984 2.364 2.626
.842 1.282 1.645 1.960 2.326 2.576
Standard
normal 17
Interval Estimation of a Population
Mean:
Unknown
Interval Estimate
X t / 2 X and X s / n
where: 1 - = the confidence coefficient
t/2 = the t value providing an area of /2
in the upper tail of a t distribution
with n - 1 degrees of freedom
s = the sample standard deviation
18
Interval Estimation of a Population
Mean:
Unknown
Example: Apartment
Rents
A reporter for a student newspaper is writing
an
article on the cost of off-campus
housing. A sample of 16
efficiency apartments within a
half-mile of campus resulted in
a sample mean of $650 per month and a sample
standard deviation of $55.
19
Interval Estimation of a Population
Mean:
Unknown
Example: Apartment
Rents
Let us provide a 95% confidence interval
estimate of the mean rent per
month for the population of
efficiency apartments within a
half-mile of campus. We will
assume this population to be normally
distributed.
20
Interval Estimation of a Population
Mean:
Unknown
At 95% confidence, = .05, and /2 = .025.
t.025 is based on n 1 = 16 1 = 15 degrees of freedom.
In the t distribution table we see that t.025 = 2.131.
Degrees Area in Upper Tail
of Freedom .20 .100 .050 .025 .010 .005
15 .866 1.341 1.753 2.131 2.602 2.947
16 .865 1.337 1.746 2.120 2.583 2.921
17 .863 1.333 1.740 2.110 2.567 2.898
18 .862 1.330 1.734 2.101 2.520 2.878
19 .861 1.328 1.729 2.093 2.539 2.861
. . . . . . . 21
Interval Estimation of a Population
Mean:
Unknown
Interval Estimate
s
x t.025
n
55
650 2.131 650 29.30
16
We are 95% confident that the mean rent per mon
for the population of efficiency apartments within a
half-mile of campus is between $620.70 and $679.30
22
EXAMPLE 5.1 (page 221)
23
Summary of Interval Estimation
Procedures for a Population Mean
Can the
Yes population standard No
deviation be assumed
known ?
Use the sample
standard deviation
s to estimate
Known
Case
Use Unknown Use s
x z / 2 Case x t / 2
n n
24
Page 276
25
Sample Size for an Interval Estimate
of a Population Mean
Let E = the desired margin of error.
E is the amount added to and subtracted from the
point estimate to obtain an interval estimate.
26
Sample Size for an Interval Estimate
of a Population Mean
Margin of Error
E z /2
n
Necessary Sample Size
( z / 2 ) 2 2
n
E2
27
Sample Size for an Interval Estimate
of a Population Mean
Suppose a musical store is evaluating a potential location for a new retail
outlet in Stillwater, OK, based in part, on the mean annual income of the
individuals in this marketing area.
Suppose that store’s management team wants an estimate the population
mean such that there is a .95 probability that the sampling error is $500
or less. The population is not believed to be highly skewed. The
population standard deviation is estimated to be $4,500. How large a
sample size is needed to meet the required precision?
28
EXAMPLE 5.4 (Page 232)
A federal agency has decided to investigate the advertised weight
printed on cartons of a certain brand of cereal. The company in
question periodically samples cartons of cereal coming off the
production line to check their weight. A summary of 1,500 of the
weights made available to the agency indicates a mean weight of
11.80 ounces per carton and a standard deviation of .75 ounce. Use
this information to determine the number of cereal cartons the
federal agency must examine to estimate the average weight of
cartons being produced now, using a 99% confidence interval of
width .50.
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