CHAPTER 6

Estimation
For Single Population

BBBQT1224
Business Statistic
Objectives
• Explain the difference between a
point and an interval estimate.
• Construct and interpret confidence
intervals:
◦ with a z for the population mean or proportion.
◦ with a t for the population mean.
 How to determine a minimum
sample size when estimating a
population proportion.
Point and Interval Estimate
 Estimation is the process of estimating
the value of a parameter from
information obtained from a sample.
 A point estimate is the statistic,
compute from the sample information,
which is used to estimate the
population parameter. The best point
estimate of the population mean 𝜇 is
the sample mean 𝑥.ҧ
Example:
A lecturer wants to estimate the average time taken by
the students to browse internet per day.

Population Population parameter = 𝜇

Sampling

Sample S𝑎𝑚𝑝𝑙𝑒 𝑆𝑡𝑎𝑡𝑖𝑠𝑡𝑖𝑐 = 𝑥ҧ

Based on the sample information, 𝑥ҧ = 4 hours

Thus, we estimate that the true population mean,
𝜇 = 4 hours.
Estimation Process

I am 90% confident
Random Sample that μ is between 70
& 90.
Population Mean
(mean, μ, is X = 80
unknown)

Sample
 Point and Interval Estimates

 A Point Estimate is a single number,

 A Confidence Interval provides additional
information about variability

Lower Upper
Confidence Confidence
Point Estimate Limit
Limit
Width of
confidence interval
Point Estimates

We can estimate a with a Sample

Population Parameter … Statistic
(a Point Estimate)

Mean μ X
Proportion P 𝑃෠
Interval Estimate
of Population Mean
 A confidence interval estimate is a range
or interval of value constructed from
the sample data to include the unknown
population parameter at a specific
parameter.
 The specific probability is call the level of
confidence.
 This estimate may or may not contain
the value of parameter being estimated.
Confidence Intervals
 How much uncertainty is associated with a
point estimate of a population parameter?
 An interval estimate provides more
information about a population characteristic
than does a point estimate
 Such interval estimates are called confidence
intervals

 Stated in terms of level of confidence

 Can never be 100% confident
Confidence Interval for 𝝁
When 𝝈 Is Known
 If the population distribution is normal, the
sampling distribution of the mean is normal.
 If the sample is sufficiently large, regardless of the
shape of the population distribution, the sampling
distribution is normal (Central Limit Theorem).
Constructing a 1 − 𝛼 100% Confidence Interval for 𝜇.
Confidence Interval for
𝜇 = 𝑥ҧ ± 𝑧𝜎𝑥ҧ
Confidence level
= 1 − 𝛼 100%
𝜎
= 𝑥 ± 𝑧𝛼 Significance level =𝛼
2 𝑛
Factors Affecting Confidence Interval Estimates
To construct the interval estimate, there are few
considerations:
a) The standard deviation of the sample mean.
The greater the value of 𝜎𝑥ҧ , the wider the interval to
include 𝜇.
b) The level of confidence, z attached to the interval.
The greater the level of confidence in the interval,
the wider the interval. We need to give a confidence
interval. (Common values: 90%, 95%, 99%)
c) Sample size, 𝑛
A sample size increases, the width of the confidence
interval decreases.
 Confidence Interval Width
sY
Y Z ( )
N
• Confidence Level – Increasing our confidence level
from 95% to 99% means we are less willing to
draw the wrong conclusion – we take a 1% risk
(rather than a 5%) that the specified interval does
not contain the true population mean.
If we reduce our risk of being wrong, then we need
a wider range of values . . . So the interval becomes
less precise.
Confidence Interval Width
Confidence Interval Width

sY
Y Z ( )
N
Standard Deviation – Smaller sample standard
deviations result in smaller, more precise
confidence intervals.
(Unlike sample size and confidence level, the
researcher plays no role in determining the standard
deviation of a sample.)
Example: Sample Size and
Confidence Intervals
Confidence Interval Width
sY
Y Z ( )
N
• Sample Size – Larger samples result in smaller
standard errors, and therefore, in sampling
distributions that are more clustered around the
population mean. A more closely clustered
sampling distribution indicates that our
confidence intervals will be narrower and more
precise.
How to Locate the z-value ?
 Example for 95% confidence, 𝛼 = 0.05

 95% confidence-𝛼 = 1 − 0.95 = 0.05

 Then, search for the 𝑧 −value in the
normal table under
𝑍𝛼 = 𝑍0.05 = 𝑍0.025
2 2
Then,
0.5 − 0.025 = 0.4750
Area under Standard Normal Curve
Critical Values of 𝑧 and
Levels of Confidence
𝟏−𝜶 𝜶 𝒁𝜶
𝟐 𝟐

0.99 0.005 2.576

0.98 0.010 2.326

0.95 0.025 1.960

0.90 0.050 1.645

0.80 0.100 1.282

 Example
 If we take a sample of 100 people and find that they work a mean
of 34 hours per week with a standard deviation of 8 hours, how
do we construct a 95% confidence interval for the mean number
of hours worked by the population?
 We know that 95% of sample means fall in the range:
 - 1.96(/n) to  + 1.96(/n)
 We estimate  using the sample standard deviation, which is 8.
 The sample size (n) is 100. Therefore n = 10.
 Therefore 1.96(/n) = 1.96 x (8 / 10)
= 1.96 x .8
= 1.568
 Therefore there is a 95% likelihood that the sample mean that we
have found is within (about) 1.57 hours of the actual mean.
 And so we can say with 95% confidence that the population’s
mean weekly hours of work will fall somewhere between 34
minus 1.57 and 34 plus 1.57.
 A 95% confidence interval of 32.43 to 35.57 hours per week.
 Finite-Population Correction Factor
 A population that has a fixed upper bound is said to be finite.
 For a finite population, where the total number of objects is N
and the size of the sample is n, the following adjustment is made
to the standard errors of the sample means and the proportion:
 However, if n/N < .05, the finite-population correction factor
may be ignored.

Standard Error of the Standard Error of the

Sample M ean Sample Proportion

 N n p (1  p ) N n
x  p 
n N 1 n N 1

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Confidence Interval Formulas for Estimating Means and
Proportions with Finite Population Correction

C.I. for the Mean ()

s N n
X t
n N 1

C.I. for the Proportion ()

p(1  p) N n
pz
n N 1

22
 Effects on FPC when n/N Changes

Observe that FPC approaches 1 when n/N becomes smaller

23
 Note: What happens if the sample size is
too small for one to safely assume that the
sample mean has a Normal distribution?

 When a sample is small (i.e. less than about 25)

the assumption that the sample mean is normally
distributed is not reasonable.
 In fact, regardless of sample size, the sample
mean can be assumed to have a t-distribution;
the precise shape of a t-distribution depends on
the sample size, and for moderate-to-large
sample sizes the t-distribution is very similar to
the Normal distribution (and, as the sample size
approaches infinity, eventually converges with it).
Confidence Interval Estimates for the Mean

If the the sample size is less than 30 and the

population distribution is known to be normal, or
if the sample size is large and the population
distribution is unknown, a (1-)100% confidence
interval estimate for the population mean, ,
based on sample data is
S
X  t
, n 1 n
2

25
How to Read the
𝑡 −distribution Table ?
 Step 1: Find the value of degree of
freedom for 𝑡 − 𝑠𝑡𝑎𝑡𝑖𝑠𝑡𝑖𝑐 is 𝑛 − 1.
 Step 2: Find the desired 𝛼Τ2.
 Step 3: Refer the 𝑡 −table to find
the value.

Example: Find the value of 𝑡𝑛−1,𝛼Τ2 . Given

that 95% confidence interval, and 𝑛 = 20.
 CI For Mean with FPC - Example
Given in Problem:
There are 250 families in N – 250
Scandia, Pennsylvania. A n – 40
random sample of 40 s - $75
of these families
revealed the mean Since n/N = 40/250 = 0.16, the finite
annual church population correction factor must be
contribution was $450 used.
and the standard The population standard deviation is
not known therefore use the t-
deviation of this was distribution (may use the z-dist since
$75. n>30)
Use the formula below to compute the
Develop a 90 percent confidence interval:
confidence interval for
the population mean.
Interpret the confidence s N n
X t
interval. n N 1
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Confidence Interval for a
Population Proportion
 For estimating 𝑝, a sample is considered large
enough when both 𝑛𝑝 and 𝑛𝑞 are greater than
5.
 The confidence interval for a population
proportion is estimated by:
ෝ𝒒
𝒑 ෝ
ෝ ± 𝒛𝜶
𝒑
𝟐 𝒏

Where the sample proportion 𝑝Ƹ is equal to the number of

successes in the sample, 𝑥, divided by the number of trials
(the sample size), 𝑛, and 𝑞ො = 1 − 𝑝.Ƹ
Example

 Finda 95% confidence interval for p,

the proportion of NCSU students
that strongly favor the current
lottery system for awarding tickets
to football and men’s basketball
games, if a random sample of 1000
students found that 50 strongly favor
the current system.
Example (solution)
Interpreting Confidence Intervals
 Previous example: .05±.014(.036, .064)
 Correct: We are 95% confident that the interval
from .036 to .064 actually does contain the true
value of p. This means that if we were to select many
different samples of size 1000 and construct a 95% CI
from each sample, 95% of the resulting intervals would
contain the value of the population proportion p. (.036,
.064) is one such interval. (Note that 95% refers to the
procedure we used to construct the interval; it does not
refer to the population proportion p)
 Wrong: There is a 95% chance that the population
proportion p falls between .036 and .064. (Note that p is
not random, it is a fixed but unknown number)
Example:
The Union representing the Bottle Blowers of
Armenth (BBA) is considering a proposal to merge
with the Teamster Union. According to BBA union by
laws, at least three-fourths of the union membership
must approve any merger. A random sample of 2,000
current BBA member reveals 1,600 plan to vote for
the merger proposal. What is the estimate of the
population proportion?
Develop a 95% confidence interval for the
population proportion. Basing your decision on
this sample information, can you conclude that
the necessary proportion of BBA members favor
the merger? Why?
Sample Size Estimation
 Estimate the 𝑛 is important to accomplish the
purpose of study.
 There are 3 factors that determine the size of
sample, none of which has any direct relationship
to size of population. They are:
 What is the variation (variance or standard
deviation) of the population in question?
 How close do you want your sample estimate to
be to the unknown parameter? (what is the
desired bound, B)?
 What is the degree of confidence 1 − 𝛼
selected so that the distance between your
estimate and the parameter is less than or equal
to B?
Selecting a Sample Size
A 1 − 𝛼 confidence Interval for 𝜇:
𝜎
𝑥ҧ ± 𝑍𝛼
2 𝑛 Bound, B

Minimum required sample size in estimating the population

mean, 𝜇

(𝑍𝛼ൗ )2 𝜎 2
2
𝑛=
𝐵2
Bound of estimate:
𝜎
𝐵 = 𝑍𝛼
2 𝑛
 Sample Size Determination for a
Variable- Another Example

A consumer group would like to estimate the mean monthly

electricity charge for a single family house in July within $5 using a
99 percent level of confidence. Based on similar studies the
standard deviation is estimated to be $20.00. How large a sample is
required?

2
 (2.58)( 20) 
n   107
 5 

36
To Estimate a Population
Proportion p
 If you desire a C% confidence interval for
a population proportion p with an
accuracy specified by you, how large does
the sample size need to be?

 We will denote the accuracy by B, which

stands for Bound of Estimate.
Selecting a Sample Size
(Population Proportion)
Minimum required sample size in estimating the
population proportion, 𝑝

(𝑍𝛼ൗ )2 𝑝𝑞
2
𝑛=
𝐵2
Bound of estimate:
𝜎
𝐵 = 𝑍𝛼
2 𝑛
 Another Example

The American Kennel Club wanted to estimate the proportion

of children that have a dog as a pet. If the club wanted the
estimate to be within 3% of the population proportion, how
many children would they need to contact? Assume a 95%
level of confidence and that the club estimated that 30% of
the children have a dog as a pet.

2
 1.96 
n  (.30)(. 70)   897
 .03 

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