Slide 8
Interval Estimation
Population Mean: Known
Population Mean: Unknown
Determining the Sample Size
Population Proportion
Slide 1
Height of CUHK Business Students
Population mean = 168cm
Population S.D. = 5cm
What’s the probability that a randomly selected
sample (n = 25) will have sample mean between 166
and 170?
Slide 2
Margin of Error and the Interval Estimate
A point estimator cannot be expected to provide the
exact value of the population parameter.
An interval estimate can be computed by adding and
subtracting a margin of error to the point estimate.
Point Estimate +/ Margin of Error
The purpose of an interval estimate is to provide
information about how close the point estimate is to
the value of the parameter.
Slide 3
Margin of Error and the Interval Estimate
The general form of an interval estimate of a
population mean is
x Margin of Error
Slide 4
Interval Estimate of a Population Mean:
Known
In order to develop an interval estimate of a
population mean, the margin of error must be
computed using either:
• the population standard deviation , or
• the sample standard deviation s
is rarely known exactly, but it is possible that a
good estimate can be obtained based on historical
data or other information.
We refer to such cases as the known case.
Slide 5
Interval Estimate of a Population Mean:
Known
There is a 1 probability that the value of a
sample mean will provide a margin of error of z /2 x
or less.
Sampling
distribution
of x
/2 1 - of all /2
x values
x
z /2 x z /2 x
Slide 6
Interval Estimate of a Population Mean:
Known
Sampling
distribution
of x
1 - of all
/2 /2
x values
interval
does not x
include interval
z /2 x z /2 x includes
[------------------------- x -------------------------]
[------------------------- x -------------------------]
[------------------------- x -------------------------]
Slide 7
Interval Estimate of a Population Mean:
Known
Interval Estimate of
x z /2
n
where: x is the sample mean
1 - is the confidence coefficient
z /2 is the z value providing an area of
/2 in the upper tail of the standard
normal probability distribution
is the population standard deviation
n is the sample size
Slide 8
Interval Estimate of a Population Mean:
Known
Values of z /2 for the Most Commonly Used
Confidence Levels
Confidence Table
Level /2 Look-up Area z /2
90% .10 .05 .9500 1.645
95% .05 .025 .9750 1.960
99% .01 .005 .9950 2.576
Slide 9
Meaning of Confidence
Because 90% of all the intervals constructed using
x 1.645 x will contain the population mean,
we say we are 90% confident that the interval
x 1.645 x includes the population mean .
We say that this interval has been established at the
90% confidence level.
The value .90 is referred to as the confidence
coefficient.
Slide 10
Interval Estimate of a Population Mean:
Known
Example: HMV
HMV has 260 retail outlets in Asia. The firm is
evaluating a potential location for a new outlet, based
in part, on the mean annual income of the individuals
in the marketing area of the new location.
A sample of size n = 36 was taken; the sample
mean income is $41,100. The population is not
believed to be highly skewed. The population
standard deviation is estimated to be $4,500, and the
confidence coefficient to be used in the interval
estimate is .95.
Slide 11
Interval Estimate of a Population Mean:
Known
Example: HMV
95% of the sample means that can be observed
are within + 1.96 x of the population mean .
The margin of error is:
4,500
z /2 1.96 1, 470
n 36
Thus, at 95% confidence, the margin of error
is $1,470.
Slide 12
Interval Estimate of a Population Mean:
Known
Example: HMV
Interval estimate of is:
$41,100 + $1,470
or
$39,630 to $42,570
We are 95% confident that the interval contains the
population mean.
Slide 13
Interval Estimate of a Population Mean:
Known
Adequate Sample Size
In most applications, a sample size of n = 30 is
adequate.
If the population distribution is highly skewed or
contains outliers, a sample size of 50 or more is
recommended.
Slide 14
Interval Estimate of a Population Mean:
Known
Adequate Sample Size (continued)
If the population is not normally distributed but is
roughly symmetric, a sample size as small as 15
will suffice.
If the population is believed to be at least
approximately normal, a sample size of less than 15
can be used.
Slide 15
Interval Estimate of a Population Mean:
Known
Slide 16
Example
Slide 17
Example
Slide 18
Interval Estimate of a Population Mean:
Unknown
If an estimate of the population standard deviation
cannot be developed prior to sampling, we use the
sample standard deviation s to estimate .
This is the unknown case.
In this case, the interval estimate for is based on the
t distribution.
(We’ll assume for now that the population is
normally distributed.)
Slide 19
t - Distribution
Slide 20
t Distribution
The t distribution is a family of similar probability
distributions.
A specific t distribution depends on a parameter
known as the degrees of freedom.
Degrees of freedom refer to the number of
independent pieces of information that go into the
computation of s.
Slide 21
t Distribution
A t distribution with more degrees of freedom has
less dispersion.
As the degrees of freedom increases, the difference
between the t distribution and the standard normal
probability distribution becomes smaller and
smaller.
Slide 22
t Distribution
t distribution
Standard (20 degrees
normal of freedom)
distribution
t distribution
(10 degrees
of freedom)
z, t
0
Slide 23
t Distribution
For more than 100 degrees of freedom, the standard
normal z value provides a good approximation to
the t value.
The standard normal z values can be found in the
infinite degrees ( ) row of the t distribution table.
Slide 24
t Distribution
Standard normal
z values
Slide 25
Interval Estimate of a Population Mean:
Unknown
Interval Estimate
s
x t /2
n
where: 1 - = the confidence coefficient
t /2 = the t value providing an area of /2
in the upper tail of a t distribution
with n - 1 degrees of freedom
s = the sample standard deviation
Slide 26
Interval Estimate of a Population Mean:
Unknown
Example: Apartment Rents
A reporter for a student newspaper is writing an
article on the cost of off-campus housing. A sample
of 16 efficiency apartments within a half-mile of
campus resulted in a sample mean of $750 per month
and a sample standard deviation of $55.
The students want a 95% confidence interval
estimate of the mean rent per month for the
population of efficiency apartments within a half-
mile of campus. We will assume this population to
be normally distributed.
Slide 27
Interval Estimate of a Population Mean:
Unknown
At 95% confidence, = .05, and /2 = .025.
t.025 is based on n 1 = 16 1 = 15 degrees of freedom.
In the t distribution table we see that t.025 = 2.131.
Slide 28
Interval Estimate of a Population Mean:
Unknown
Interval Estimate
s
x t.025 Margin
n of Error
55
750 ± 2.131( ) = 750 ± 29.30
16
We are 95% confident that the mean rent per month
for the population of efficiency apartments within a
half-mile of campus is between $720.70 and $779.30.
Slide 29
Interval Estimate of a Population Mean:
Unknown
Adequate Sample Size
In most applications, a sample size of n = 30 is
adequate when using the expression x t / 2 s n to
develop an interval estimate of a population mean.
If the population distribution is highly skewed or
contains outliers, a sample size of 50 or more is
recommended.
Slide 30
Interval Estimate of a Population Mean:
Unknown
Adequate Sample Size (continued)
If the population is not normally distributed but is
roughly symmetric, a sample size as small as 15
will suffice.
If the population is believed to be at least
approximately normal, a sample size of less than 15
can be used.
Slide 31
Interval Estimate of a Population Mean:
Unknown
For non-normal distribution, if n is large enough (say
when n>30), or if each is approximately normal, then
the above results still approximately hold. Otherwise the
method has to be used with caution!
Slide 32
Example
Slide 33
Slide 34
Slide 35
Summary of Interval Estimation Procedures
for a Population Mean
Can the
Yes No
population standard
deviation be assumed
known ?
Use the sample
standard deviation
Known s to estimate
Case
Use Use
Unknown s
x z /2 Case x t /2
n n
Slide 36
Example
The strength of a disposable plastic beverage
container is being investigated. The strengths are
normally distributed, with a known standard
deviation of 15 psi. A sample of 20 plastic
containers has a mean strength of 246 psi.
Compute the 95% lower bound CI for the process
mean.
Slide 37
Slide 38
Slide 39
Example
Slide 40
Slide 41
Sample Size for an Interval Estimate
of a Population Mean
Let E = the desired margin of error.
E is the amount added to and subtracted from the
point estimate to obtain an interval estimate.
If a desired margin of error is selected prior to
sampling, the sample size necessary to satisfy the
margin of error can be determined.
Slide 42
Sample Size for an Interval Estimate
of a Population Mean
Margin of Error
E z /2
n
Necessary Sample Size
2 2
(z /2 )
n
E2
Slide 43
Sample Size for an Interval Estimate
of a Population Mean
The Necessary Sample Size equation requires a
value for the population standard deviation .
If is unknown, a preliminary or planning value
for can be used in the equation.
1. Use the estimate of the population standard
deviation computed in a previous study.
2. Use a pilot study to select a preliminary study and
use the sample standard deviation from the study.
3. Use judgment or a “best guess” for the value of .
Slide 44
Sample Size for an Interval Estimate
of a Population Mean
Example: HMV
Recall that HMV is evaluating a potential location
for a new retail outlet, based in part, on the mean
annual income of the individuals in the marketing
area of the new location.
Suppose that HMV’s management team wants an
estimate of the population mean such that there is a
.95 probability that the sampling error is $500 or less.
How large a sample size is needed to meet the
required precision?
Slide 45
Sample Size for an Interval Estimate
of a Population Mean
z /2 500
n
At 95% confidence, z.025 = 1.96. Recall that = 4,500.
(1.96)2 (4, 500)2
n 311.17 312
(500)2
A sample of size 312 is needed to reach a desired
precision of + $500 at 95% confidence.
Slide 46
Interval Estimate
of a Population Proportion
The sampling distribution of p plays a key role in
computing the margin of error for this interval
estimate.
The sampling distribution of p can be approximated
by a normal distribution whenever np > 5 and
n(1 – p) > 5.
Slide 48
Interval Estimate
of a Population Proportion
Normal Approximation of Sampling Distribution of p
Sampling
p(1 p)
distribution p
of p n
/2 1- of all /2
p values
p
p
z /2 p z /2 p
Slide 49
Interval Estimate
of a Population Proportion
Interval Estimate
p (1 p )
p z /2
n
where: 1 - is the confidence coefficient
z /2 is the z value providing an area of
/2 in the upper tail of the standard
normal probability distribution
p is the sample proportion
Slide 50
Interval Estimate
of a Population Proportion
Example: Political Science, Inc.
Political Science, Inc. (PSI) specializes in voter polls
and surveys designed to keep political office seekers
informed of their position in a race.
Using telephone surveys, PSI interviewers ask
registered voters who they would vote for if the
election were held that day.
Slide 51
Interval Estimate
of a Population Proportion
Example: Political Science, Inc.
In a current election campaign, PSI has just found
that 220 registered voters, out of 500 contacted, favor
a particular candidate. PSI wants to develop a 95%
confidence interval estimate for the proportion of the
population of registered voters that favor the
candidate.
Slide 52
Interval Estimate
of a Population Proportion
p (1 p )
p z /2
n
where: n = 500, p = 220/500 = .44, z /2 = 1.96
.44(1 .44)
.44 1.96 = .44 .0435
500
PSI is 95% confident that the proportion of all voters
that favor the candidate is between .3965 and .4835.
Slide 53
Sample Size for an Interval Estimate
of a Population Proportion
Necessary Sample Size
( z / 2 ) 2 p* (1 p* )
n
E2
The planning value p* can be chosen by:
1. Using the sample proportion from a previous
sample of the same or similar units, or
2. Selecting a preliminary sample and using the
sample proportion from this sample.
3. Use judgment or a “best guess” for a p* value.
4. Otherwise, use .50 as the p* value.
Slide 54
Sample Size for an Interval Estimate
of a Population Proportion
Example: Political Science, Inc.
Suppose that PSI would like a .99 probability that
the sample proportion is within .03 of the
population proportion.
A previous sample of similar units yielded .44 for
the sample proportion.
How large a sample size is needed to meet the
required precision?
Slide 55
Sample Size for an Interval Estimate
of a Population Proportion
p(1 p )
z /2 .03
n
At 99% confidence, z.005 = 2.576. Recall that p = .44.
2
(z /2 ) p(1 p) (2.576)2 (.44)(.56)
n 2
1817
E (.03)2
A sample of size 1817 is needed to reach a desired
precision of + .03 at 99% confidence.
Slide 56
Sample Size for an Interval Estimate
of a Population Proportion
Note: We used .44 as the best estimate of p in the
preceding expression. If no information is available
about p, then .5 is often assumed because it provides
the highest possible sample size. If we had used
p = .5, the recommended n would have been 1843.
Slide 57
Slide 58
Example
Slide 59
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Slide 61