© 2003 Pearson Prentice Hall

Chapter 7

Inferences Based on a Single Sample:

Estimation with Confidence Intervals

7-1
 Learning Objectives
© 2003 Pearson Prentice Hall

1. State What Is Estimated

2. Distinguish Point & Interval Estimates
3. Explain Interval Estimates
4. Compute Confidence Interval Estimates
for Population Mean & Proportion
5. Compute Sample Size

7-2
 Thinking Challenge
© 2003 Pearson Prentice Hall

Suppose you’re
interested in the
average amount of
money that students
in this class (the
population) have on
them. How would
you find out?

7-3
© 2003 Pearson Prentice Hall

Introduction
to Estimation

7-4
 Statistical Methods
© 2003 Pearson Prentice Hall

Statistical
Statistical
Methods
Methods

Descriptive
Descriptive Inferential
Inferential
Statistics
Statistics Statistics
Statistics

Hypothesis
Hypothesis
Estimation
Estimation Testing
Testing

7-5
 Estimation Process
© 2003 Pearson Prentice Hall

7-6
 Estimation Process
© 2003 Pearson Prentice Hall

Population

Mean, , is
unknown

 
 


 

7-7
 Estimation Process
© 2003 Pearson Prentice Hall

Population Random Sample

Mean 
Mean, , is X= 50
unknown

 
 
Sample


 

7-8
 Estimation Process
© 2003 Pearson Prentice Hall

Population Random Sample

I am 95%
Mean  confident that
Mean, , is X= 50  is between
unknown
 40 & 60.
 
 
Sample


 

7-9
 Unknown Population
Parameters Are
© 2003 Pearson Prentice Hall
Estimated
Estimate Population with Sample
Parameter... Statistic
Mean  x
Proportion p p^
2 2
Variance  s
Differences 1 -  2 x1 -x2
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 Estimation Methods
© 2003 Pearson Prentice Hall

7 - 11
 Estimation Methods
© 2003 Pearson Prentice Hall

Estimation

7 - 12
 Estimation Methods
© 2003 Pearson Prentice Hall

Estimation

Point
Estimation

7 - 13
 Estimation Methods
© 2003 Pearson Prentice Hall

Estimation

Point Interval
Estimation Estimation

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© 2003 Pearson Prentice Hall

Point Estimation

7 - 15
 Estimation Methods
© 2003 Pearson Prentice Hall

Estimation

Point Interval
Estimation Estimation

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 Point Estimation
© 2003 Pearson Prentice Hall

1. Provides Single Value

 Based on Observations from 1 Sample
2. Gives No Information about How Close
Value Is to the Unknown Population
Parameter
3. Example: Sample MeanX = 3 Is Point
Estimate of Unknown Population Mean

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© 2003 Pearson Prentice Hall

Interval Estimation

7 - 18
 Estimation Methods
© 2003 Pearson Prentice Hall

Estimation

Point Interval
Estimation Estimation

7 - 19
 Interval Estimation
© 2003 Pearson Prentice Hall

1. Provides Range of Values

 Based on Observations from 1 Sample

2. Gives Information about Closeness to

Unknown Population Parameter
 Stated in terms of Probability

3. Example: Unknown Population Mean Lies

Between 50 & 70 with 95% Confidence

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 Key Elements of
© 2003 Pearson Prentice Hall
Interval Estimation

7 - 21
 Key Elements of
© 2003 Pearson Prentice Hall
Interval Estimation

Sample statistic

(point estimate)

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 Key Elements of
© 2003 Pearson Prentice Hall
Interval Estimation

Sample statistic
Confidence
interval
(point estimate)

Confidence Confidence
limit (lower) limit (upper)
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 Key Elements of
© 2003 Pearson Prentice Hall
Interval Estimation
A probability that the population parameter
falls somewhere within the interval.

Sample statistic
Confidence
interval
(point estimate)

Confidence Confidence
limit (lower) limit (upper)
7 - 24
 Confidence Limits
for Population Mean
We know the distribution of X-bar (for
large n:
 CLT says it’s normally distributed with
mean Mu)
For any z, look up Pr   X z X 
Equivalent formulations:
  X  z X
 
X    z X ,   z X 
  ( X  z X , X  z X z  X
z  X
 Confidence Depends
© 2003 Pearson Prentice Hall
on Interval (z)

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 Confidence Depends
© 2003 Pearson Prentice Hall
on Interval (z)

x_

X


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 Confidence Depends
© 2003 Pearson Prentice Hall
on Interval (z)
X=  ± Zx
x_

X


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 Confidence Depends
© 2003 Pearson Prentice Hall
on Interval (z)
X=  ± Zx
x_

X
  +1.65x
-1.65x
90% Samples

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 Confidence Depends
© 2003 Pearson Prentice Hall
on Interval (z)
X=  ± Zx
x_

X
  +1.65x
-1.65x -1.96x +1.96x

90% Samples
95% Samples

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 Confidence Depends
© 2003 Pearson Prentice Hall
on Interval (z)
X=  ± Zx
x_

X
-2.58x -1.65x  +1.65x +2.58x
-1.96x +1.96x

90% Samples
95% Samples
99% Samples
7 - 31
 Confidence Level
© 2003 Pearson Prentice Hall

1. Probability that the Unknown

Population Parameter Falls Within
Interval
2. Denoted (1 - 
 Is Probability That Parameter Is Not
Within Interval
3. Typical Values Are 99%, 95%, 90%

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 Intervals &
© 2003 Pearson Prentice Hall
Confidence Level
Sampling x__
Distribution /2 /2
1 - 
of Mean _
X
x = 
Intervals (1 - ) % of
extend from intervals
X - ZX to contain .
X + Z X  % do not.
Intervals derived from
7 - 33 many samples
 Factors Affecting
© 2003 Pearson Prentice Hall
Interval Width
1. Data Dispersion Intervals Extend from
 Measured by  X - ZX toX + ZX
2. Sample Size
—
 X =  / n
3. Level of Confidence
(1 - )
 Affects Z

© 1984-1994 T/Maker Co.

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 Confidence Interval
© 2003 Pearson Prentice Hall
Estimates

7 - 35
 Confidence Interval
© 2003 Pearson Prentice Hall
Estimates
Confidence
Intervals

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 Confidence Interval
© 2003 Pearson Prentice Hall
Estimates
Confidence
Intervals

Mean

7 - 37
 Confidence Interval
© 2003 Pearson Prentice Hall
Estimates
Confidence
Intervals

Mean Proportion

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 Confidence Interval
© 2003 Pearson Prentice Hall
Estimates
Confidence
Intervals

Mean Proportion Variance

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 Confidence Interval
© 2003 Pearson Prentice Hall
Estimates
Confidence
Intervals

Mean Proportion Variance

Known

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 Confidence Interval
© 2003 Pearson Prentice Hall
Estimates
Confidence
Intervals

Mean Proportion Variance

Known  Unknown

7 - 41
© 2003 Pearson Prentice Hall

Confidence Interval
Estimate Mean (
Known)

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 Confidence Interval
© 2003 Pearson Prentice Hall
Estimates
Confidence
Intervals

Mean Proportion Variance

Known  Unknown

7 - 43
 Confidence Interval
© 2003 Pearson Prentice Hall
Mean ( Known)
1. Assumptions
 Population Standard Deviation Is Known
 Population Is Normally Distributed
 If Not Normal, Can Be Approximated by
Normal Distribution (n  30)

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 Confidence Interval
© 2003 Pearson Prentice Hall
Mean ( Known)
 1. Assumptions
 Population Standard Deviation Is Known
 Population Is Normally Distributed
 If Not Normal, Can Be Approximated by
Normal Distribution (n  30)
2. Confidence Interval Estimate
 
X  Z / 2    X  Z  / 2 
n n
7 - 45
 Estimation Example
© 2003 Pearson Prentice Hall
Mean ( Known)
The mean of a random sample of n = 25
isX = 50. Set up a 95% confidence
interval estimate for  if  = 10.

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 Estimation Example
© 2003 Pearson Prentice Hall
Mean ( Known)
The mean of a random sample of n = 25
isX = 50. Set up a 95% confidence
interval estimate for  if  = 10.
 
X  Z / 2    X  Z  / 2 
n n
10 10
50  1.96   50  1.96 
25 25
46.08  53.92

7 - 47
 Thinking Challenge
© 2003 Pearson Prentice Hall

You’re a Q/C inspector for

Gallo. The  for 2-liter
bottles is .05 liters. A
random sample of 100
bottles showedX = 1.99
liters. What is the 90%
confidence interval
estimate of the true mean
22
amount in 2-liter bottles? liter
liter
© 1984-1994 T/Maker Co.

7 - 48
 Confidence Interval
© 2003 Pearson Prentice Hall
Solution*

 
X  Z / 2     X  Z / 2 
n n

.05 .05
1.99  1.645    1.99  1.645 
100 100

1.982   1.998

7 - 49
 Check Your
Understanding
You take a sample
 Compute x-bar and confidence interval of 1.96*sigma around
x-bar
 Is Pr(mu lies in the confidence interval)=.95?
Suppose you take another sample
 Is Pr(x-bar for new sample lies in the first confidence interval)
= .95?
 Is Pr(confidence interval computed from the second sample
contains mu) = .95?
Suppose you combine the two samples
 Will the confidence interval be larger or smaller than the
individual intervals computed?
 Will it be more or less likely to contain mu?
© 2003 Pearson Prentice Hall

Confidence Interval
Estimate Mean (
Unknown)

7 - 51
 Confidence Interval
© 2003 Pearson Prentice Hall
Estimates
Confidence
Intervals

Mean Proportion Variance

Known  Unknown

7 - 52
 Large Samples
© 2003 Pearson Prentice Hall

The sample variance s is a good estimator

of sigma
Carry on as before

7 - 53
 Another Way To
© 2003 Pearson Prentice Hall
Think About It
Define variable X 
X  X 
Z  
X  / n s/ n
X-bar is the sampling distribution of the mean of a sample of
Xs
By the CLT, X-bar is normally distributed
Z is the normalized variable X
 mu= 0 and sigma = 1
Confidence interval
 find z-value associated with desired confidence level alpha
 De-normalize z-value to compute interval around X-bar

7 - 54
 Problem for Small
© 2003 Pearson Prentice Hall
Samples

X may not be normally distributed

s is not a good estimator of  X
n

7 - 55
 Solution for Small
© 2003 Pearson Prentice Hall
Samples
1. Assumptions
 Population of X Is Normally Distributed
2. Use Student’s t Distribution
1. Define variable
X 
T
s/ n
2. T has the Student distribution with n-1 degrees of
freedom (When X is normally distributed)
• There’s a different Student distribution for different degrees of
freedom
• As n gets large, Student distribution approximates a normal
distribution with mean = 0 and sigma = 1

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 Student’s t
© 2003 Pearson Prentice Hall
Distribution

Standard
Normal
Bell-Shaped
t (df = 13)
Symmetric
t (df = 5)
‘Fatter’ Tails

Z
t
0
7 - 57
 Confidence Interval
© 2003 Pearson Prentice Hall
Mean ( Unknown)
Find t-value associated with desired
confidence level alpha Pr T  t / 2,n 1 
X 
T
s/ n
1001    confidence interval is
X  t s s 
  / 2,n  1 , X  t / 2,n 1 
 n n

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 Student’s t Table
© 2003 Pearson Prentice Hall

7 - 59
 Student’s t Table
© 2003 Pearson Prentice Hall

v t.10
.10 t.05
.05 t.025
.025

1 3.078 6.314 12.706

2 1.886 2.920 4.303

3 1.638 2.353 3.182

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 Student’s t Table
© 2003 Pearson Prentice Hall

v t.10
.10 t.05
.05 t.025
.025

1 3.078 6.314 12.706

2 1.886 2.920 4.303

3 1.638 2.353 3.182

t values
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 Student’s t Table
© 2003 Pearson Prentice Hall

/2
v t.10
.10 t.05
.05 t.025
.025

1 3.078 6.314 12.706

2 1.886 2.920 4.303

3 1.638 2.353 3.182 /2

0 t
t values
7 - 62
 Student’s t Table
© 2003 Pearson Prentice Hall

Assume:
/2 n=3
v t.10 t.05 t.025
.10 .05 .025 df = n - 1 = 2
 = .10
1 3.078 6.314 12.706
/2 =.05
2 1.886 2.920 4.303

3 1.638 2.353 3.182 /2

0 t
t values
7 - 63
 Student’s t Table
© 2003 Pearson Prentice Hall

Assume:
/2 n=3
v t.10 t.05 t.025
.10 .05 .025 df = n - 1 = 2
 = .10
1 3.078 6.314 12.706
/2 =.05
2 1.886 2.920 4.303

3 1.638 2.353 3.182 /2

0 t
t values
7 - 64
 Student’s t Table
© 2003 Pearson Prentice Hall

Assume:
/2 n=3
v t.10 t.05 t.025
.10 .05 .025 df = n - 1 = 2
 = .10
1 3.078 6.314 12.706
/2 =.05
2 1.886 2.920 4.303

3 1.638 2.353 3.182 .05

0 t
t values
7 - 65
 Student’s t Table
© 2003 Pearson Prentice Hall

Assume:
/2 n=3
v t.10 t.05 t.025
.10 .05 .025 df = n - 1 = 2
 = .10
1 3.078 6.314 12.706
/2 =.05
2 1.886 2.920 4.303

3 1.638 2.353 3.182 .05

0 t
t values 2.920
7 - 66
 Degrees of Freedom
© 2003 Pearson Prentice Hall
(df)
1. Number of Observations that Are Free to
Vary After Sample Statistic Has Been
Calculated
2. Example degrees of freedom
= n -1
 Sum of 3 Numbers Is 6 = 3 -1
X1 = 1 (or Any Number) =2
X2 = 2 (or Any Number)
X3 = 3 (Cannot Vary)
Sum = 6

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 Estimation Example
© 2003 Pearson Prentice Hall
Mean ( Unknown)
A random sample of n = 25 hasx = 50 &
s = 8. Set up a 95% confidence interval
estimate for .

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 Estimation Example
© 2003 Pearson Prentice Hall
Mean ( Unknown)
A random sample of n = 25 hasx = 50 &
s = 8. Set up a 95% confidence interval
estimate for .
S S
X  t  / 2, n  1     X  t  / 2, n  1 
n n
8 8
50  2.0639     50  2.0639 
25 25
46.69    53.30
7 - 69
 Thinking Challenge
© 2003 Pearson Prentice Hall

You’re a time study

analyst in manufacturing.
You’ve recorded the
following task times (min.):
3.6, 4.2, 4.0, 3.5, 3.8, 3.1 .
What is the 90%
confidence interval
estimate of the population
mean task time?

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 Confidence Interval
© 2003 Pearson Prentice Hall
Solution*
X = 3.7
S = 0.389
n = 6, df = n - 1 = 6 - 1 = 5
S / n = 0.389/ 6 = 0.389/ 2.449 = 0.159
t.05,5 = 2.015
3.7 - (2.015)(0.159) 3.7 + (2.015)(0.159)
3.7 - 0.32 3.7 + 0.32
3.380  4.02
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© 2003 Pearson Prentice Hall

Confidence Interval
Estimate of Proportion

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 Confidence Interval
© 2003 Pearson Prentice Hall
Estimates
Confidence
Intervals

Mean Proportion Variance

Known  Unknown

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 Confidence Interval
© 2003 Pearson Prentice Hall
Proportion

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 Confidence Interval
Proportion of
© 2003 Pearson Prentice Hall
Population
Two Categorical Outcomes
Mean of 0-1 variables, each with prob. p
Normal Approximation Can Be Used
 pq pq 
X  z X , X  z X   p  z , p  z 
 n n 
 pq pq 
 p  z ,pz 
 n n 

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 Confidence Interval
© 2003 Pearson Prentice Hall
Proportion
1. Assumptions
 Two Categorical Outcomes
 Population Follows Binomial Distribution
 Normal Approximation Can Be Used
 ˆ 1  p
p ˆ  Does Not Include 0 or 1
ˆ 3
p ˆ
n
2. Confidence Interval Estimate
 (1  p )
p  (1  p )
p
p  z 2   p  p  z 2 
n n
7 - 76
 Estimation Example
© 2003 Pearson Prentice Hall
Proportion
A random sample of 400 graduates
showed 32 went to grad school. Set up a
95% confidence interval estimate for p.

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 Estimation Example
© 2003 Pearson Prentice Hall
Proportion
A random sample of 400 graduates
showed 32 went to grad school. Set up a
95% confidence interval estimate for p.
 (1  p )
p  (1  p )
p
p  Z  / 2   p  p  Z  / 2 
n n
.08 (1 .08) .08 (1 .08)
.08  1.96   p .08  1.96 
400 400
.053  p .107
7 - 78
 Thinking Challenge
© 2003 Pearson Prentice Hall

You’re a production
manager for a newspaper.
You want to find the %
defective. Of 200
newspapers, 35 had
defects. What is the
90% confidence interval
estimate of the population
proportion defective?

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 Confidence Interval
© 2003 Pearson Prentice Hall
Solution*

 (1  p )
p  (1  p )
p
p  z //22   p  p  z //22 
n n

.175 (.825) .175 (.825)

.175  1.645   p .175  1.645 
200 200

.1308  p .2192

7 - 80
© 2003 Pearson Prentice Hall

Finding Sample Sizes

7 - 81
 Finding Sample
Sizes
© 2003 Pearson Prentice Hall
for Estimating 
I don’t want to
X  Error
(1) Z  sample too much
x x or too little!


(2) Error  Z x  Z
n
2 2
Z 
(3) n
Error 2
Error Is Also Called Bound, B
7 - 82
 Determining Sample
© 2003 Pearson Prentice Hall
Size
Z is determined by desired confidence
level
But how do you determine sigma?

7 - 83
 Determining Sample
© 2003 Pearson Prentice Hall
Size
Z is determined by desired confidence
level
But how do you determine sigma?
 Known from previous studies
 Pilot test on a small n
 Theoretical derivation

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 Sample Size
© 2003 Pearson Prentice Hall
Example
What sample size is needed to be 90%
confident of being correct within  5? A
pilot study suggested that the standard
deviation is 45.

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 Sample Size
© 2003 Pearson Prentice Hall
Example
What sample size is needed to be 90%
confident of being correct within  5? A
pilot study suggested that the standard
deviation is 45.

n
Z 2


1.645 45
2 2 2
219.2 220
Error 2
52

7 - 86
 Thinking Challenge
© 2003 Pearson Prentice Hall

You work in Human

Resources at Merrill Lynch.
You plan to survey employees
to find their average medical
expenses. You want to be
95% confident that the sample
mean is within ± $50.
A pilot study showed that 
was about $400. What
sample size do you use?
7 - 87
 Sample Size
© 2003 Pearson Prentice Hall
Solution*

Z 22 22
n
Error 22



1.96 400
22 22

5022

245.86 246

7 - 88
 Public Opinion Poll
© 2003 Pearson Prentice Hall

You want to know what percentage of the

population supports gay marriage
Within bound plus/minus 4% at 95%
confidence
How large a sample do you need?
Derive a conservative bound on   p1  p 
p(1-p) achieves its maximum at p=.5
 .5
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 Public Opinion Poll
© 2003 Pearson Prentice Hall
Solution*
2 2 2 2 2
z 
1.96 pq 1.96 * .05
n  
2 2 2
B .04 .04
600
Even if p is near .5, 95% confidence interval will
be plus/minus 4 percent
If p is much smaller, will the confidence interval
be larger or smaller? (Hint: try p=.1)

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 Conclusion
© 2003 Pearson Prentice Hall

1. Stated What Is Estimated

2. Distinguished Point & Interval Estimates
3. Explained Interval Estimates
4. Computed Confidence Interval Estimates
for Population Mean & Proportion
5. Computed Sample Size

7 - 91
 End of Chapter

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