Applied Statistics DESCRIPTIVE STATISTICS Dr.

Mahmoud Abd El-Raouf

1. Introduction
For a layman, ‘Statistics’ means numerical information expressed in quantitative terms. This
information may relate to objects, subjects, activities, phenomena, or regions of space. As a matter of
fact, data have no limits as to their reference, coverage, and scope.

2. Meaning and Definitions of Statistics

In the beginning, it may be noted that the word ‘statistics’ refers to the whole body of tools that are
used to collect data, organize and interpret them to draw conclusions from them. If statistics, as a
subject, is inadequate and consists of poor methodology, we could not know the right procedure to
extract from the data the information they contain. Similarly, if our data are defective or that they are
inadequate or inaccurate, we could not reach the right conclusions even though our subject is well
developed.
A.L. Bowley has defined statistics as: (i) statistics is the science of counting, (ii) Statistics may rightly
be called the science of averages, and (iii) statistics is the science of measurement of social organism
regarded as a whole in all its manifestations.
Boddington defined as: Statistics is the science of estimates and probabilities.
Further, W.I. King has defined Statistics in a wider context “the science of Statistics is the method of
judging collective, natural or social phenomena from the results obtained by the analysis or
enumeration or collection of estimates”.
Seligman explored that statistics is a science that deals with the methods of collecting, classifying,
presenting, comparing and interpreting numerical data collected to throw some light on any sphere of
enquiry.
Spiegal defines statistics highlighting its role in decision-making particularly under uncertainty, as
follows: statistics is concerned with scientific method for collecting, organizing, summarizing,
presenting and analyzing data as well as drawing valid conclusions and making reasonable
decisions on the basis of such analysis.
According to Prof. Horace Secrist, Statistics is the aggregate of facts, affected to a marked extent by
multiplicity of causes, numerically expressed, enumerated or estimated according to reasonable

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Applied Statistics DESCRIPTIVE STATISTICS Dr. Mahmoud Abd El-Raouf

standards of accuracy, collected in a systematic manner for a pre-determined purpose, and placed in
relation to each other.

3. Types of Data
Statistical data are the basic raw material of statistics. Data may relate to an activity of our interest,
a phenomenon, or a problem situation under study. They derive as a result of the process of measuring,
counting and/or observing. Statistical data, therefore, refer to those aspects of a problem situation that
can be measured, quantified, counted, or classified. In statistics, data are classified into two broad
categories: quantitative data and qualitative data. This classification is based on the kind of
characteristics that are measured.

Quantitative data are those that can be quantified in definite units of measurement. These refer to
characteristics whose successive measurements yield quantifiable observations. Depending on the
nature of the variable observed for measurement, quantitative data can be further categorized as
continuous and discrete data.
Obviously, a variable may be a continuous variable or a discrete variable.
• Continuous data represent the numerical values of a continuous variable. A continuous variable is
the one that can assume any value between any two points on a line segment, thus representing an
interval of values. The values are quite precise and close to each other, yet distinguishably different.
All characteristics such as weight, length, height, thickness, velocity, temperature, tensile strength,
etc.,
• Discrete data are the values assumed by a discrete variable. A discrete variable is the one whose
outcomes are measured in fixed numbers. Such data are essentially count data. These are derived
from a process of counting, such as the number of items possessing or not possessing a certain
characteristic. The number of customers visiting a departmental store every day, the incoming
flights at an airport, and the defective items in a consignment received for sale, are all examples of
discrete data.

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Applied Statistics DESCRIPTIVE STATISTICS Dr. Mahmoud Abd El-Raouf

Qualitative data refer to qualitative characteristics of a subject or an object. A characteristic is

qualitative in nature when its observations are defined and noted in terms of the presence or absence
of a certain attribute in discrete numbers. These data are further classified as nominal and ordinal data.
• Nominal data are the outcome of classification into two or more categories of items or units
comprising a sample or a population according to some quality characteristic. Classification of
students according to sex (as males and females), of workers according to skill (as skilled, semi-
skilled, and unskilled), and of employees according to the level of education (as matriculates,
undergraduates, and post-graduates).
• Ordinal data, on the other hand, are the result of assigning ranks to specify order in terms of the
integers 1,2,3, ..., n. Ranks may be assigned according to the level of performance in a test. a
contest, a competition, an interview, or a show. The candidates appearing in an interview, for
example, may be assigned ranks in integers ranging from 1 to n, depending on their performance
in the interview.
4. Types of Statistics
There are two major divisions of statistics such as descriptive statistics and inferential statistics.

The descriptive statistics deals with collecting, summarizing, and simplifying data, which are
otherwise quite unwieldy and voluminous. It seeks to achieve this in a manner that meaningful
conclusions can be readily drawn from the data. Descriptive statistics may thus be seen as comprising
methods of bringing out and highlighting the latent characteristics present in a set of numerical data.
It not only facilitates an understanding of the data and systematic reporting thereof in a manner; and
also makes them amenable to further discussion, analysis, and interpretations.

A well thought-out and sharp data classification facilitates easy description of the data by means of a
variety of summary measures. These include measures of central tendency, dispersion, skewness, and
kurtosis, which constitute the essential scope of descriptive statistics.

Inferential statistics, goes beyond describing a given problem situation by means of collecting,
summarizing, and meaningfully presenting the related data. Instead, it consists of methods that are
used for drawing inferences, or making broad generalizations, about a totality of observations on the

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Applied Statistics DESCRIPTIVE STATISTICS Dr. Mahmoud Abd El-Raouf

basis of knowledge about a part of that totality. Thus, obtaining a particular value from the sample
information and using it for drawing an inference about the entire population underlies the subject
matter of inferential statistics.
Notes:
(1) The totality of observations about which an inference may be drawn, or a generalization made,
is called a population.
(2) The part of totality, which is observed for data collection and analysis to gain knowledge about
the population, is called a sample.

Inferential statistics helps to evaluate the risks involved in reaching inferences or generalizations about
an unknown population on the basis of sample information. for example, an inspection of a sample of
five battery cells drawn from a given lot may reveal that all the five cells are in perfectly good
condition. This information may be used to conclude that the entire lot is good enough to buy or not.

5. Importance of Statistics in Business

There are three major functions in any business enterprise in which the statistical methods are

useful. These are as follows:

(i) The planning of operations: This may relate to either special projects or to the recurring

activities of a firm over a specified period.

(ii) The setting up of standards: This may relate to the size of employment, volume of sales, fixation

of quality norms for the manufactured product, norms for the daily output, and so forth.

(iii) The function of control: This involves comparison of actual production achieved against the

norm or target set earlier. In case the production has fallen short of the target, it gives remedial

measures so that such a deficiency does not occur again.

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Applied Statistics DESCRIPTIVE STATISTICS Dr. Mahmoud Abd El-Raouf

Statistical Measures
The description of statistical data may be quite elaborate or quite brief depending on two factors: the
nature of data and the purpose for which the same data have been collected.
1) Measures Of Central Tendency:
The measures of central tendency enable us to compare two or more distributions pertaining to the
same time period or within the same distribution over time. For example, the average consumption of
tea in two different territories for the same period or in a territory for two years, say, 2003 and 2004,
can be attempted by means of an average.
• MEAN

Adding all the observations and dividing the sum by the number of observations results the
mean. Symbolically, the mean is
∑ 𝑋 𝑋1 + 𝑋2 + ⋯ + 𝑋𝑛
𝑋̅ = =
𝑛 𝑛
It may be noted that the Greek letter 𝜇 is used to denote the mean of the population and n to denote
the total number of observations in a population.
Example 1: Calculate the following average workers' wages:
15, 18, 28, 39, 56, 66
Solution:
∑ 𝑋 15 + 18 + 28 + 39 + 56 + 6 222
𝑋̅ = = = = 37
𝑛 6 6
Example 2: Calculate the mean of the following items:
29, 21, 18, 27, 25, 30, 16
Solution:
∑ 𝑋 29 + 21 + 18 + 27 + 25 + 30 + 16 166
𝑋̅ = = = = 23.7142
𝑛 7 7
• MEDIAN

Median is defined as the value of the middle item (or the mean of the values of the two middle
items) when the data are arranged in an ascending or descending order of magnitude. if the n values
are arranged in ascending or descending order of magnitude,

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Applied Statistics DESCRIPTIVE STATISTICS Dr. Mahmoud Abd El-Raouf

𝑛+1 𝑡ℎ
• if n is odd. the median is the middle value ( 2
) .

𝑛 𝑡ℎ 𝑛 𝑡ℎ
• if n is even. the median is the mean of the two middle values (2) and (2 + 1) .

Suppose we have the following series:

15, 19, 21,7, 10, 33, 25, 18 ,5
We have to first arrange it in either ascending or descending order. These figures are arranged in an
ascending order as follows:
5, 7, 10, 15, 18, 19, 21, 25, 33
𝑛+1 𝑡ℎ
Now as (n) is odd number, to find out the value of the middle item, we use the formula ( 2
) then

the median =18

Suppose we have the following series: 5, 7, 10, 15, 18, 19, 21, 23, 25, 33.
Now as (n) is even number, to find out 2 values of the middle, we have to take the average of the
𝟏𝟖+𝟏𝟗
values of 5th and 6th item, then 𝑡ℎ𝑒 𝑚𝑒𝑑𝑖𝑎𝑛 = = 𝟏𝟖. 𝟓
𝟐

Example 3: Calculate the following median workers' wages:

15, 18, 28, 39, 56, 66
Solution:

15 18 28 39 56 66
39 + 28
median = = 33.5
2
Example 4: Calculate the median of the following items:
29, 21, 18, 27, 25, 30, 16
Solution:
16 18 21 25 27 29 30
median = 25
• MODE

The mode is another measure of central tendency. It is the value at the point around which the
items are most heavily concentrated. (The most frequent values)

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Applied Statistics DESCRIPTIVE STATISTICS Dr. Mahmoud Abd El-Raouf

Example 5: Calculate the mode of the following items:

• 29, 25, 18, 27, 25, 30, 16
𝑚𝑜𝑑𝑒 = 25
• 15, 18, 18, 39, 56, 15
𝑚𝑜𝑑𝑒 = {15,18}
• 15, 18, 18, 39, 39, 15
No mode.
The mode is the only measure that takes more than one value and it is possible that there is no mode
2) Measures of Dispersion:
It may be noted that these measures do not indicate the extent of dispersion or variability in a
distribution. The dispersion or variability provides us one more step in increasing our understanding
of the pattern of the data. Further, a high degree of uniformity (i.e. low degree of dispersion) is a
desirable quality.
Averages are not sufficient to give a complete description of the data, as they are not suitable for
measuring how different or homogeneous the data are with each other. For example, if we look at the
following two sets of data:
A 30 40 55 60 65 80 90
B 55 57 59 60 61 63 65
We found that the mean and the median for each are 60. However, the differences between them
are large. Values in group B are close to each other and are not far from the mean or median, unlike
in case A where we find their components more dispersed. Accordingly, when accurately describing
the dataset, we are not satisfied with the average scale, but in addition, a dispersion scale should be
calculated. There are commonly used measures: range - variance - standard deviation.
• RANGE

The simplest measure of dispersion is the range, which is the difference between the maximum
value and the minimum value of data.
A B
Range = max -min = 90 − 30 = 60 = 65 − 55 = 10

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Applied Statistics DESCRIPTIVE STATISTICS Dr. Mahmoud Abd El-Raouf

it is clear that group B is less dispersed than group A. In other words, the elements of group B
are more homogeneous with each other than the elements of group A.
• VARIANCE

variance is the mean squared difference between all elements of a group and the mean of this
group.
∑(𝑋 − 𝑋̅)2
𝑆2 =
𝑛−1
A B
𝑋𝑖 𝑋 − 𝑋̅ (𝑋 − 𝑋̅)2 𝑋𝑖 𝑋 − 𝑋̅ (𝑋 − 𝑋̅)2
30 -30 900 55 -5 25
40 -20 400 57 -3 9
55 -5 25 59 -1 1
60 0 0 60 0 0
65 5 25 61 1 1
80 20 400 63 3 9
90 30 900 65 5 25
∑ 420 0 2650 420 0 70
∑(𝑋 − 𝑋̅)2 2650 70
𝑆2 = 𝑆𝐴2 = = 441.6666 𝑆𝐵2 = = 11.6666
𝑛−1 7−1 7−1

• STANDARD DEVIATION

standard deviation is the mean of difference between all elements of a group and the mean of this
group.
𝑆 = √𝑆 2

𝑆 = √𝑆 2 𝑆𝐴 = √441.6666 = 21.01586 𝑆𝐵 = √11.6666 = 3.415650

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Applied Statistics DESCRIPTIVE STATISTICS Dr. Mahmoud Abd El-Raouf

Solved Problems
1) Calculate the mean, median and mode of the following data:
i.18, 10, 15, 13, 17, 15, 12, 15, 18, 16, 11
Solution: Order data: 10, 11, 12, 13, 15, 15, 15, 16, 17, 18, 18 = 15 , 𝑀𝑒𝑑𝑖𝑎𝑛 = 15 and 𝑀𝑒𝑎𝑛 =
10+11+12+13+15×3+16+17+18×2
= 14.55
11

ii. Find the Average, Median, Mode, Range, Variance, and Standard Deviation for the following
data: 4, 7, 9, 12, 15, 20.
Solution: Order data: 4, 7, 9, 12, 15, 20 𝒙 𝒙−𝑿 ̅ (𝒙 − 𝑿
̅ )𝟐
𝑀𝑜𝑑𝑒 = 𝑁𝑜 𝑀𝑜𝑑𝑒, 4 −43/6 1849/36
9+12
7 −25/6 625/36
𝑀𝑒𝑑𝑖𝑎𝑛 = = 10.5 𝑅𝑎𝑛𝑔𝑒 = 20 − 4 = 16, 9 −13/6 169/36
2
4+7+9+12+15+20 67 12 5/6 25/36
𝑋̅ = = = 11.16, 15 23/6 529/36
6 6
166.83 20 53/6 2809/36
𝑣(𝑥) = = 33.266and 𝑆𝐷 = √33.266 = 5.77
5 Σ 0 166.83

2) In the following data, which group is more homogenous? Why?

Group A 187 284 201 151 100 154 105
Group B 20 15 8 8 15 12 16
Solution:
𝒙𝑨 𝒙𝑨 − ̅̅̅̅
𝑿𝑨 (𝒙𝑨 − ̅̅̅̅
𝑿𝑨 )𝟐 𝒙𝑩 𝒙𝑩 − ̅̅̅̅
𝑿𝑩 (𝒙𝑩 − ̅̅̅̅
𝑿𝑩 )𝟐
187 127/7 16129/49 20 46/7 2116/49
284 806/7 649636/49 15 11/7 121/49
201 225/7 50625/49 8 −38/7 1444/49
151 −125/7 15625/49 8 −38/7 1444/49
100 −482/7 232324/49 15 11/7 121/49
154 −104/7 10816/49 12 −10/7 144/49
105 −447/7 199809/49 16 18/7 256/49
Σ 1182 0 23978.86 94 0 115.71

1182 94
̅̅̅
𝑋 𝐴 = = 168.86 ̅̅
𝑋̅̅
𝐵 = = 13.43
7 7
23978.86 115.71
𝑣𝐴 (𝑥) = = 3996.476 𝑣𝐵 (𝑥) = = 19.285
6 6

𝑆𝐷𝐴 = 63.22 𝑆𝐷𝐵 = 4.39

Therefore, Group B is more Homogenous than Group A because, it has smaller SD.

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Applied Statistics DESCRIPTIVE STATISTICS Dr. Mahmoud Abd El-Raouf

Self-Assessment Questions
1. Calculate the Mean, Median and Mode of the following data:
i. 2, 0, 5, 4, 6, 4, 2, 0, 4, 8, 0, 6.
ii. 51, 52, 47, 50, 48, 41, 59, 56, 89.
iii. 1, 2, 4, 5, 1, 2, 5, 7, 0, -1.
iv. 4, 8, 6, 2, 1, 0, -1, 7.
v. 740, 712, 742, 7, 712, 751, 714, 742
vi. 1, 2, 5, 4, 2, 4, 1, 1, 5, 4, 2, 5.
vii. 2, 3, 5, 6, 3, 4, 8, 2, 9, 3, 5, 5, 5, 2, 7.
viii. -1, -2, -3, -9, 0, 4, 9, 7, 5, 6, 4, -1, 0, 2.
ix. -1, 0, 2, -1, 0, 0, 3, 8, 0, 5, -1.
x. 4, 5, 8, 8, 7, 4, 5, 7, 2.
2. Find the Average, Median, Mode, Range, Variance, and Standard Deviation for the
following data:
i. 1, 1, 2, 3, 4, 1, 6, 3, 2, 4, 1, 2
ii. 3, 1, 10, 10, 42, 1, 3, 2, 2, 1, 3, 5, 2, 1.
iii. 3, 1, 2, 3, 4, 1, 2, 3, 5, 7, 6, 2
iv. -1, -4, -3, 1, -4, -4
3. In the following data, which group is more homogenous? Why?
Group A 22 25 29 28 27 22 20
Group B 7 2 8 9 11 15 19

Group A 24 31 35 39 41 24 36
Group B 19 14 13 16 15 15 19

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Applied Statistics Correlation & Regression Analysis Dr. Mahmoud Abd El-Raouf

CORRELATION ANALYSIS
describing the relationship between two or more variables, is another important part of statistics.
In many business research situations, the key to decision making lies in understanding the relationships
between two or more variables.
For example, in an effort to predict the behavior of the bond market, a broker might find it useful
to know whether the interest rate of bonds is related to the prime interest rate. While studying the
effect of advertising on sales, an account executive may find it useful to know whether there is a strong
relationship between advertising dollars and sales dollars for a company.
Correlation is a measure of association between two or more variables. When two or more variables
very in sympathy so that movement in one tends to be accompanied by corresponding movements in
the other variable(s), they are said to be correlated.
“The correlation between variables is a measure of the nature and degree of association between
the variables”.

1. Linear and Non-linear (Curvilinear) Correlation

If the change in one variable is accompanied by change in another variable in a constant ratio, it
is a case of linear correlation. Observe the following data:
X : 10 20 30 40 50
Y: 25 50 75 100 125
The ratio of change in the above example is the same. It is, thus, a case of linear correlation. If we
plot these variables on graph paper, all the points will fall on the same straight line.
On the other hand, if the amount of change in one variable does not follow a constant ratio with the
change in another variable, it is a case of non-linear or curvilinear correlation. If a couple of figures
in either series X or series Y are changed, it would give a non-linear correlation.

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Applied Statistics Correlation & Regression Analysis Dr. Mahmoud Abd El-Raouf

Linear relationships Curvilinear relationships

2. PEARSON’S COEFFICIENT OF CORRELATION

A mathematical method for measuring the intensity or the magnitude of linear relationship between
two variables was suggested by Karl Pearson (1867-1936), a great British Biometrician and
Statistician and, it is by far the most widely used method in practice.
Karl Pearson’s measure, known as Pearson correlation coefficient between two variables X and Y,
usually denoted by (r) is a numerical measure of linear relationship between them and is defined as
the ratio of the covariance between X and Y, to the product of the standard deviations of X and Y.
The Pearson correlation coefficient may be found as

𝑛 ∑ 𝑋𝑌 − ∑ 𝑋 ∑ 𝑌
𝑟= , −1≤𝑟 ≤1
√𝑛 ∑ 𝑋 2 − (∑ 𝑋 )2 √𝑛 ∑ 𝑌 2 − (∑ 𝑌)2
The following table sums up the degrees of correlation corresponding to various values of r:
Value of r Degree of correlation
±1 perfect correlation
0.6 ≤ 𝑟 < 1 Positive strong correlation
0.4 ≤ 𝑟 < 0.6 Positive Moderate correlation
0 < 𝑟 < 0.4 Positive week correlation
𝑟=0 No correlation
−0.4 < 𝑟 < 0 Negative week correlation
−0.6 < 𝑟 ≤ −0.4 Negative Moderate correlation
−1 < 𝑟 ≤ −0.6 Negative strong correlation

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Applied Statistics Correlation & Regression Analysis Dr. Mahmoud Abd El-Raouf

When the relationship between two variables X and Y, Scatter plot can explain the relationship
between X and Y is very strong if most points fall on a straight line, and is weak whenever points
spread around the straight line.

Example1: The following sample observations were randomly selected.

X 5 3 6 3 4 4 6 8
Y 13 15 7 12 13 11 9 5
Determine the Pearson’s Correlation Coefficient.
Solution:
𝒙 𝒚 𝒙𝒚 𝒙² 𝒚²
5 13 65 25 169
3 15 45 9 225
6 7 42 36 49
3 12 36 9 144
4 13 52 16 169
4 11 44 16 121
6 9 54 36 81
8 5 40 64 25
39 85 378 211 983

8(378) − (39)(85)
𝑟= = −0.891
√8(211) − (39)2 √8(983) − (85)2
There is negative strong relation between x and y.
Example2: Find the Pearson’s correlation coefficient for the following data using SPSS
program
X 2 5 3 4 7 8 9
Y 5 6 5 3 8 7 4

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Applied Statistics Correlation & Regression Analysis Dr. Mahmoud Abd El-Raouf

Step 1: start the SPSS program and insert the variables X and Y using the variable view.

Step 2: Insert the data

Step 3: Choose Analyze ➪ Correlate ➪ Bivariate

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Applied Statistics Correlation & Regression Analysis Dr. Mahmoud Abd El-Raouf

Step 4: Select the variables X and Y and place them in the Variable(s) box

Step 5: Click Ok to get the results

Correlations

X Y

X Pearson Correlation 1 .321

Sig. (2-tailed) .483

N 7 7
Y Pearson Correlation .321 1

Sig. (2-tailed) .483

N 7 7

You can find the Pearson correlation statistic at the top of each square. The correlation coefficient =
0.321; then there is positive weak relation between the two variables.
Sig (2-Tailed) value :This value indicates if there is a statistically significant relationship between
the two variables.
• If its value is greater than 0.05 then there is no statistically significant relationship between the
two variables.
• If its value is less than 0.05 then there is a statistically significant relationship between the two
variables.

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Applied Statistics Correlation & Regression Analysis Dr. Mahmoud Abd El-Raouf

REGRESSION ANALYSIS
In 1889, Sir Francis Galton reported results of a study of the relationship between heights of
fathers and heights of their sons. A straight line was fit to the data pairs: height of father versus height
of son. Here, too, he found a “regression” The heights of the sons represented a movement away from
their fathers, towards the average height. We credit Sir Galton with the idea of statistical regression.
In business, several times it becomes necessary to have some forecast so that the management can
take a decision regarding a product or a particular course of action. In order to make a forecast, one
has to ascertain some relationship between two or more variables relevant to a particular situation.

Simple regression involves only two variables; one variable is predicted by another variable. The
variable to be predicted is called the dependent variable (Y). The predictor is called the independent
variable (X), or explanatory variable.

For example, when we are trying to predict the demand for television sets on the basis of population
growth, we are using the demand for television sets as the dependent variable and the population
growth as the independent variable.

3. Simple Linear Regression

The task of bringing out linear relationship consists of developing methods of fitting a straight line,
or a regression line as is often called, to the data on two variables. The line of Regression is the
graphical or relationship representation of the best estimate of one variable for any given value of the
other variable. If X and Y are two variables of which relationship is to be indicated, a line that gives
best estimate of Y for any value of X, it is called Regression line of Y on X.
The least square method of fitting a line of best fit requires minimizing the sum of the squares of
vertical deviations of each observed Y value from the fitted line.
Y = aX + b
Where
𝑛 ∑ 𝑋𝑌 − ∑ 𝑋 ∑ 𝑌 ∑𝑌 ∑𝑋
𝑎= , 𝑏= −𝑎
𝑛 ∑ 𝑋 2 − (∑ 𝑋 )2 𝑛 𝑛

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Applied Statistics Correlation & Regression Analysis Dr. Mahmoud Abd El-Raouf

Example3:
A sample of 10 families in the Chicago area revealed the following figures for family size and the amount
spent on food per week:
Size 3 6 5 6 6 3 4 4 5 3
Food 99 104 55 151 129 142 111 74 91 111
a) Calculate the regression equation.
b) Estimate the amount spent on Food if the family size is 10.
Solution:
𝒙 𝒚 𝒙𝒚 𝒙²
3 99 297 9
6 104 624 36
5 55 275 25
6 151 906 36
6 129 774 36
3 142 426 9
4 111 444 16
4 74 296 16
5 91 455 25
3 111 333 9
45 1067 4830 217

𝟏𝟎(𝟒𝟖𝟑𝟎)−(𝟒𝟓)(𝟏𝟎𝟔𝟕) 𝟏𝟎𝟔𝟕 𝟒𝟓
𝒂= = 𝟏. 𝟗𝟕, 𝒃 = − (𝟏. 𝟗𝟕 ∗ ) = 𝟗𝟕. 𝟖𝟔
𝟏𝟎(𝟐𝟏𝟕)−(𝟒𝟓)𝟐 𝟏𝟎 𝟏𝟎

a) The regression equation: 𝒚 = 97.86 + 1.97𝒙

b) 𝒚 = 97.86 + 1.97(10) = 117.51
Example 4:
1. Find the equation of the regression line for the following data using SPSS program:
X 2 5 3 4 7 8 9
Y 5 6 5 3 8 7 4
Solution:

Step 1: start the SPSS program and insert the variables X and Y using the variable view.

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Applied Statistics Correlation & Regression Analysis Dr. Mahmoud Abd El-Raouf

Step 2: Insert the data

Step 3: Choose Analyze ➪ Regression ➪ Linear

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Applied Statistics Correlation & Regression Analysis Dr. Mahmoud Abd El-Raouf

Step 4: Select the variable Y, and place it in the Dependent box and Select the variable X and place
it in the Independent(s) box, then click Ok.

Step 5: The first column of the Coefficients table contains the constant a, plus the coefficient of the
independent variable, namely b.

Coefficientsa

Standardized
Unstandardized Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) 4.295 1.643 2.614 .047

X .209 .276 .321 .757 .483

a. Dependent Variable: Y

The regression line can be written as:

𝑌 = 4.295 + 0.209 𝑋

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Applied Statistics Correlation & Regression Analysis Dr. Mahmoud Abd El-Raouf

4. Multiple linear regression

Multiple linear regression, also known simply as multiple regression, is a statistical technique that
uses several explanatory variables to predict the outcome of a response variable. The goal of multiple
linear regression is to model the linear relationship between the explanatory (independent) variables
and response (dependent) variable.
𝐘 = 𝐚𝟏 𝐗 𝟏 + 𝐚𝟐 𝐗 𝟐 + … … … + 𝒃
A simple linear regression is a function that allows an analyst or statistician to make predictions about
one variable based on the information that is known about another variable. Linear regression can only
be used when one has two continuous variables an independent variable and a dependent variable. The
independent variable is the parameter that is used to calculate the dependent variable or outcome. A
multiple regression model extends to several explanatory variables.
The multiple regression model is based on the following assumptions:
• There is a linear relationship between the dependent variables and the independent variables.
• The independent variables are not too highly correlated with each other.
• Y observations are selected independently and randomly from the population.
• Residuals should be normally distributed with a mean of 0 and variance σ.
Example 5: If we have the following data:
price of alternative goods (X3) Income (X2) Price (X1) Quantity (Y) years
10 400 9 40 2001
14 500 8 45 2002
12 600 9 50 2003
13 700 8 55 2004
11 800 7 60 2005
15 900 6 70 2006
16 1000 6 65 2007
17 1100 8 65 2008
22 1200 5 75 2009
19 1300 5 75 2010
20 1400 5 80 2011
23 1500 3 100 2012
18 1600 4 90 2013
24 1700 3 95 2014
21 1800 4 85 2015

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Applied Statistics Correlation & Regression Analysis Dr. Mahmoud Abd El-Raouf

These data represent the relationship between the quantity of commodities (Y) and the factors affecting
them, which are the price (X1), consumer income (X2) in dollars, the price of the alternative
commodity (X3). is there a relationship between the dependent variable (quantity) and the independent
variables (price, income, price of alternative goods)?
Solution:
Step 1: start the SPSS program and insert the variables X1,X2,X3 and Y using the variable
view.

Step 2: Insert the data

Step 3: Choose Analyze ➪ Regression ➪ Linear

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 Applied Statistics Correlation & Regression Analysis Dr. Mahmoud Abd El-Raouf

• To the left you find a list of the

variables in the file, click on the
variable (Y) and click the arrow
button in front of the box
(Dependent)
• Click on the variables (x1, x2,
x3) and click the arrow button
in front of the box
(Independents)
• Then click ok
• • The results appear in the
(output) fil

b
The first table represents the regression method Variable s Ente re d/Re mov ed

used (Enter method). The program entered all the Variables Variables
Model Entered Removed Method
independent variables in the multiple linear 1 X3, X2, X1a . Enter
a. All requested variables entered.
regression equation.
b. Dependent Variable: Y

The second table shows values M ode l Summary

1. Average of the three correlation
coefficients R = 0.97 Adjusted Std. Error of
Model R R Square R Square the Estimate
2. The coefficient of determination R2 = 1 .975a .951 .938 4.52761
0.95 a. Predictors: (Constant), X3, X2, X1
3. 3. Finally, the corrected correction
factor R2 = 0.94

This means that the independent variables (price, income, price of other commodities) were able to
explain 0.94 from the changes in the required quantity (Y) and (0.06) due to other factors.
R2 by itself can't thus be used to identify which predictors should be included in a model and which
should be excluded. R2 can only be between 0 and 1, where 0 indicates that the outcome cannot be

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 Applied Statistics Correlation & Regression Analysis Dr. Mahmoud Abd El-Raouf

predicted by any of the independent variables and 1 indicates that the outcome can be predicted without
error from the independent variables.

ANOVAb

Sum of
Model Squares df Mean Square F Sig.
1 Regression 4374.508 3 1458.169 71.133 .000a
Residual 225.492 11 20.499
Total 4600.000 14
a. Predictors: (Constant), X3, X2, X1
b. Dependent Variable: Y

The third table represents the analysis of variance and shows the strength of the influence of
independent variables on the dependent variable by means of the F statistic. We note the high
significance of the F test (P <0.0001). This confirms the power of influence of independent variables
in the multiple linear regression model.

Coefficie ntsa

Unstandardized Standardized
Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) 79.106 19.782 3.999 .002
X1 -4.928 1.611 -.563 -3.059 .011
X2 1.590E-02 .007 .392 2.146 .055
X3 .175 .637 .043 .275 .789
a. Dependent Variable: Y

The fourth table shows the values of the regression coefficients and the statistical significant tests for
these coefficients. This table can be summarized as follows:

The dependent the independent

Statistics value T test values P-value
variable variables

constant 79.1 3.99 0.002

Y X1 - 4.93 -3.059 0.01

X2 1.6 2.146 0.055
X3 0.17 0.275 0.789

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Applied Statistics Correlation & Regression Analysis Dr. Mahmoud Abd El-Raouf

Self-Assessment Questions
1. Calculate the correlation coefficient for the following data:
X -2 -1 0 1 2
Y -1 1 2 5 6
Calculate Pearson’s Correlation Coefficient.

2. Consider the following data:

X 12 14 16 23 18 14
Y 34 45 43 39 45 31
Calculate Pearson’s Correlation Coefficient.

3. Consider the following data:

X 4 3 5 7 8 9 10 11
Y 5 8 9 6 4 3 2 5
Calculate Pearson’s correlation coefficient.
4. Consider the following data:
X 20 21 25 31 33
Y 7 8 5 4 2
a. Find the regression equation.
b. Estimate the value of 𝑌 when 𝑋 = 40.

5. Find the regression equation for the following data:

X 2 5 7 8 9
Y 5 6 8 7 4

6. Find the regression equation for the following data:

X 10 11 12 14 15
Y 12 14 15 16 18

7. Find the regression equation for the following data:

X 20 22 31 25 29 23 25 21 31
Y 3.1 2.5 2.6 2.4 2.8 3.4 2.6 2.7 3.3

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Applied Statistics PROBABILITY Dr. Mahmoud Abd El-Raouf

1. INTRODUCTION
Life is full of uncertainties. ‘Probably’, ‘likely’, ‘possibly’, ‘chance’ etc. is some of the most used terms in
our day-to-day conversation. All these terms convey the same sense - “the situation under consideration is
uncertain and commenting on the future with certainty is impossible”. Decision-making in such areas is
facilitated through formal and precise expressions for the uncertainties involved. For example, product demand
is uncertain, but study of demand spelled out in a form amenable for analysis may go a long way to help analyze
and facilitate decisions on sales planning and inventory management. Intuitively, we see that if there is a high
chance of a high demand in the coming year, we may decide to stock more. We may also take some decisions
regarding the price increase, reducing sales expenses etc. to manage the demand. However, to make such
decisions, we need to quantify the chances of different quantities of demand in the coming year. Probability
theory provides us with the ways and means to quantify the uncertainties involved in such situations.
A probability is a quantitative measure of uncertainty a number that conveys the strength of our belief
in the occurrence of an uncertain event.
2. SOME BASIC CONCEPTS
In order that we can compute Probability, a proper understanding of certain basic concepts in probability
theory is required. These concepts are an experiment, a sample space, and an event.
• RANDOM EXPERIMENT
An experiment is a process that leads to one of several possible outcomes. An outcome of an experiment
is some observation or measurement.
The term experiment is used in probability theory in a much broader sense than in physics or chemistry.
Any action, whether it is the drawing a card out of a deck of 52 cards, throw a single coin, throw a die or the
launching of a new product in the market.
• SAMPLE SPACE
The sample space is the universal set S pertinent to a given experiment. It is the set of all possible outcomes
of an experiment. So each outcome is visualized as a sample point in the sample space. The sample spaces for
the above experiments are:
Experiment Sample Space
Drawing a Card {all 52 cards in the deck}
throw a single coin {H,T}
throw a die {1 , 2 , 3 , 4 , 5 , 6}
Measurement of a Product's Dimension {undersize, outsize, right size}
If we throw a coin twice, the sample space for this experiment is the set: 𝑆 = {(𝐻, 𝐻), (𝐻𝑇), (𝑇, 𝐻), (𝑇, 𝑇)}

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Applied Statistics PROBABILITY Dr. Mahmoud Abd El-Raouf

Likewise, if we roll the dice twice in a row, then the sample space is the set

 (1,1), (1,2), (1,3), (1,4), (1,5), (1,6) 

 (2,1), (2,2), (2,3), (2,4), (2,5), (2,6)
 
 (3,1), (3,2), (3,3), (3,4), (3,5), (3,6) 
S= 
(4,1), (4,2), (4,3), (4,4), (4,5), (4,6) 
 (5,1), (5,2), (5,3), (5,4), (5,5), (5,6) 
 
 (6,1), (6,2), (6,3), (6,4), (6,5), (6,6) 
• EVENT
An event, in probability theory, constitutes one or more possible outcomes of an experiment. An event is a
subset of a sample space. It is a set of basic outcomes. We say that the event occurs if the experiment gives
rise to a basic outcome belonging to the event.
For example: An experiment involving a couple with three children in which we care to know all possible
outcomes of the child's sex (boy & girl). It is noted that the sample space for this experiment consists of eight
simple events. S = {BBB, BBG, BGB, BGG, GBB, GBG, GGB, GGG}
The sample space can represent the tree diagram
examples of events in the given sample space:
• At least two children {BBG, BGB, GBB, BBB}
• Exactly two girls {BGG, GBG, GGB}
• All of the same sex {BBB, GGG}

• OPERATIONS ON EVENTS
The event was defined as a set of elements with possible outcomes for a randomized trial.
Consequently, all group properties of Union, Intersection and Differences apply to events. These event
properties will be displayed.

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Applied Statistics PROBABILITY Dr. Mahmoud Abd El-Raouf

1) The Union of Two Events: (𝑨 ∪ 𝑩)

The union of A, B is an event that includes all the sample points
belonging to A or B or both together. (An event that includes all of the
sample points belonging to at least one of them).
2) Intersection of Two Events: (𝑨 ∩ 𝑩)
The intersection of two events A, B is an event that includes all the
points belonging to A and B (all the points belonging to together).

3) Complementary Events:(𝑨 𝒐𝒓 𝑨𝒄 𝒐𝒓 𝑨′ )
The complement of A is the set of all sample space points that do not
belong to A. It should be noted that 𝐴̅ is the negation of A (not A) and
is also the difference between the sample space and event A.
4) The difference between two events: (𝑨 ∩ 𝑩̄)
The difference between events A and B is an event that includes all the
points of the sample that belong to A and do not belong to B. (A and no
B occur).
5) Mutually Exclusive(Disjoint) Events
The two events are called mutually exclusive, meaning they cannot
happen together. (The occurrence of one of them denies the occurrence
of the other at the same time). Events A and B are said to be mutually
exclusive (disjoint) if 𝐴 ∩ 𝐵 = 𝛷.

3. THE CLASSICAL PROBABILITY

The first situation is characterized by the fact that for a given experiment we have a sample space
with equally likely basic outcomes. When a card is drawn out of a well-shuffled deck, every one of
the cards (the basic outcomes) is as likely to occur as any other. This type of situations, marked by the
presence of "equally likely" outcomes, gave rise to the Classical Approach to the probability theory.
In the Classical Approach, probability of an event is defined as the relative size of the event with
respect to the size of the sample space. Since there are 4 kings and there are 52 cards, the size of A is
4 and the size of the sample space is 52. Therefore, the probability of A is equal to 4/52.

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Applied Statistics PROBABILITY Dr. Mahmoud Abd El-Raouf

The rule we use in computing probabilities, assuming equal likelihood of all basic outcomes, is as
follows:
𝑛(𝐴)
𝑃𝑟𝑜𝑏𝑎𝑏𝑖𝑙𝑖𝑡𝑦 𝑜𝑓 𝑡ℎ𝑒 𝑒𝑣𝑒𝑛𝑡 𝐴: 𝑃(𝐴) =
𝑛(𝑠)
where 𝑛(𝐴) = the number of outcomes favorable to the event A
𝑛(𝑆) = total number of outcomes
Notes:
• The probability of an event A must be a number between zero and one, both values inclusive.
Thus
0 ≤ 𝑃(𝐴) ≤ 1
• The probability of occurrence of all possible events is equal to one. As S denotes the sample
space or the set of all possible events, we write
𝑃(𝑆) = 1

Example 1:
In the experience of throwing a coin 𝑆 = {𝐻, 𝑇} And if the event A is to obtain the head 𝐴 = {𝐻 }
1
Then the probability of A is 𝑃(𝐴) = .
2
1 1
And the probability of obtain the tail is 𝑃(𝐴) = 1 − 𝑃(𝐴) = 1 − =
2 2

Example 2:
If the event is to get the number 5 when throwing a die, 𝐵 = {5} and 𝑆 = {1, 2, . . . , 6} and the
probability of B is P (B) = 1/6
1 5
And The probability of getting a number is not 5 is 𝑃(𝐵) = 1 − 𝑃(𝐵) = 1 − =
6 6

Example 3:
Box contains 8 black balls and 2 white balls. The experiment is to withdraw one ball from the box and
8
event C is that the drawn ball is black then 𝑆 = {𝑅, 𝑊 } , 𝐶 = {𝑅} 𝑎𝑛𝑑 𝑃(𝐶) = = 0.8
10

And The probability of getting a white ball is 𝑃(𝐶) = 1 − 𝑃(𝐶 ) = 1 − 0.8 = 0.2

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Applied Statistics PROBABILITY Dr. Mahmoud Abd El-Raouf

• ADDING PROBABILITY RULE

When we have two events A and B and the probability of at least one of them occurring {P(A or B)}
is
𝑃 (𝐴 ∪ 𝐵 ) = 𝑃 (𝐴 ) + 𝑃 ( 𝐵 ) − 𝑃 (𝐴 ∩ 𝐵 )

Example 4:
if the probability of a student passes in statistics is 0.8 and the probability of he passes in computer
course is 0.9 and the probability of he passes in both courses is 0.75. Find:
I. Probability of he passed in statistics or computer.
II. The probability of he passed in statistics and he fails in computers.
III. the probability of he passed in only one course.
IV. the possibility he fails in the two course.
solution
We assume that The probability of student passed in statistics is A
and The probability of student passed in computer is B then:
𝑃(𝐴) = 0.8 𝑃(𝐵) = 0.9 𝑃(𝐴 ∩ 𝐵) = 0.75
I. Probability of he passed in statistics or computer.
𝑃(𝐴 ∪ 𝐵) = 𝑃(𝐴) + 𝑃(𝐵) − 𝑃(𝐴 ∩ 𝐵)
= 0.8 + 0.9 − 0.75
= 0.95
II. The probability of he passed in statistics and he fails in computers.
𝑃(𝐴 ∩ 𝐵) = 𝑃(𝐴) − 𝑃(𝐴 ∩ 𝐵)
= 0.8 − 0.75
= 0.05
III. the probability of he passed in only one course.
𝑃(𝐴 ∩ 𝐵̄) + 𝑃(𝐴̄ ∩ 𝐵) = 𝑃(𝐴 ∪ 𝐵) − 𝑃(𝐴 ∩ 𝐵)

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Applied Statistics PROBABILITY Dr. Mahmoud Abd El-Raouf

= 𝑃(𝐴) + 𝑃(𝐵) − 2𝑃(𝐴 ∩ 𝐵)

= 0.8 + 0.9 − 2(0.75)
= 0.2
IV. the possibility he fails in the two course.
𝑃(𝐴 ∩ 𝐵) = 1 − 𝑃(𝐴 ∪ 𝐵)
= 1 − 0.95 = 0.05
Basic rules of probability
𝑷(𝑨) ≥ 𝟎
P(S) = 1
𝑷(𝑨) = 𝟏 − 𝑷(𝑨)
𝑷(𝑨𝒐𝒓𝑩) = 𝑷(𝑨 ∪ 𝑩) = 𝑷(𝑨) + 𝑷(𝑩)
𝑷(𝑨 ∩ 𝑩) = 𝑷(𝑨) − 𝑷(𝑨 ∩ 𝑩)
𝑷(𝑨 ∪ 𝑩) = 𝟏 − 𝑷(𝑨 ∪ 𝑩)

• Independent Events
Two events are said to be independent of each other if the occurrence or non-occurrence of one event
in any trial does not affect the occurrence of the other event in any trial. Events A and B are
independent of each other if and only if
𝑷(𝑨 ∩ 𝑩) = 𝑷(𝑨) ∗ 𝑷(𝑩)
This rule is thus called the Product Rule for Independent Events.
The probability of the intersection of several independent events 𝐴1 , 𝐴2 , … …is just the product of
separate probabilities i.e.
𝑃(𝐴1 ∩ 𝐴2 ∩ 𝐴3 ∩ … . ) = 𝑃(𝐴1 ) ∗ 𝑃(𝐴2 ) ∗ 𝑃(𝐴3 ). . . . . . . ..
Example 5:
A problem in mathematics is given to five students A, B,C, D and E. Their chances of solving it are
1/2, 1/3, 1/3, 1/4 and 1/5 respectively. Find the probability that the problem will
(a) not be solved
(b) be solved

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Applied Statistics PROBABILITY Dr. Mahmoud Abd El-Raouf

Solution:
(a) The problem will not be solved when none of the students solve it. So the required probability is
𝑃 (𝑝𝑟𝑜𝑏𝑙𝑒𝑚 𝑤𝑖𝑙𝑙 𝑛𝑜𝑡 𝑏𝑒 𝑠𝑜𝑙𝑣𝑒𝑑) = 𝑃(𝐴) ∗ 𝑃(𝐵) ∗ 𝑃(𝐶 ) ∗ 𝑃(𝐷 ) ∗ 𝑃 (𝐸 )
1 1 1 1 1 2
= (1 − ) ∗ (1 − ) ∗ (1 − ) ∗ (1 − ) ∗ (1 − ) =
2 3 3 4 5 15
(b) The problem will be solved when at least one of the students solve it. So the required probability
is:
2 13
𝑃(𝐴 ∪ 𝐵 ∪ 𝐶 ∪ 𝐷 ∪ 𝐸 ) = 1 − {𝑃(𝐴̅) ∗ 𝑃(𝐵) ∗ 𝑃(𝐶 ) ∗ 𝑃(𝐷 ) ∗ 𝑃(𝐸 )} = 1 − { }=
15 15

4. THE BINOMIAL DISTRIBUTION

In the real world we often make several trials, not just one, to achieve one or more successes. Let
us consider such cases of several trials.
Consider a random experiment with two possible outcomes such as (success or failure) and that
experiment is repeated a number (n), assuming that the number of successes (X) and the number of
failures (n-x) and the probability of success is (P) and the probability of failure (1-P). Here, identically
means that they all have the same p, and independently means that the value of one X does not in any
way affect the value of another. For example, the value of X2 does not affect the value of X3.
assume that all successful experiences come first, the probability that the number of successes X in
the n trials is

Now we know that there are nCx ways of getting x successes out of n trials.
𝒏 𝑛!
( ) = 𝐶𝑥𝑛 =
𝒙 𝑥! (𝑛 − 𝑥)!

We also observe that each of these nCx possibilities has px(1-p)n-x probability of occurrence
corresponding to x successes and (n-x) failures. Therefore,
𝑛
𝑝(𝑥) = ( ) 𝑝 𝑥 (1 − 𝑝)𝑛−𝑥 , 𝜒 = 0,1,2, . . . . , 𝑛
𝑥

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Applied Statistics PROBABILITY Dr. Mahmoud Abd El-Raouf

This equation is the Binomial probability formula. If we denote the probability of failure as q then
the Binomial probability formula is
𝑛
𝑝(𝑥) = ( ) 𝑝 𝑥 𝑞𝑛−𝑥 , 𝜒 = 0,1,2, . . . . , 𝑛
𝑥
The expected value or the mean, denoted by μ = np
The variance, denoted by σ2 = npq
Example 6:
Assuming the probability of male birth as ½,. Find the probability that a family of 5 children have
(i) at least one boy
(ii) at most 3 boys
Solution: Let the random variable X measures the number of boys out of 5 births. Clearly X is a
binomial random variable. So we apply the Binomial probability function to calculate the required
probabilities. 𝑋 ~ 𝐵 (5, ½)
𝑛
𝑝(𝑥) = ( ) 𝑝 𝑥 𝑞𝑛−𝑥 , 𝜒 = 0,1,2,3,4,5
𝑥
The required probabilities are
(i) P(X ≥ 1) = 1- P(X = 0) = 1- 1/32 = 31/32
(iii) P(X ≤ 3) = P(X = 0)+ P(X = 1)+ P(X = 2)+ P(X = 3) = 1/32 + 5/32 + 10/32 + 10/32 = 26/32

SOLVED PROBLEMS

1) Three students A, B and C arc in a swimming race, A and B have the same probability of winning
and each is twice as likely to win as C.
A. What is the probability that A does not win?
B. What is the probability that B or C wins?
Solution:
A. P (A) = P (B) = 2P(C) ⇛ P (A) + P(B) + P(C) = 1
2𝑃(𝐶 ) + 2𝑃(𝐶 ) + 𝑃(𝐶 ) = 1 ⇛ 𝑃 (𝐶) = 1/5 ⇛ 𝑃(𝐴) = 𝑃 (𝐵) = 2/5
B. 𝑃(𝐴𝑐 ) = 0.6 or 𝑃(𝐶 ∪ 𝐵) = 0.6

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Applied Statistics PROBABILITY Dr. Mahmoud Abd El-Raouf

2) The events X and Y are mutually exclusive. Suppose P(X) = 0.05 andP(Y) = 0.02. What is the
probability of either X or Y occurring?
Solution:
𝑃(𝑋 ∩ 𝑌) = Zero
𝑃(𝑋 ∪ 𝑌) = 𝑃(𝑋 ) + 𝑃(𝑌) − 𝑃(𝑋 ∩ 𝑌) = 0.05 + 0.02 − 0 = 0.07
𝑃(𝑋 ∪ 𝑌)𝑐 = 1 − 𝑃(𝑋 ∪ 𝑌) = 1 − 0.07 = 0.93

3) Suppose P(A) = 0.4, P(B) = 0.7 and P(A ∩ B) = 0.3. Find the following probabilities:
i.𝑃(𝐴𝑐 ) ii.𝑃(𝐵𝑐 ) iii.𝑃(𝐴 ∪ 𝐵)
Solution:
i. 𝑃(𝐴𝑐 ) = 1 − 0.4 = 0.6
ii. 𝑃(𝐵𝑐 ) = 1 − 0.7 = 0.3
iii. 𝑃(𝐴 ∪ 𝐵) = 0.4 + 0.7 − 0.3 = 0.8
4) In a certain population of women 4% have had breast cancer, 20% are smokers and 3% are smokers
and have had breast cancer. A woman is selected at random from the population. What is the
probability that:
A. She has had breast cancer or smokes?
B. She has had breast cancer given that she is a smoker?
Solution:
𝑃(𝐵) = 0.04,𝑃(𝑆) = 0.20 and 𝑃(𝐵 ∩ 𝑆) = 0.03
𝑃(𝐵 ∪ 𝑆) = 𝑃(𝐵) + 𝑃(𝑆) − 𝑃(𝐵 ∩ 𝑆) = 0.04 + 0.2 − 0.03 = 0.21
𝑃(𝐵 ∪ 𝑆 𝑐 ) = 𝑃(𝐵) − 𝑃(𝐵 ∩ 𝑆) = 0.04 − 0.03 = 0.01
5) Seven coins are tossed; if the probability of obtaining a tail is 0.4. Find the probability of
obtaining:
(A) Three tails (B) Four heads (C) No tails. (D) At most two tails
(E) At least five tails (F) At most five tails (G) Find the expected value and the variance.

Solution
(A) 𝑃(𝑥 = 3) = 7𝐶 3 (0.4)3 (0.6)4 = 0.2903
(B) 𝑃(𝑥 = 4) = 7𝐶 4 (0.6)4 (0.4)3 = 0.2903

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Applied Statistics PROBABILITY Dr. Mahmoud Abd El-Raouf

(C) 𝑃(𝑥 = 0) = 7𝐶 0 (0.4)0 (0.6)7 = 0.02799

(D) 𝑃(𝑥 ≤ 2) = [ 𝑃(0) + 𝑃(1) + 𝑃(2)] = 7𝐶 0 (0.4)0 (0.6)7 + 7𝐶 1 (0.4)1 (0.6)6 +
7𝐶 2 (0.4)2 (0.6)5 = 0.4199
(E) 𝑃(𝑥 ≥ 5) = 𝑃(5) + 𝑃(6) + 𝑃(7) = 7𝐶 5 (0.4)5 (0.6)2 + 7𝐶 6 (0.4)6 (0.6)1 +
7𝐶 7 (0.4)7 (0.6)0 = 0.0963
(F) 𝑃(𝑥 ≤ 5) = 1 − [ 𝑃(6) + 𝑃(7)] = 1 − [ 7𝐶 6 (0.4)6 (0.6)1 + 7𝐶 7 (0.4)7 (0.6)0 ] = 0.9812
(G) 𝜇 = 𝑛 𝑝 = 7 ∗ 0.4 = 2.8 𝜎 2 = 𝑛𝑝𝑞 = 7 ∗ 0.4 ∗ 0.6 = 1.68

Self-Assessment Questions
1) What is wrong with each of the following statements:
i) The probability of rain is 0.6 and the probability of strong winds is 0.8 and the probability of
rain and strong winds is 0.85.
ii) The probability of Salem passing in Statistics 0.6 and the probability of his success in Statistics
and Mathematics 0.66.
iii) Fatima’s probability of success in statistics 0.8 and probability of her success in statistics or
mathematics 0.7.
iv) The probability that a doctor will receive less than 10 patients is 0.5 and the probability of
receiving a doctor 10 or more patients is 0.6.
v) Fatima is studying 6 courses of this semester, the probability that she will succeed in at least
?? courses is 0.8 and the probability that the number of courses she succeeds in will not
exceed 4 is 0.1.

2) A fair die is thrown. The events A, B, C and D are defined as follows:

A=The score is even; B=The score is divisible by 3.
C=The score is not more than 2. D=The score exceeds 3.
Find: 𝑃(𝐴𝑐 ),𝑃(𝐵𝑐 ), 𝑃(𝐷 𝑐 ), 𝑃(𝐶 𝑐 ), 𝑃(𝐴 ∪ 𝐵), 𝑃(𝐴 ∩ 𝐵) and 𝑃(𝐶 ∪ 𝐵)

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Applied Statistics PROBABILITY Dr. Mahmoud Abd El-Raouf

3) Two coins are tossed. If A is the event "two heads" and B is the event "two tails” are A and B
mutually exclusive? Are they complements?
4) An experiment defined in one of three mutually exclusive events, A, B and C. It is known that
P(A) = 0.30, P(B) = 0.55 and P(C) = 0.15. Find each of the following probabilities:
A. 𝑃(𝐴 ∪ 𝐵) B. 𝑃(𝐴 ∩ 𝐵) C. 𝑃(𝐵 ∪ 𝐶 ) D. Are 𝐵 and 𝐶 independent events? Explain.

5) Assume the likelihood that any flight on Delta Airlines arrives within 15 minutes of the scheduled
time is 0.90. We select 4 flights from yesterday.
i) What is the probability all four of the selected flights arrived within 15 minutes of the scheduled
time?
𝑃(𝐴1 ∩ 𝐴2 ∩ 𝐴3 ∩ 𝐴4) = 0.9 ∗ 0.9 ∗ 0.9 ∗ 0.9
ii) What is the probability that none of the selected flights arrived within 15 minutes of the
scheduled time?
𝑃(̅̅̅̅
𝐴1 ∩ ̅̅̅̅
𝐴2 ∩ ̅̅̅̅
𝐴3 ∩ ̅̅̅̅
𝐴4) = 0.1 ∗ 0.1 ∗ 0.1 ∗ 0.1
iii) What is the probability at least one of the selected flights did not arrive within 15 minutes of the
scheduled time?
6) An Economic Research Commission claimed that among the 500 stores there are 308 dealing with
European companies, 266 dealing with Asian companies 103 dealing with both sides regularly and
29 not dealing with either side.
308
P(dealing with European companies)= 𝑃(𝐴) =
500
266
P(dealing with Asian companies)= 𝑃(𝐵) =
500
103
P(dealing with both sides)= 𝑃(𝐴 ∩ 𝐵) =
500

29
P(not dealing with either side)= 𝑃(𝐴̅ ∩ 𝐵̅) = 1 − 𝑃(𝐴 ∪ 𝐵) =
500

i) What is the probability that the stores deal with European or Asian companies?
29
𝑃(𝐴̅ ∩ 𝐵̅) = 1 − 𝑷(𝑨 ∪ 𝑩) =
500

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Applied Statistics PROBABILITY Dr. Mahmoud Abd El-Raouf

29
𝑃 (𝐴 ∪ 𝐵 ) = 1 − = 0.942
500
ii) What is the probability that the stores do not deal with European companies?
308
𝑃(𝐴̅) = 1 − 𝑃(𝐴) = 1 − = 0.384
500
iii) What is the probability that the stores only deal with Asian companies?
266 − 103
𝑃(𝐵 ∩ 𝐴̅) = 𝑃(𝐵) − 𝑃(𝐴 ∩ 𝐵 ) = = 0.326
500
iv) What is the probability that stores deal with only one type of company?
𝑃(𝐴 ∩ 𝐵̅) + 𝑃 (𝐵 ∩ 𝐴̅) = 𝑃(𝐴 ∪ 𝐵) − 𝑃(𝐴 ∩ 𝐵) = 0.942 − 0.206 = 0.736

7) A group of 200 students registered 138 in the statistics course, 115 registered in the psychology
course and 91 students registered in both courses. A student was randomly chosen from the group
i) What is the probability that the student is registered at least in the two courses?
ii) What is the probability that the student is not registered in the statistics course?
iii) What is the probability that the student is registered in the statistics course only?
iv) What is the probability that the student is not registered in any of the courses?

8) If B and A are mutually exclusive events and 𝑃 (𝐴) = 0.37 and 𝑃 (𝐵) = 0.44, find
𝑃(𝐴), 𝑃(𝐵), 𝑃(𝐴 ∪ 𝐵), 𝑃(𝐴 ∩ 𝐵), 𝑃(𝐴 ∩ 𝐵), 𝑃(𝐴 ∩ 𝐵)

9) If 𝑃 (𝐴) = 0.59, 𝑃 (𝐵) = 0.30 & 𝑃 (𝐴 ∩ 𝐵) = 0.21 Calculate the probability of:
𝑃(𝐴 ∪ 𝐵), 𝑃(𝐴 ∩ 𝐵), 𝑃(𝐴 ∪ 𝐵), 𝑃(𝐴 ∩ 𝐵)

10) A bag contains a red ball, 40 white balls and 35 black balls. If two balls are drawn, what is the
probability that one of them is red and the other is white in each of the following cases:
i) If the first ball is returned to the bag before the second is withdrawn (that is, the withdrawal
with replacement).
ii) If the first ball is not returned to the bag (i.e., the drawing without replacement).

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Applied Statistics PROBABILITY Dr. Mahmoud Abd El-Raouf

11) If the probability of rain is 0.1 and the probability of strong winds on that day is 0.05 and the
probability of strong winds and rain together is 0.03 then calculate the probability:
i) Rain or strong winds
ii) It does not rain and there is no strong wind
iii) strong winds and rain
iv) If there are strong winds and no rain.

12) Team 𝐴 has probability 2/3 of wining whenever it plays. If A plays four games, find the
probability that 𝐴 wins:
i) Exactly two games.
ii) More than half of the games.
iii) At least one game

13) A manufacturer of window frames knows from long experience that 5 percent of the production
will have some type of minor defect that will require an adjustment. What is the probability that in
a sample of 20 window frames:
i) none will need adjustment?
ii) at least one will not need adjustment?
iii) more than two will need adjustment?

14) A family has six children. Find the probability that there are:
i) three boys.
ii) fewer boys than girls.

15) The Egyptian Postal Service reports 95 percent of first class mail within the same city is delivered
within two days of the time of mailing. Six letters are randomly sent to different locations.
i) What is the probability that all six arrive within two days?
ii) What is the probability that exactly five arrive within two days?
iii) Find the mean number of letters that will arrive within two days.
iv) Compute the variance and standard deviation of the number that will arrive within two days.

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Applied Statistics PROBABILITY Dr. Mahmoud Abd El-Raouf

16) It is reported that 16 percent of Egyptian households use a cell phone exclusively for their
telephone service. In a sample of eight households, find the probability that:
i) None use a cell phone as their exclusive service.
ii) At least one uses the cell exclusively.
iii) At least five use the cell phone.

17) A recent survey revealed 23% of students graduating with a major in accounting select public
accounting. Suppose we select a sample of 15 recent graduates.
i) What is the probability two select public accounting?
ii) How many graduates would you expect to select public accounting?

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Applied Statistics Dr. Mahmoud Abd El-Raouf

Normal Distribution
The normal distribution is one of the most important distributions because of its characteristics that apply to
natural, social and economic. If we choose a hundred or thousand people and measure their lengths, we will
find a large percentage of them close to the average, and the percentage of lengths will decrease as we move
away from the average value.

The data are shown graphically in a symmetrical bell curve around the mean

Where µ is the mean and σ is the standard deviation. We write X ~ N (µ, σ).
The value of σ determines whether the bell The value of µ determines the location of the curve
curve is tall and thin or short and squat

Assuming that 𝑝(𝑥1 < 𝑥 < 𝑥2 ),This possibility is determined by the following area:

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Applied Statistics Dr. Mahmoud Abd El-Raouf

This area (probability) is calculated by finding the following integral:

− 1  x − 
x2 x2 2

p( x1  x  x2 ) =  f ( x)dx = 
1
e 2   dx
x1 x1  2

This integration is difficult to calculate, a Transform has been made, and its probability distribution can be
used to calculate these probabilities. This transformation is:
𝒙−𝝁
𝒁=
𝝈
The new variable is known as Z and is the standard normal variable, its mean = 0 and a standard deviation = 1
Z ~ N (0.1).

• Properties for normal distribution curve

1. Symmetric around the mean µ so the average divides the standard normal curve into two equal parts in
shape and area.
2. The total area under the curve is equal to one.
• To find the probabilities (areas) in the normal distribution problems
we first convert the values of X to the corresponding Z values. Then the value of Z is detected in the standard
normal distribution table, and this gives the value of area (probability) less than the value of Z under the curve.
Example 1: Find the probabilities indicated, where as always Z denotes a standard normal random variable.
a. 𝑃(𝑍 < 1.48)
b. 𝑃(𝑍 > −0.25).
c. 𝑃(𝑍 > 1.60).
d. 𝑃(𝑍 < −1.02).
e. 𝑃(0.5 < 𝑍 < 1.57).

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Applied Statistics Dr. Mahmoud Abd El-Raouf

Solution
a. The digits in the ones and tenths places of 1.48, namely 1.4, are used to select the appropriate row of the
table; the hundredths part of 1.48, namely 0.08, is used to select the appropriate column of the table. The
four decimal place number in the interior of the table that lies in the intersection of the row and column
selected, 0.9306, is the probability sought: 𝑃(𝑍 < 1.48) = 𝑄(1.48) = 0.9306.

b. The minus sign in −0.25 makes no difference in the procedure; the table is used in exactly the same way as
in Previous example: the probability sought is the number that is in the intersection of the row with heading
0.2 and the column with heading 0.05, the number 0.5987. Thus
P(Z > −0.25) = P(Z < 0.25) = 𝑄(0.25) = 0.4013.

c. Because the events Z > 1.60 and Z ≤ 1.60 are complements, the Probability Rule for Complements implies
that
P(Z > 1.60) = 1 − P(Z ≤ 1.60) = 1 − 𝑄(1.60)
which we know how to find from the table. The number in the row with heading 1.6 and in the column with
heading 0.00 is 0.9452. Thus P(Z < 1.60) = 0.9452 so P(Z > 1.60) = 1 − P(Z ≤ 1.60) = 1 − 0.9452 =
0.0548

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Applied Statistics Dr. Mahmoud Abd El-Raouf

d. The minus sign in −1.02 makes no difference in the procedure; the table is used in exactly the same way as
in part (b). This means that

𝑃(𝑍 < −1.02) = 𝑃(𝑍 ≥ 1.02) = 1 − 𝑄(1.02) = 1 − 0.8461 = 0.1539 6

e. First look up the areas in the table that correspond to the numbers 0.5 (which we think of as 0.50 to use the
table) and 1.57. We obtain 0.6915 and 0.9418, respectively. we must take the difference of these two
numbers to obtain the probability desired
𝑃(0.5 < 𝑍 < 1.57) = 𝑄(1.57) − 𝑄(0.5) = 0.9418 − 0.6915 = 0.2503

𝑃(𝑍 < 𝑎) = Ф(𝑎) 𝑃(𝑍 > 𝑎) = 1 − Ф(𝑎) 𝑃(𝑎 < 𝑍 < 𝑏) = Ф(𝑏) − Ф(𝑎)

𝑃(𝑍 > − 𝑎) = Ф(𝑎) 𝑃(𝑍  − 𝑎) = 1 − Ф(𝑎) 𝑃(−𝑎 < 𝑍 < 𝑏) = Ф(𝑏) + Ф(𝑎) − 1

Example 2: If Z is a random variable follows the standard normal distribution, then find
a) P(Z  1.54)
b) P(−1.8  Z  0)

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Applied Statistics Dr. Mahmoud Abd El-Raouf

c) P(1  Z  2)
Solution
a) P (Z < 1.54) = 0.9382
b) (- 1.8< Z < 0) = P (Z < 0)–P (Z<-1.8)
=0.5– 0.359 = 0.4641
c) P (1 < Z < 2) = P (Z < 2) – P (Z < 1)
=P (1 < Z < 2)
= P (Z < 2) – P (Z < 1) = 0.1359
Example 3: If the lengths of a group of plants follow a normal distribution of an average of 168 cm and a
standard deviation of 6 cm. One of the plants was randomly selected. What is the probability that its length:
a) Less than 159 cm?
b) greater than 180 cm?
c) Between (165, 174)?
Solution
Suppose X for plant lengths is a random variable that follows normal distribution with mean 168 cm and a
standard deviation 6 cm.
a) Less than 159 cm?
 x − μ 159 − 168 
P( X  159) = P  
 σ 6 
= P(Z  −1.5) = 0.0668
b) greater than 180 cm?
 x − μ 180 − 168 
P( X  180) = P  
 σ 6 
= P(Z  2)
= 1 - P(Z  2)
= 1 − 0.9772 = 0.0228
c) Between (165, 174)?
P(165 X  174)
 165 − 168 x − μ 174 − 168 
= P    = P(− 0.5  Z  1)
 6 σ 6 
= P( Z  1 ) - P( Z  - 0.5 ) = 0.8413- 0.3085= 0.5328

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Applied Statistics Dr. Mahmoud Abd El-Raouf

Example 4: The professor of Statistics found that the average time required for students to complete the final
exam = 150 minutes with a standard deviation of 30 minutes.
Find the following:
1. What is the probability that students complete an exam between 125 and 150 minutes?
2. What is the probability that students complete an exam in 185 minutes or less?
3. What is the probability that students complete an exam in more than 195 minutes?
4. If the number of students is 1000 students. Find the number of students who completed an exam in more
than 185 minutes.
Solution
1. What is the probability that students complete an exam between 125 and 150 minutes?
P(125 X  150)
 125 − 150 x − μ 150 − 150 
= P   
 30 σ 30 
= P(− 0.83  Z  0)
= P( Z  0 ) - P( Z  - 0.83)
= 0.5 000 - 0.2033 = 0.296
2. What is the probability that students complete an exam in 185 minutes or less?
P(X  185)
 x − μ 185 − 150 
= P  
 σ 30 
= P(Z  1.17) = 0.8790
3. What is the probability that students complete an exam in more than 195 minutes?
P(X  185)
 x − μ 195 − 150 
= P  
 σ 30 
= P(Z  1.5) = 1 - P(Z  1.5)
= 1 - 0.9332 = 0.0668
4. If the number of students is 1000 students. Find the number of students who completed an exam in
more than 185 minutes.
1000 P( X  185)
1000  0.121 = 121

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Applied Statistics Dr. Mahmoud Abd El-Raouf

EXERCISES
1. The amount X of beverage in a can labeled 12 ounces is normally distributed with mean 12.1 ounces and
standard deviation 0.05 ounce. A can is selected at random.
a. Find the probability that the can contains at least 12 ounces.
b. Find the probability that the can contains between 11.9 and 12.1 ounces.

2. The systolic blood pressure X of adults in a region is normally distributed with mean 112 mm Hg and
standard deviation 15 mm Hg. A person is considered “prehypertensive” if his systolic blood pressure is
between 120 and 130 mm Hg. Find the probability that the blood pressure of a randomly selected person
is prehypertensive.

3. Birth weights of full-term babies in a certain region are normally distributed with mean 7.125 lb and
standard deviation 1.290 lb. Find the probability that a randomly selected newborn will weigh less than 5.5
lb, the historic definition of prematurity.

4. The amount of time necessary for a student of statistics to solve assignments is, on average, 15 minutes.
This can be modeled as a random normal variable with a standard deviation of 2 minutes. Calculate the
probability that an assignment is instead solved between14 and 16 minutes

5. Scores on an achievement test are known to be normally distributed with a mean of 420 and a standard
deviation of 80.
a. what is the probability of a score between 400 and 480?
b. What is the minimum test score needed in order to be in the top 10% of all people taking the test?
𝜇 = 420 , 𝜎 = 80
𝑃(400 < 𝑋 < 480)
𝑃(−0.25 < 𝑍 < 0.75)
𝑄(0.75) − (1 − 𝑄(0.25)) = 0.3721

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Applied Statistics Dr. Mahmoud Abd El-Raouf

b-
𝑃(𝑍 > 𝑎) = 0.1
1 − 𝑄(𝑎) = 0.1
𝑄(𝑎) = 0.9
𝑎 = 1.28
𝑿−𝝁
𝒁=
𝝈
𝑋 = (𝑍𝜎) + 𝜇
𝑋 = (1.28 ∗ 80) + 420 = 522

6. It is known that amounts of money spent on clothing in a year by students on a particular campus follow a
normal distribution with a mean of $380 and a standard deviation of $50.
a. What is the probability that a randomly chosen student will spend less than $400 on clothing in a year?
b. What is the probability that a randomly chosen student will spend more than $360 on clothing in a
year?
c. What is the probability that a randomly chosen student will spend between $300 and $400 on clothing
in a year?

7. Anticipated consumer demand in a restaurant for free-range steaks next month can be modeled by a normal
random variable with mean 1,200 pounds and standard deviation 100 pounds.
a. What is the probability that demand will exceed 1,000 pounds?
b. What is the probability that demand will be between 1,100 and 1,300 pounds?
c. The probability is 0.10 that demand will be more than how many pounds?

8. The tread life of Road Stone tires has a normal distribution with a mean of 35,000 miles and a standard
deviation of 4,000 miles.
a. What proportion of these tires has a tread life of more than 38,000 miles?

8
Applied Statistics Dr. Mahmoud Abd El-Raouf

b. What proportion of these tires has a tread life of less than 32,000 miles?

9. An investment portfolio contains stocks of a large number of corporations. Over the last year the
rates of return on these corpora the stocks followed a nor- mal distribution with mean 12.2% and standard
deviation 7.2%.
a. For what proportion of these corporations was the rate of return higher than 20%?
b. For what proportion of these corporations was the rate of return negative?
c. For what proportion of these corporations was the rate of return between 5% and 15%?

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Applied Statistics Dr. Mahmoud Abd El-Raouf

Standard normal distribution table

Used to find area (probability)

𝑸 = 𝑷(𝒁 < 𝒂)
where
𝑿−𝝁
𝒁= ∼ 𝑵(𝟎, 𝟏)
𝝈

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Applied Statistics Dr. Mahmoud Abd El-Raouf

11
Applied Statistics Confidence Intervals Dr. Mahmoud Abd El-Raouf

1. Introduction
The need to use the sample statistic to draw conclusions about the population characteristic is one
of the fundamental applications of statistical inference in business and economics.

The sampling process is used to draw statistical inference about the characteristics of a population
or process of interest. On many occasions we do not have enough information to calculate an exact
value of population parameters (𝑠𝑢𝑐ℎ 𝑎𝑠 𝜇, 𝜎 ) and therefore make the best estimate of this value from
the corresponding sample statistics ((𝑠𝑢𝑐ℎ 𝑎𝑠 𝑥̅ 𝑎𝑛𝑑 𝑠).

A single sample statistic (𝑠𝑢𝑐ℎ 𝑎𝑠 𝑥̅ 𝑎𝑛𝑑 𝑠) is calculated from the sample to provide a best estimate
of the true value of the corresponding population parameter (𝑠𝑢𝑐ℎ 𝑎𝑠 𝜇 𝑎𝑛𝑑 𝜎). Such a single relevant
statistic is termed as point estimator, and the value of the statistic is termed as point estimate.

a point estimate does not provide information about ‘how close is the estimate’ to the population
parameter unless accompanied by a statement of possible sampling errors involved based on the
sampling distribution of the statistic. It is therefore important to know the precision of an estimate
before relying on it to make a decision. Thus, decision makers prefer to use an interval estimate that
is likely to contain the population parameter value. However, it is also important to state ‘how
confident’ he is that the interval estimate actually contains the parameter value. Hence an interval

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Applied Statistics Confidence Intervals Dr. Mahmoud Abd El-Raouf

estimate of a population parameter is therefore a confidence interval with a statement of confidence

that the interval contains the parameter value.
2. Interval estimation of population mean (𝝈 known)
The confidence interval estimate of a population mean is obtained by applying the formula:

𝑋̅ ± 𝐸𝑟𝑟𝑜𝑟

Where
σ
• 𝐸𝑟𝑟𝑜𝑟 = 𝐸 = 𝑍𝑐 ∗
√𝑛

• 𝒁𝒄 =critical value of standard normal variable that represents confidence level

𝛔
• = The standard error of the mean is the standard deviation of 𝑋̅ . It indicates the extent to which
√𝒏

the observed value of sample mean can be away from the true value, due to sampling errors.
• n is the sample size
Suppose the population mean 𝜇 is unknown and the population standard deviation 𝜎 is known. Then
for a large sample size (𝑛 ≥ 30), the interval estimation of population mean 𝜇 is given by
𝛔 𝛔 𝛔
̅ ± (𝒁𝒄 ∗
𝑿 ) 𝒐𝒓 ̅ − (𝒁𝒄 ∗
𝑿 )<𝝁<𝑿 ̅ + (𝒁𝒄 ∗ )
√𝒏 √𝒏 √𝒏
where 𝒁𝒄 is the z-value representing an area under the carve of the standard normal probability distribution, as
shown in the following Figure.

(1-α) is the level of confidence (probability of being correct) such as 0.90,0.95.

In general, a 95 per cent confidence interval estimate implies that if all possible samples of the same
size were drawn, then 95 per cent of them would include the true population mean somewhere within
the interval around their sample mean and only 5 per cent of them would not. The values for

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Applied Statistics Confidence Intervals Dr. Mahmoud Abd El-Raouf

𝒁𝜶⁄ for the most commonly-used as well as the other confidence levels can be seen from standard
𝟐

normal probability table as shown in the following table

Confidence Level, (𝟏 − 𝜶) (%) 𝜶 𝜶⁄ 𝒁𝜶⁄

𝟐 𝟐
90% 0.10 0.05 1.645
95% 0.05 0.025 1.960
99% 0.01 0.005 2.575

Example 1: The average monthly electricity consumption for a sample of 100 families is 1250 units.
Assuming the standard deviation of electric consumption of all families is 150 units, construct a 95
per cent confidence interval estimate of the actual mean electric consumption.
Solution: The information given is: 𝑋̅ = 1250, 𝜎 = 150, 𝑛 = 100 and confidence level (1 − 𝛼) =
95%. Using the ‘Standard Normal Curve’ we find that 𝒁𝜶⁄𝟐 = ± 1.96. Thus confidence limits are

given by
𝟏𝟓𝟎 𝟏𝟓𝟎
𝟏𝟐𝟓𝟎 − 𝟏. 𝟗𝟔 < 𝝁 < 𝟏𝟐𝟓𝟎 + 𝟏. 𝟗𝟔
√𝟏𝟎𝟎 √𝟏𝟎𝟎
1220.60 ≤ 𝜇 ≤ 1279.40
Thus for 95 % level of confidence, the population mean 𝝁 is likely to fall between 1220.60 units and
1279.40 units.
Example 2: A random sample of 64 sales invoices was taken from a large population of sales invoices.
The average value was found to be Rs.2000 with a standard deviation of Rs.540. Find a 90 per cent
confidence interval for the true mean value of all the sales.
Solution: The information given is: 𝑋̅ = 2000, 𝑠 = 540, 𝑛 = 64, 𝑎𝑛𝑑 𝛼 = 10 per cent, 𝒁𝜶⁄𝟐 = ± 1.64

for 95 per cent confidence level. Therefore

𝛔 𝟓𝟒𝟎
̅ ± (𝒁𝒄 ∗
𝑿 ) = 𝟐𝟎𝟎𝟎 ± (𝟏. 𝟔𝟒 ∗ ) = 𝟐𝟎𝟎𝟎 ± 𝟏𝟏𝟎. 𝟕𝟎
√𝒏 √𝟔𝟒
1889.30 ≤ 𝜇 ≤ 2110.70
Thus the mean of the sales invoices for the whole population is likely to fall between Rs.1889.30 and
Rs.2110.70

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Applied Statistics Confidence Intervals Dr. Mahmoud Abd El-Raouf

The procedure of the confidence interval estimation of population mean 𝜇 when population standard
deviation is unknown and sample size is large or small, is summarized in following table.
Sample size Large 𝑛 ≥ 30 Large 𝑛 ≥ 30 Small 𝑛 < 30 Small 𝑛 < 30
𝝈 known estimated by s known estimated by s
Interval σ S σ S
𝑋̅ ± (𝑍𝑐 ∗ ) 𝑋̅ ± (𝑍𝑐 ∗ ) 𝑋̅ ± (𝑍𝑐 ∗ ) 𝑋̅ ± (𝑡𝑑𝑓 ∗ )
Estimate of 𝛍 √𝑛 √𝑛 √𝑛 √𝑛

3. Interval Estimation for Population Proportion

You know that normal distribution as an approximation of the sampling distribution of sample
𝑥
proportion 𝑝 = is based on the large sample conditions: 𝑛𝑝 > 5 and 𝑛𝑞 = 𝑛 (1 − 𝑝) > 5, The
𝑛

confidence interval estimate for a population proportion at (1 − 𝛼) confidence coefficient is given

by

𝑝(1 − 𝑃)
p ± (𝑍𝑐 ∗ √ )
𝑛

Example 3: Suppose we want to estimate the proportion of families in a town, which have two or
more children. A random sample of 144 families shows that 48 families have two or more children.
Setup a 95 per cent confidence interval estimate of the population proportion of families having
two or more children.
Solution: The sample proportion is:
𝑥 48 1
𝑝= = =
𝑛 144 3
1
Using the information 𝑛 = 144 , 𝑝 = 3 , 𝒁𝜶⁄𝟐 = ± 1.96 at 95 per cent confidence coefficient, we
have
1 1
𝑝 (1 − 𝑃 ) 1 √ (1 − )
p ± (𝑍𝑐 ∗ √ ) = ± (1.96 ∗ 3 3 )
𝑛 3 144

0.256 ≤ 𝑝 ≤ 0.410
Hence the population proportion of families who have two or more children is likely to be between
25.6 to 41 per cent, that is.

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Applied Statistics Confidence Intervals Dr. Mahmoud Abd El-Raouf

4. Sample Size Determination

the sample size n, which is also related to the width of the confidence intervals Obviously, the
width or range of the confidence interval can be decreased by increasing the sample size n.
Thus for estimating the population mean μ with a condition that the error in its estimation should
not exceed a fixed value, say E, we require that the sample mean x should fall within the range, μ ± 𝐸
with a specified probability. Thus the margin of error acceptable can be written as:
𝛔
𝑬 = 𝒁𝒄 ∗
√𝒏
𝒁𝒄 ∗ 𝛔 𝒁𝒄 𝟐 ∗ 𝛔𝟐
√𝒏 = →𝒏=
𝑬 𝑬𝟐
Example 4: Suppose the sample standard deviation of P/E ratios for stocks listed on the Mumbai
Stock Exchange (BSE) is s = 7.8. Assume that we are interested in estimating the population mean
of P/E ratio for all stocks listed on BSE with 95 per cent confidence. How many stocks should be
included in the sample if we desire a margin of error of 2?
Solution: The information given is: 𝐸 = 2, 𝑠 = 7.8, 𝒁𝜶⁄𝟐 = 1.96 at 95 per cent level of confidence.

Using the formula for n and substituting the given values, we have
𝒁𝒄 𝟐 ∗ 𝛔𝟐 𝟏. 𝟗𝟔𝟐 ∗ 𝟕. 𝟖𝟐
𝒏= = ≅ 𝟓𝟗
𝑬𝟐 𝟐𝟐
Thus a sample size n = 59 should be chosen to estimate the population mean of P/E ratio for all stocks
on the BSE.
Self-Assessment Questions
1) A personnel manager has found that historically the scores on aptitude tests given to applicants
for entry level positions follow a normal distribution with a standard deviation of 32.4 points. A
random sample of nine test scores from the current group of applicants had a mean score of
187.9 points. Find an 90% confidence interval for the population mean score of the current
group of applicants.

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Applied Statistics Confidence Intervals Dr. Mahmoud Abd El-Raouf

2) It is known that the standard deviation in the volumes of 20-ounce (591- milliliter) bottles of
natural spring water bottled by a particular company is 5 milliliters. One hundred bottles are
randomly sampled and measured.
a) Calculate the standard error of the mean.
b) Find the margin of error of a 90% confidence interval estimate for the population mean
volume.
c) Calculate the width for a 99% confidence interval for the population mean volume.

3) A business school placement director wants to estimate the mean annual salaries 5 years after
students graduate. A random sample of 25 such graduates found a sample mean of $42,740 and
a sample standard deviation of $4,780. Find a 90% confidence interval for the population mean,
assuming that the population distribution is normal.
𝝈 𝝈
𝒙̄ − 𝒛(𝜶) < 𝝁 < 𝒙̄ + 𝒛(𝜶)
𝟐 √𝒏 𝟐 √𝒏

𝟒𝟕𝟖𝟎 𝟒𝟕𝟖𝟎
𝟒𝟐𝟕𝟒𝟎 − 𝟏. 𝟔𝟒𝟓 < 𝝁 < 𝟒𝟒𝟐𝟕𝟒𝟎 + 𝟏. 𝟔𝟒𝟓
√𝟐𝟓 √𝟐𝟓
𝟒𝟕𝟖𝟎
𝒎𝒊𝒏 = 𝟒𝟐𝟕𝟒𝟎 − (𝟏. 𝟔𝟒𝟓 ) = 𝟒𝟏𝟐𝟏𝟕
√𝟐𝟓
𝟒𝟕𝟖𝟎
𝒎𝒂𝒙 = 𝟒𝟐𝟕𝟒𝟎 + (𝟏. 𝟔𝟒𝟓 ) = 𝟒𝟒𝟑𝟔𝟐
√𝟐𝟓

4) A process produces bags of refined sugar. The weights of the contents of these bags are normally
distributed with standard deviation 1.2 ounces. The contents of a random sample of 25 bags had a
mean weight of 19.8 ounces. Find the upper and lower confidence limits of a 99% confidence
interval for the true mean weight for all bags of sugar produced by the process.

5) A college admissions officer for an MBA program has determined that historically applicants
have under graduate grade point averages that are normally distributed with standard deviation
0.45. From a random sample of 25 applications from the current year, the sample mean grade
point average is 2.90. Find a 95% confidence interval for the population mean.

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Applied Statistics Confidence Intervals Dr. Mahmoud Abd El-Raouf

6) A security feature on some web pages is graphic representations of words that are readable by
human beings but not machines. When a certain design format was tested on 450 subjects, by
having them attempt to read ten disguised words, 448 subjects could read all the words.
a) Give a point estimate of the proportion p of all people who could read words disguised in this
way.
b) Show that the sample is not sufficiently large to construct a confidence interval for the
proportion of all people who could read words disguised in this way.
7) In a random sample of 250 employed people, 61 said that they bring work home with them
at least occasionally.
a) Give a point estimate of the proportion of all employed people who bring work home
with them at least occasionally.
𝐑 = 𝟔𝟏/𝟐𝟓𝟎 = 𝟎. 𝟐𝟒
b) Construct a 99% confidence interval for that proportion.

𝑅 (1 − 𝑅 ) 0.24(1 − 0.24)
R ± (𝑍𝑐 ∗ √ ) = 0.24 ± (2.576 ∗ √ )
𝑛 250

0.24(1 − 0.24)
𝑚𝑖𝑛 = 0.24 − (2.576 ∗ √ ) = 0.17
250

0.24(1 − 0.24)
𝑚𝑎𝑥 = 0.24 + (2.576 ∗ √ ) = 0.31
250

8) In a random sample of 12,447 hip replacement or revision surgery procedures nationwide, 162
patients developed a surgical site infection.
a) Give a point estimate of the proportion of all patients undergoing a hip surgery procedure
who develop a surgical site infection.

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Applied Statistics Confidence Intervals Dr. Mahmoud Abd El-Raouf

b) Verify that the sample is sufficiently large to use it to construct a confidence interval for that
proportion.
c) Construct a 95% confidence interval for the proportion of all patients undergoing a hip surgery
procedure who develop a surgical site infection.
9) In order to estimate the proportion of entering students who graduate within six years, the
administration at a state university examined the records of 600 randomly selected students who
entered the university six years ago, and found that 312 had graduated.
a) Give a point estimate of the six-year graduation rate, the proportion of entering students who
graduate within six years.
b) Assuming that the sample is sufficiently large, construct a 99% confidence interval for the
six-year graduation rate.
10) In a research study in cattle breeding, 159 of 273 cows in several herds that were in estrus were
detected by means of an intensive once a day, one-hour observation of the herds in early morning.
a) Give a point estimate of the proportion of all cattle in estrus who are detected by this method.
b) Assuming that the sample is sufficiently large, construct a 90% confidence interval for the
proportion of all cattle in estrus who are detected by this method.

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Applied Statistics Dr. Mahmoud Abd El-Raouf

Testing of Hypotheses

Testing of Hypotheses is one of the most important aspects of the theory of decision-making, where the
decision made by a decision maker depends primarily on the strength of the evidence thrown up by a random
sample drawn from a population.

➢ What is a Hypothesis?
A hypothesis is something that has not yet been proven to be true. It is some statement about a population
parameter.
In any testing of hypotheses problem, we are faced with a pair of hypotheses such that one and only one of
them is always true. One of this pair is called the null hypothesis and the other one the alternative hypothesis.
• A null hypothesis denoted H0, is the statement about the population parameter that is assumed to be true
unless there is convincing evidence to the contrary.
• The alternative hypothesis denoted H1, is a statement about the population parameter that is
contradictory to the null hypothesis, and is accepted as true only if there is convincing evidence in favor
of it.
Illustrative examples:
• A manager in a company claims that the average time taken to maintain any machine is less than 12 hours.
𝐻0 : 𝜇 = 12
𝐻1 : 𝜇 < 12
• An electric battery manufacturer claims that the average battery life is more than 1.5 years.
𝐻0 : 𝜇 = 1.5
𝐻1 : 𝜇 > 1.5
• An investor claims that the average profit percentage from investing in Saudi stocks is not equal to 0.10
𝐻0 : 𝜇 = 10
𝐻1 : 𝜇 ≠ 10
What is Testing of Hypotheses?
Hypothesis testing is a statistical procedure in which a choice is made between a null hypothesis and an
alternative hypothesis based on information in a sample.
The end result of a hypotheses testing procedure is a choice of one of the following two possible conclusions:
1. Reject H0 (and therefore accept H1), or Fail to reject H0 (and therefore fail to accept H1).
There are four possible outcomes of hypothesis testing procedure, as shown in the following table:

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Applied Statistics Dr. Mahmoud Abd El-Raouf

States of Population
Decision based on Sample
H0 True H0 False
Accept H0 Correct decision (No Error) Wrong Decision (Type II Error)
Reject H0 Wrong Decision (Type I Error) Correct Decision (No Error)
Choosing α smaller in order to reduce the chance of making a Type I error has the effect of increasing the
chance of making a Type II error. The only way to simultaneously reduce the chances of making either kind
of error is to increase the sample size.

➢ GENERAL TESTING PROCEDURE

We can do a general testing procedure in a more systematic way. we design the test and set up the conditions
under which we shall reject the null hypothesis. Then we use the sample evidence and draw our conclusion as
to whether the null hypothesis can be rejected. The steps involved are as follows:
Step 1: State the Null and the Alternate Hypotheses. i.e. H0 and H1
Step 2: Specify a level of significance α
Step 3: Calculate the observed value of the test statistic
Step 4: Define the critical region in terms of the test statistic
Step 5: Decide to accept or reject the null hypothesis by comparing the observed value of the test statistic
with the critical value of the test statistic.

❖ Step 1: State the Null and the Alternate Hypotheses.

the null hypothesis is used to assume that there is no difference between the average of the sample and the
claimed mean of the population. (𝑯𝟎 : 𝝁 = 𝝁𝟎 )
𝐻1 is the alternative hypothesis of null hypothesis has three states
1. Assuming that the mean of a sample is less than the assumed mean of population. 𝑯𝟏 : 𝝁 < 𝝁𝟎
2. Assuming that the mean of the sample is greater than the assumed mean of population. 𝑯𝟏 : 𝝁 > 𝝁𝟎
3. Assume that the mean of a sample does not equal the assumed mean of population. 𝑯𝟏 : 𝝁 ≠ 𝝁𝟎
❖ Step 2: Specify a level of significance α and critical value
The number 𝛂 is the probability that the test procedure will result in a Type I error. It has several values
(5%, 1% ,0.1%, … . ) according to the sample confidence interval. Using 𝛂, we can determine the critical value
that is the value of (Z) corresponding to the probability of error (𝛼) in the standard normal distribution is called
𝑍𝛼 .Values of 𝑍𝛼 at different significance levels:

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Applied Statistics Dr. Mahmoud Abd El-Raouf

Confidence Level, (𝟏 − 𝜶) (%) 𝜶 𝒁𝜶 𝒁𝜶⁄

𝟐
90% 0.10 1.28 1.645
95% 0.05 1.645 1.96
99% 0.01 2.33 2.575

❖ Step 3: calculate the observed value of the test statistic

A test statistic is a random variable calculated from the sample evidence and provide the means to decide
whether statistical hypothesis is to be rejected or accepted. Most of the time, the test statistic we use will be
𝒁𝒄 .
𝑋̅ − 𝜇0
𝑻𝒆𝒔𝒕𝒔 𝒇𝒐𝒓 𝒂 𝑷𝒐𝒑𝒖𝒍𝒂𝒕𝒊𝒐𝒏 𝑴𝒆𝒂𝒏 𝑍𝑐 = 𝜎
⁄ 𝑛
√
𝑝̅ − 𝑝0
𝑻𝒆𝒔𝒕𝒔 𝒇𝒐𝒓 𝒂 𝑷𝒐𝒑𝒖𝒍𝒂𝒕𝒊𝒐𝒏 𝑷𝒓𝒐𝒑𝒐𝒓𝒕𝒊𝒐𝒏 𝑍𝑐 =
√𝑝0 (1 − 𝑝0 )
𝑛
❖ Step 4: define the critical region in terms of the test statistic
To determine the rejection region, we must know the critical value. The critical value is the value of (Z)
corresponding to the probability of error (𝛼) in the standard normal distribution is called 𝑍𝛼
The rejection region for 𝐻0 is determined according to the 𝐻1 states

1. If (𝐻1 : 𝜇 < 𝜇0 ), we will reject H0 only test statistic

takes a significantly low value in the left tail of its
distribution and this case is called a left-tailed test.

2. If (𝐻1 : 𝜇 > 𝜇0 ), we will reject H0 only when test

statistic takes a significantly high value in the right tail
of its distribution and this case is called a right -tailed
test.

3. If (𝐻1 : 𝜇 ≠ 𝜇0 ), we have to reject H0 in both cases, that

is, when test statistic is significantly less than value in
the left tail or greater than the right tail , which is to say
that rejection occurs on both tails. Therefore, this case
is called a two- tailed test.

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Applied Statistics Dr. Mahmoud Abd El-Raouf

❖ Step 5: Decide to accept or reject the null hypothesis

To decide between H0 and H1 we would select a “rejection region” of values and reject H0 if the test
statistic lies in the rejection region, but not reject H0 if it does not.
1. if 𝐻1 : 𝜇 < 𝜇0 , we reject H0 if 𝑍 < −𝑍𝛼 , so the rejection region has the form of an interval (−∞, −𝑍𝛼 ].
2. if 𝐻1 : 𝜇 > 𝜇0 , we reject H0 if 𝑍 > 𝑍𝛼 , so the rejection region has the form of an interval [𝑍𝛼 , ∞).
3. if 𝐻1 : 𝜇 ≠ 𝜇0 , we reject H0 if 𝑍 < −𝑍𝛼⁄2 or 𝑍 > 𝑍𝛼⁄2 , so the rejection region has the form of the union of

two intervals (−∞, −𝑍𝛼⁄2 ] ∪ [𝑍𝛼⁄2 , ∞).

Tests for a Population Mean

In this section we describe and demonstrate the procedure for conducting a test of hypotheses about the
mean of a population 𝝁𝟎 in the case that the sample size 𝑛 ≥ 30. to test the value of mean population follows
the normal distribution with known standard deviation σ .A random sample is selected with 𝒏 ≥ 𝟑𝟎 and
̅,
average sample 𝑿
✓ The null hypothesis will have the form 𝐻0 : 𝜇 = 𝜇0 .
✓ The alternative hypothesis will be one of the three inequalities 𝜇 < 𝜇0 𝑜𝑟 𝜇 > 𝜇0 , 𝑜𝑟 𝜇 ≠ 𝜇0 .
✓ This implies that the test statistic
𝑋̅ − 𝜇0
𝑍= 𝜎
⁄ 𝑛
√
If we do not know σ, then we replace it by the sample standard deviation s. Since the sample is large the
resulting test statistic still has a distribution that is approximately standard normal.
𝑋̅ − 𝜇0
𝑍= 𝑠
⁄ 𝑛
√
and hypothesis tests are performed with the previous steps.

Example 1:
It is hoped that a newly developed pain reliever will more quickly produce perceptible reduction in pain to
patients after minor surgeries than a standard pain reliever. The standard pain reliever is known to bring relief
in an average of 3.5 minutes with standard deviation 1.5 minutes. To test whether the new pain reliever works
more quickly than the standard one, 50 patients with minor surgeries were given the new pain reliever and their
times to relief were recorded. The experiment yielded sample mean 3.1 minutes. Is there sufficient evidence in

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Applied Statistics Dr. Mahmoud Abd El-Raouf

the sample to indicate, at the 5% level of significance, that the newly developed pain reliever does deliver
perceptible relief more quickly?
Solution
Step 1: State the Null and the Alternate Hypotheses
𝑯𝟎 : 𝝁 = 𝟑. 𝟓
𝑯𝟏 : 𝝁 < 𝟑. 𝟓
Step 2: Specify a level of significance α and critical value
at the 5% level of significance this is a left-tailed test, so there is a single critical value −𝑍𝛼 = −1.645
Step 3: Calculate the value of the test statistic
𝑋̅ − 𝜇 3.1 − 3.5
𝑍=𝜎 = = −1.886
⁄ 𝑛 1.5⁄
√ √50
Step 4: Define the critical region

Step 5: Decide to accept or reject the null hypothesis

the test statistic falls in the rejection region. The decision is to reject H0.

Conclusion: the data provide sufficient evidence, at the 5% level of significance, to conclude that the average
time until patients experience perceptible relief from pain using the new pain reliever is smaller than the
average time for the standard pain reliever.

Example 2:
A cosmetics company fills its best-selling 8-ounce jars of facial cream by an automatic dispensing machine.
The machine is set to dispense a mean of 8.1 ounces per jar. Uncontrollable factors in the process can shift the
mean away from 8.1 and cause either underfill or overfill, both of which are undesirable. In such a case the
dispensing machine is stopped and recalibrated. Regardless of the mean amount dispensed, the standard

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Applied Statistics Dr. Mahmoud Abd El-Raouf

deviation of the amount dispensed always has value 0.22 ounce. A quality control engineer routinely selects
30 jars from the assembly line to check the amounts filled. On one occasion, the sample mean is 8.2 ounces.
Determine if there is sufficient evidence in the sample to indicate, at the 1% level of significance, that the
machine should be recalibrated.
Solution
Step 1: State the Null and the Alternate Hypotheses
𝑯𝟎 : 𝝁 = 𝟖. 𝟏
𝑯𝟏 : 𝝁 ≠ 𝟖. 𝟏
Step 2: Specify a level of significance α and critical value
at the 1% level of significance this is a two-tailed test, so there are two critical values±𝑍𝛼⁄2 = ±2.576

Step 3: Calculate the value of the test statistic

𝑋̅ − 𝜇 8.2 − 8.1
𝑍=𝜎 = = 2.49
⁄ 𝑛 0.22⁄
√ √30
Step 4: Define the critical region

Step 5: Decide to accept or reject the null hypothesis

the test statistic does not fall in the rejection region. The decision is not to reject H0.

Conclusion: The data do not provide sufficient evidence, at the 1% level of significance, to conclude that the
average amount of product dispensed is different from 8.1 ounce. We conclude that the machine does not need
to be recalibrated.

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Applied Statistics Dr. Mahmoud Abd El-Raouf

Example 3:
In a random sample consisting of recording 100 deaths in a village, it was found that the mean age in the sample
was 67.5 years, and the standard deviation was 8 years. Is the average age in this village greater than 65 years?
Use a 5% level of significance.
Solution
Assume µ the average age in this village.
𝐻0 : 𝜇 = 65
𝐻1 : 𝜇 > 65
Right-side test and significance level α = 0.05 then the critical value is:
𝑍0.05 = 1.64
The test statistic value is:
𝑋̅ − 𝜇 67.5 − 865
𝑍=𝜎 = = 3.125
⁄ 𝑛 8⁄
√ 100
We find that the calculated value of 3.125 is greater than the tabular value 1.64. Therefore, the calculated Z
falls in the rejection region, so we can reject 𝑯𝟎 .
It means that the average age in this village is more than 65 years.

Tests for a Population Proportion

Both the critical value approach can be applied to test hypotheses about a population proportion p.
✓ The null hypothesis will have the form 𝐻0 : 𝑝 = 𝑝0 .
✓ The alternative hypothesis will be one of the three inequalities 𝑝 < 𝑝0 , 𝑝 > 𝑝0 , 𝑜𝑟 𝑝 ≠ 𝑝0 .
✓ The test statistic has the standard normal distribution.
𝑝̅ − 𝑝0
𝑍𝑐 =
√𝑝0 (1 − 𝑝0 )
𝑛
In the formula 𝑝0 is the numerical value of p that appears in the two hypotheses , 𝑝̅ is the sample proportion,
and n is the sample size. The distribution of the standardized test statistic and the corresponding rejection
region for each form of the alternative hypothesis (left-tailed, right-tailed, or two-tailed)
Example 4:
A soft drink maker claims that more than 50% of adults prefer its leading beverage over that of its main
competitor’s. To test this claim 500 randomly selected people were given the two beverages in random order
to taste. Among them, 270 preferred the soft drink maker’s brand, 211 preferred the competitor’s brand, and

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Applied Statistics Dr. Mahmoud Abd El-Raouf

19 could not make up their minds. Determine whether there is sufficient evidence, at the 5% level of
significance, to support the soft drink maker’s claim against the default that the population is evenly split in its
preference.
Solution
𝟐𝟕𝟎
̅=
𝒑 = 𝟓𝟎% = 𝟎. 𝟓, 𝒏 = 𝟓𝟎𝟎, 𝒑 = 𝟎. 𝟓𝟒
𝟓𝟎𝟎
Step 1: State the Null and the Alternate Hypotheses
𝑯𝟎 : 𝒑 = 𝟎. 𝟓
𝑯𝟏 : 𝝁 > 𝟎. 𝟓
Step 2: Specify a level of significance α and critical value
at the 5% level of significance this is right-tailed test, so there are one critical value 𝑍𝛼 = 1.645
Step 3: Calculate the value of the test statistic
𝑝̅ − 𝑝0 0.54 − 0.5
𝑍𝑐 = = = 1.789
√𝑝0 (1 − 𝑝0 ) √0.5(1 − 0.5)
𝑛 500
Step 4: Define the critical region

Step 5: Decide to accept or reject the null hypothesis

the test statistic falls in the rejection region. The decision is to reject H0.
Conclusion: The data provide sufficient evidence, at the 5% level of significance, to conclude that a majority
of adults prefer the company’s beverage to that of their competitor’s.
Example 5:
Globally the long-term proportion of newborns who are male is 51.46%. A researcher believes that the
proportion of boys at birth changes under severe economic conditions. To test this belief randomly selected
birth records of 5,000 babies born during a period of economic recession were examined. It was found in the

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Applied Statistics Dr. Mahmoud Abd El-Raouf

sample that 52.55% of the newborns were boys. Determine whether there is sufficient evidence, at the 10%
level of significance, to support the researcher’s belief.
Solution
̅ = 𝟎. 𝟓𝟐. 𝟓𝟓% = 𝟎. 𝟓𝟐𝟓𝟓
𝒑 = 𝟓𝟏. 𝟒𝟔% = 𝟎. 𝟓𝟏𝟒𝟔, 𝒏 = 𝟓𝟎𝟎𝟎, 𝒑
Step 1: State the Null and the Alternate Hypotheses
𝑯𝟎 : 𝒑 = 𝟎. 𝟓𝟏𝟒𝟔
𝑯𝟏 : 𝝁 ≠ 𝟎. 𝟓𝟏𝟒𝟔
Step 2: Specify a level of significance α and critical value
at the 10% level of significance a two-tailed test, so there are a pair of critical values ±𝑍𝛼 = ±1.645
Step 3: Calculate the value of the test statistic
𝑝̅ − 𝑝0 0.5255 − 0.5146
𝑍𝑐 = = = 1.542
√𝑝0 (1 − 𝑝0 ) √0.5146(1 − 0.5146)
𝑛 5000
Step 4: Define the critical region

Step 5: Decide to accept or reject the null hypothesis

the test statistic does not fall in the rejection region. The decision is not to reject H0.

Example 6:
If the proportion of smokers in a city in 1974 was 28.8%, and in 1982 a sample of the population of this city,
1283 people, was selected, 320 people who were smokers. Did the percentage of smokers decrease between
1974 and 1982? Use the significance level of α = 0.05
Solution
H 0 : P = 0.288

H 1 : P  0.288

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Applied Statistics Dr. Mahmoud Abd El-Raouf

Left -side test and significance level α = 0.05 then the critical value is:
−𝑍0.05 = −1.645
The test statistic value is:
P − P0 320
Z= ,r = = 0.249
P0 (1 − P0 ) 1283
n
0.249 − 0.288 − 0.039 − 0.039 − 0.039
= = = = = −3.9
0.288(1 − 0.288) 0.288  0.712 0.20 0.01
1283 1283 1283
We find that the calculated value of -3.9 is smaller than the tabular value 1.645. Therefore, the calculated Z
falls in the rejection region, so we can reject 𝑯𝟎 .
That is, the percentage of smokers in the year 1982 is less than 28.8%, meaning that the proportion of smokers
decreased between the years 1974 and 1982 with 95% confidence.

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Applied Statistics Dr. Mahmoud Abd El-Raouf

One sample T-teste Using SPSS

When do we accept the null hypothesis 𝑯𝟎

1. A center of statistical research centers claimed that the average income of an employee in a
company is $ 1000 per month. a sample of employees is collected and restricted their income as
follows: Is the claim true or not?
400 500 600 700 800 900 1000 1100 1200 1300 1400 1500 1600 1700 1800

solution
𝑯𝟎 : 𝝁 = 𝟏𝟎𝟎𝟎
𝑯𝟏 : 𝝁 ≠ 𝟏𝟎𝟎𝟎
After entering the data to be analyzed, From the Analyze menu, choose compare means and one-
sample T Test

11
Applied Statistics Dr. Mahmoud Abd El-Raouf

• Moves the variable to be tested (income)

• Write the value of the claim in the box in front of Test Value

We get the following results in the output file

Sig (2-Tailed)= P-value

This value indicates if there is a statistically significant difference between the claim and average
income.

12
Applied Statistics Dr. Mahmoud Abd El-Raouf

• If the value is greater than 0.05, then there is no statistically significant difference (we accept
nullity).
• If the value is less than 0.05, then there are statistically significant differences (we reject the null
hypothesis).

𝑷 − 𝒗𝒂𝒍𝒖𝒆 = 𝟎. 𝟒𝟎𝟏 > 𝟎. 𝟎𝟓

We accept𝐻0 ,the average employee income in the company is $ 1,000 per month
2. A company selling licenses for new e-commerce computer software advertises that firms using this
software obtain, on average during the first year, a yield of 10% on their initial investments. A
random sample of 10 of these franchises produced the following yields for the first year of
operation:
6.1 9.2 11.5 8.6 12.1 3.9 8.4 10.1 9.4 8.9
Assuming that population yields are normally distributed, test the company’s claim.
Solution
𝐻0 : 𝜇 = 10
𝐻1 : 𝜇 ≠ 10
One-Sample Test
Test Value = 10
95% Confidence Interval of the Difference
t df Sig. (2-tailed) Mean Difference Lower Upper
yields -1.554 9 .155 -1.1800 -2.898 .538
𝑡 = −1.554
𝑃 − 𝑣𝑎𝑙𝑢𝑒 = 0.155 > 0.05
Decision: we can accept 𝐻0
Then the average during the first year, a yield of 10% on their initial investments
3. A process that produces bottles of shampoo, when operating correctly, produces bottles whose
contents weigh, on average, 20 ounces. A random sample of nine bottles from a single production
run yielded the following content weights (in ounces):
21.4 19.7 20.6 20.8 20.1 19.7 20.3 20.9
Assuming that the population distribution is normal, test at the 5% level against a two-sided
alternative the null hypothesis that the process is operating correctly.

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Applied Statistics Dr. Mahmoud Abd El-Raouf

Solution
𝐻0 : 𝜇 = 20
𝐻1 : 𝜇 ≠ 20
One-Sample Test
Test Value = 20
95% Confidence Interval of the Difference
t df Sig. (2-tailed) Mean Difference Lower Upper
weights 2.063 7 .078 .4375 -.064 .939

𝑡 = 2.063
𝑃 − 𝑣𝑎𝑙𝑢𝑒 = 0.078 > 0.05
Decision: accept 𝐻0 . Then the process is operating correctly
4. A statistics instructor is interested in the ability of students to assess the difficulty of a test
they have taken. This test was taken by a large group of students, and the average score was
78.5. A random sample of eight students was asked to predict this average score. Their
predictions were as follows:
72 83 78 65 69 77 81 71
Assuming a normal distribution, test the null hypothesis that the population mean prediction would
be 78.5. Use a two-sided alternative and a 10% significance level.
Solution
𝐻0 : 𝜇 = 78.5
𝐻1 : 𝜇 ≠ 78.5

One-Sample Test
Test Value = 78.5
90% Confidence Interval of the Difference
t df Sig. (2-tailed) Mean Difference Lower Upper
scores .948 7 .375 96.0000 -95.790 287.790

𝑡 = 0.948
𝑃 − 𝑣𝑎𝑙𝑢𝑒 = 0.375 > 0.1
Decision: accept 𝐻0 . Then the population mean prediction would be 78.5

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Applied Statistics Dr. Mahmoud Abd El-Raouf

APPLICATIONS

1. In the past the average length of an outgoing telephone call from a business office has been 143 seconds.
A manager wishes to check whether that average has decreased after the introduction of policy changes. A
sample of 100 telephone calls produced a mean of 133 seconds, with a standard deviation of 35 seconds.
Perform the relevant test at the 1% level of significance.

2. The average household size in a certain region several years ago was 3.14 persons. A sociologist wishes to
test, at the 5% level of significance, whether it is different now. Perform the test using the information
collected by the sociologist: in a random sample of 75 households, the average size was 2.98 persons, with
sample standard deviation 0.82 person.

3. An automobile manufacturer recommends oil change intervals of 3,000 miles. To compare actual intervals
to the recommendation, the company randomly samples records of 50 oil changes at service facilities and
obtains sample mean 3,752 miles with sample standard deviation 638 miles. Determine whether the data
provide sufficient evidence, at the 5% level of significance, that the population mean interval between oil
changes exceeds 3,000 miles.

4. A grocery store chain has as one standard of service that the mean time customers wait in line to begin
checking out not exceed 2 minutes. To verify the performance of a store the company measures the waiting
time in 30 instances, obtaining mean time 2.17 minutes with standard deviation 0.46 minute. Use these
data to test the null hypothesis that the mean waiting time is 2 minutes versus the alternative that it exceeds
2 minutes, at the 10% level of significance.

5. The mean household income in a region served by a chain of clothing stores is $48,750. In a sample of 40
customers taken at various stores the mean income of the customers was $51,505 with standard deviation
$6,852.
a) Test at the 10% level of significance the null hypothesis that the mean household income of customers
of the chain is $48,750 against that alternative that it is different from $48,750.
b) The sample mean is greater than $48,750, suggesting that the actual mean of people who patronize this
store is greater than $48,750. Perform this test, also at the 10% level of significance. (The computation
of the test statistic done in part (a) still applies here.)

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Applied Statistics Dr. Mahmoud Abd El-Raouf

6. Five years ago 3.9% of children in a certain region lived with someone other than a parent. A sociologist
wishes to test whether the current proportion is different. Perform the relevant test at the 5% level of
significance using the following data: in a random sample of 2,759 children, 119 lived with someone other
than a parent.

7. Two years ago 72% of household in a certain county regularly participated in recycling household waste.
The county government wishes to investigate whether that proportion has increased after an intensive
campaign promoting recycling. In a survey of 900 households, 674 regularly participate in recycling.
Perform the relevant test at the 10% level of significance.

8. A report five years ago stated that 35.5% of all state-owned bridges in a particular state were “deficient.”
An advocacy group took a random sample of 100 state-owned bridges in the state and found 33 to be
currently rated as being “deficient.” Test whether the current proportion of bridges in such condition is
35.5% versus the alternative that it is different from 35.5%, at the 10% level of significance.

9. According to the Federal Poverty Measure 12% of the U.S. population lives in poverty. The governor of a
certain state believes that the proportion there is lower. In a sample of size 1,550, 163 were impoverished
according to the federal measure. Test whether the true proportion of the state’s population that is
impoverished is less than 12%, at the 5% level of significance.

10. A rule of thumb is that for working individuals one-quarter of household income should be spent on
housing. A financial advisor believes that the average proportion of income spent on housing is more than
0.25. In a sample of 30 households, the mean proportion of household income spent on housing was 0.285
with a standard deviation of 0.063. Perform the relevant test of hypotheses at the 1% level of significance.

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Applied Statistics Dr. Mahmoud Abd El-Raouf

Applications Using SPSS

1. A professor wants to know if her introductory statistics class has a good grasp of basic math. Seven
students are chosen at random from the class and given a math proficiency test. The professor wants
the
2. class to be able to score above 70 on the test. The students get scores:
62 92 75 68 83 95 63
Can the professor have 90 percent confidence that the mean score for the class on the test would be 70?
3. A company selling licenses for new e-commerce computer software advertises that firms using this
software obtain, on average during the first year, a yield of 10% on their initial investments. A random
sample of 10 of these franchises produced the following yields for the first year of operation:
6.1 9.2 11.5 8.6 12.1 3.9 8.4 10.1 9.4 8.9
Assuming that population yields are normally distributed, test the company’s claim.
4. A process that produces bottles of shampoo, when operating correctly, produces bottles whose contents
weigh, on average, 20 ounces. A random sample of nine bottles from a single production run yielded the
following content weights (in ounces):
21.4 19.7 19.7 20.6 20.8 20.1 19.7 20.3 20.9
Assuming that the population distribution is normal, test at the 5% level against a two-sided alternative
the null hypothesis that the process is operating correctly.
5. A statistics instructor is interested in the ability of students to assess the difficulty of a test they have
taken. This test was taken by a large group of students, and the average score was 78.5. A random
sample of eight students was asked to predict this average score. Their predictions were as follows:
72 83 78 65 69 77 81 71
Assuming a normal distribution, test the null hypothesis that the population mean prediction would be
78.5. Use a two-sided alternative and a 10% significance level.
6. Tree-ring dating from archaeological excavation sites is used in conjunction with other chronologic
evidence to estimate occupation dates of prehistoric Indian ruins in the southwestern United States. It
is thought that Burnt Mesa Pueblo was occupied around 1300 A.D. (based on evidence from potsherds
and stone tools).
1189 1267 1268 1275 1275 1271 1272 1316 1317 1230
Does this information indicate that the population mean of tree-ring dates in the area is different from
that in 1300 A.D.?

17
Cumulative Probabilities of the Standard Normal Distribution
The table gives the probabilities α = Φ(z) to the left of given z–values for the standard normal
distribution.
For example, the probability that a standard normal random variable Z is less than 1.53 is found at
the intersection of the 1.5 rows and the 0.03 column, thus Φ(1.53) = P (Z ≤ 1.53) = 0.9370. Due to
symmetry it holds Φ(−z) = 1 − Φ(z) for all z.

z 0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09
0.0 0.5000 0.5040 0.5080 0.5120 0.5160 0.5199 0.5239 0.5279 0.5319 0.5359
0.1 0.5398 0.5438 0.5478 0.5517 0.5557 0.5596 0.5636 0.5675 0.5714 0.5753
0.2 0.5793 0.5832 0.5871 0.5910 0.5948 0.5987 0.6026 0.6064 0.6103 0.6141
0.3 0.6179 0.6217 0.6255 0.6293 0.6331 0.6368 0.6406 0.6443 0.6480 0.6517
0.4 0.6554 0.6591 0.6628 0.6664 0.6700 0.6736 0.6772 0.6808 0.6844 0.6879
0.5 0.6915 0.6950 0.6985 0.7019 0.7054 0.7088 0.7123 0.7157 0.7190 0.7224
0.6 0.7257 0.7291 0.7324 0.7357 0.7389 0.7422 0.7454 0.7486 0.7517 0.7549
0.7 0.7580 0.7611 0.7642 0.7673 0.7704 0.7734 0.7764 0.7794 0.7823 0.7852
0.8 0.7881 0.7910 0.7939 0.7967 0.7995 0.8023 0.8051 0.8078 0.8106 0.8133
0.9 0.8159 0.8186 0.8212 0.8238 0.8264 0.8289 0.8315 0.8340 0.8365 0.8389
1.0 0.8413 0.8438 0.8461 0.8485 0.8508 0.8531 0.8554 0.8577 0.8599 0.8621
1.1 0.8643 0.8665 0.8686 0.8708 0.8729 0.8749 0.8770 0.8790 0.8810 0.8830
1.2 0.8849 0.8869 0.8888 0.8907 0.8925 0.8944 0.8962 0.8980 0.8997 0.9015
1.3 0.9032 0.9049 0.9066 0.9082 0.9099 0.9115 0.9131 0.9147 0.9162 0.9177
1.4 0.9192 0.9207 0.9222 0.9236 0.9251 0.9265 0.9279 0.9292 0.9306 0.9319
1.5 0.9332 0.9345 0.9357 0.9370 0.9382 0.9394 0.9406 0.9418 0.9429 0.9441
1.6 0.9452 0.9463 0.9474 0.9484 0.9495 0.9505 0.9515 0.9525 0.9535 0.9545
1.7 0.9554 0.9564 0.9573 0.9582 0.9591 0.9599 0.9608 0.9616 0.9625 0.9633
1.8 0.9641 0.9649 0.9656 0.9664 0.9671 0.9678 0.9686 0.9693 0.9699 0.9706
1.9 0.9713 0.9719 0.9726 0.9732 0.9738 0.9744 0.9750 0.9756 0.9761 0.9767
2.0 0.9772 0.9778 0.9783 0.9788 0.9793 0.9798 0.9803 0.9808 0.9812 0.9817
2.1 0.9821 0.9826 0.9830 0.9834 0.9838 0.9842 0.9846 0.9850 0.9854 0.9857
2.2 0.9861 0.9864 0.9868 0.9871 0.9875 0.9878 0.9881 0.9884 0.9887 0.9890
2.3 0.9893 0.9896 0.9898 0.9901 0.9904 0.9906 0.9909 0.9911 0.9913 0.9916
2.4 0.9918 0.9920 0.9922 0.9925 0.9927 0.9929 0.9931 0.9932 0.9934 0.9936
2.5 0.9938 0.9940 0.9941 0.9943 0.9945 0.9946 0.9948 0.9949 0.9951 0.9952
2.6 0.9953 0.9955 0.9956 0.9957 0.9959 0.9960 0.9961 0.9962 0.9963 0.9964
2.7 0.9965 0.9966 0.9967 0.9968 0.9969 0.9970 0.9971 0.9972 0.9973 0.9974
2.8 0.9974 0.9975 0.9976 0.9977 0.9977 0.9978 0.9979 0.9979 0.9980 0.9981
2.9 0.9981 0.9982 0.9982 0.9983 0.9984 0.9984 0.9985 0.9985 0.9986 0.9986
3.0 0.9987 0.9987 0.9987 0.9988 0.9988 0.9989 0.9989 0.9989 0.9990 0.9990
3.1 0.9990 0.9991 0.9991 0.9991 0.9992 0.9992 0.9992 0.9992 0.9993 0.9993
3.2 0.9993 0.9993 0.9994 0.9994 0.9994 0.9994 0.9994 0.9995 0.9995 0.9995
3.3 0.9995 0.9995 0.9995 0.9996 0.9996 0.9996 0.9996 0.9996 0.9996 0.9997
3.4 0.9997 0.9997 0.9997 0.9997 0.9997 0.9997 0.9997 0.9997 0.9997 0.9998

Quantiles of the Standard Normal Distribution

For selected probabilities α, the table shows the values of the quantiles zα such that
Φ(zα ) = P (Z ≤ zα ) = α, where Z is a standard normal random variable.
The quantiles satisfy the relation z1−α = −zα .

α 0.9 0.95 0.975 0.99 0.995 0.999

zα 1.282 1.645 1.960 2.326 2.576 3.090