Confidence Interval:
Confidence interval gives the range in which the true value of the population parameter would be
lie. There are two limits in the confidence interval such as lower limit and upper limit.
Example:
A restaurant wishes to estimate the average amount of money a customer spends for lunch. A
random sample of n = 36 is selected and the sample mean is found to be = Rs. 35.00.
Assuming = 13.77, find 95% confidence limits for .
Solution:
When we say that 95% confidence interval, it shows that we are 95% confident for the results or
the results are correct. Why these results are correct in 95%, why not in 100%. These questions
arise in our mind. As confidence interval is the part of the statistical inference and statistical
inference is used to derive the results on the basis of sample for the population where sample is
the part of the population. When we are using the small part, then what are the chances that the
information which gets from the sample is 100% correct. Sample can provide the right
information or wrong information. Whatever the sample, but the 95% confidence interval means
that the values which are getting on the basis of sample, these are 95% correct. We will go 100%
confidence interval, when we will increase the sample size. When we increase the sample size,
then there will be possible that we will be move at 97% confidence interval, but there is a
drawback that time is consuming and cost will be used. Whenever we will take about confidence
limit, we will take about either 90% or 95% or 99%.
Confidence Interval for Mean:
There are two limits of the confidence interval such lower limit and upper limit. If we talk about
(9, 10), then we can say that 9 is lower limit and 10 is upper limit. Similarly if we talk about (50,
100), then we can say that 50 is lower limit and 100 is upper limit.
Whenever we talk about interval, interval is constituted with the help of two values such as lower
limit (the value where the interval will be start) and upper limit (the value where the interval will
be end).
(Upper Limit)
(Lower Limit)
1% 5% 10%
2.33 1.64 1.28
2.58 1.96 1.64
=
=
=30.5018, 39.4982.
When we talk about 95% confidence interval, then there are 5% chances of mistake and 95%
chances of confidence. We can say that 5% level of significance as 95% level of confidence.
When the level of significance is 1%, then level of confidence will be 99%. If the level of
significance is 5%, then level of confidence will be 95% and if the level of significance is 10%,
then level of confidence will be 90%. So we will look at the column of 5% level of significance.
If we look at the third column, then there are two values 1.64 and 1.96, now the question arises in
our mind that which value will be pick. If we look at the first column, then there are two value z α
and zα/2. While zα/2 is used in the formula so we will use zα/2.
Interpretation of Confidence Interval:
We are 95% confident that the mean of the population will lie in the given interval.