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CONFIDENCE INTERVAL

and
INTERVAL ESTIMATION
APRIL ANDREA M. VALERA
2016
Statistical Inference

StatisticalInference is a procedure
whereby, on the basis of observed data in
a particular sample, we generalize and
draw conclusions about the population
from which the sample is drawn.
Statistical Inference

Object of Explain
study: Parameters
Population , , etc

Infer
Recourse:
a sample Collect data; compute Statistics
x , s, etc
Example: Time Survey Report

Question: In the Time survey report, the parameter of


interest is the proportion p in the entire adult
Do you favor or oppose a tax of U.S. population who favor a tax of $1 on a
$1 on a pack of cigarettes? pack of cigarettes. The value 63%, or 0.63, is a
Favor Oppose point estimate of p based on a sample of 800
63% 32% adult individuals.
From a poll of 800 adult Americans The statement also says that the sampling
taken by Time/CNN
Sampling error is 3.5%
error (also called margin of error) was 3.5%, or
0.035. This way of presenting the results by
giving a point estimate and the margin of error
is the method of interval estimation.
Estimation

The methodology of computing the value of a


statistic from a sample in order to provide an
approximated answer to the value of a parameter
with certain degree of reliability is called estimation.
The statistic used for this purpose is called an
estimator.
The computed value of the estimator based on a
set of sample data is called an estimate.
Two Types of Estimates:

1. Point estimate: single numerical value calculated


from the sample data;
2. Interval estimate: interval for which we can assert
with a reasonable degree of certainty that it will
contain the parameter. Also called Confidence
Interval (CI).
Two Types of Estimates:

1. Point estimate:
Point estimate
for textbooks

2. Interval estimate:
Point estimate + / - Margin of error


Point estimate
Margin of error Margin of error

Interval estimate
Margin of Error and the Interval Estimate

The general form of an interval estimate of a


population mean is

Mean +/- Margin of Error


Point Estimate for Population

A point estimate is a single value estimate for a


population parameter. The most unbiased
point estimate of the population mean, , is the
sample mean, x.
The point estimate for the population mean of
textbooks in the bookstore is $74.22.
Point Estimate

Point estimate

Point estimate
for textbooks

74.22

How confident do we want to be that the interval estimate


contains the population mean, ?
Interval Estimate

An interval estimate is an interval, or range of


values, used to estimate a population
parameter.
Point estimate
for textbooks

74.22

interval estimate
How confident do we want to be that the interval estimate
contains the population mean, ?
Level of Confidence
The level of confidence c is the probability that the
interval estimate contains the population parameter.

c is the area beneath


c the normal curve
between the critical
values.
1 1
(1 c) (1 c)
2 2
z
zc z=0 zc
Use the Standard
Critical values Normal Table to find the
corresponding z-scores.

The remaining area in the tails is 1 c .


Level of confidence

C z-score of C
90% 1.645
95% 1.96
99% 2.575
Margin of Error

The difference between the point estimate and the actual population
parameter value is called the sampling error.
When is estimated, the sampling error is the difference x . Since
is usually unknown, the maximum value for the error can be calculated
using the level of confidence.
Given a level of confidence, the margin of error (sometimes called the
maximum error of estimate or error tolerance) E is the greatest possible
distance between the point estimate and the value of the parameter it
is estimating.
Margin of Error

Formula for Margin of Error : E

E z c x z c
n
When n 30, the sample
standard deviation, s,
can be used for .
Example:
A random sample of 32 textbook prices
(rounded to the nearest dollar) is taken from a
local college bookstore.

34 34 38 45 45 45 45 54
56 65 65 66 67 67 68 74
79 86 87 87 87 88 90 90
94 95 96 98 98 101 110 121
Margin of Error
Example:
A random sample of 32 textbook prices is taken from a local
college bookstore. The mean of the sample is x = 74.22,
and the sample standard deviation is s = 23.44.
Use a 95% confidence level and find the margin of error for
the mean price of all textbooks in the bookstore.

E zc 1.96
23.44 Since n 30, s can be
substituted for .
n 32
8.12
We are 95% confident that the margin of error for the
population mean (all the textbooks in the bookstore) is
about $8.12.
Confidence Intervals for

A c-confidence interval for the population


mean is

xE xE
The probability that the confidence interval
contains is c.
Example ( Known):

A random sample of 32 textbook prices is taken


from a local college bookstore. The mean of
the sample is x = 74.22, the sample standard
deviation is s = 23.44, and the margin of error is
E = 8.12.
Construct a 95% confidence interval for the
mean price of all textbooks in the bookstore.
Confidence Intervals for

Example continued:
Construct a 95% confidence interval for the mean
price of all textbooks in the bookstore.
x = 74.22 s = 23.44 E = 8.12
Left endpoint = ? Right endpoint = ?

x =
74.22
x E 74.22 8.12 x E 74.22 8.12
= 66.1 = 82.34
With 95% confidence we can say that the cost for all textbooks
in the bookstore is between $66.10 and $82.34.
Confidence
Intervals for
( Known)
Interval Estimate of
Known

x z /2
n
where: X-bar 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
Finding Confidence Intervals for
Finding a Confidence Interval for a Population Mean
(n 30 or known with a normally distributed population)
In Words In Symbols
1. Find the sample statistics n and x . x
x
n
2. Specify , if known. Otherwise, if n 30, ( x x )2
find the sample standard deviation s and s
n 1
use it as an estimate for .
3. Find the critical value zc that corresponds Use the Standard
Normal Table.
to the given level of confidence.
E zc
4. Find the margin of error E. n
Left endpoint: x E
5. Find the left and right endpoints Right endpoint: x E
and form the confidence interval. Interval: x E x E
Confidence Intervals for ( Known)
Example:
A random sample of 25 students had a grade
point average with a mean of 2.86. Past studies
have shown that the standard deviation is 0.15
and the population is normally distributed.
Construct a 90% confidence interval for the
population mean grade point average.
Confidence Intervals for ( Known)

E z c 1.645 0.15
n 25

n = 25 x = 2.86 = 0.15
zc = 1.645 0.05
x E 2.86 0.05 2.81 < < 2.91

With 90% confidence we can say that the mean grade


point average for all students in the population is between
2.81 and 2.91.
Confidence
Intervals for
( Unknown)
Confidence Intervals for ( Unknown)
o If an estimate of the population standard
deviation ()cannot be developed prior to
sampling, we use the sample standard
deviation (s)to estimate .
o This is the unknown case.
o In this case, the interval estimate for is based
on the t distribution.
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.
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.
t Distribution
t distribution
Standard (20 degrees
normal of freedom)
distribution

t distribution
(10 degrees
of freedom)

z, t
0
t Distribution

For more than 100 degrees of freedom, the standard Standard normal
normal z value provides a good approximation to z values
the t value.
The standard normal z values can be found in the
infinite degrees row of the t distribution table.
Interval Estimate of
Unknown
s
x t /2
n
where: X-bar is the sample mean
1 - is the confidence coefficient
t/2 is the t value providing an area of
/2 in the upper tail of a t distribution
with n-1 degrees of freedom
s is the sample standard deviation
n is the sample size
Example ( Unknown):

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.
Let us provide 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.
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.
Confidence Intervals for ( Known)
s
x t.025
n
x = 750

55 t = 2.131
2.131 n = 16
16 s = 55

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.
Finding Confidence Intervals for
Constructing a Confidence Interval for the Mean:
t-Distribution
In Words In Symbols
1. Identify the sample statistics n, x, x
x ( x x )2
n s
and s. n 1

2. Identify the degrees of freedom, d.f. = n 1


the level of confidence c, and
the critical value tc.
3. Find the margin of error E. E tc s
n
4. Find the left and right endpoints Left endpoint: x E
and form the confidence Right endpoint: x E
interval. Interval: x E x E
Confidence Intervals for ( Unknown)
Example:
In a random sample of 20 customers at a local
fast food restaurant, the mean waiting time to
order is 95 seconds, and the standard deviation is
21 seconds. Assume the wait times are normally
distributed and construct a 90% confidence
interval for the mean wait time of all customers.
Constructing a Confidence Interval
E tc s
n
x 95 n = 20 s = 21
21 8.1
d.f. = 19 tc = 1.729 1.729
20
x E = 95 8.1 86.9 < < 103.1

We are 90% confident that the mean wait time for


all customers is between 86.9 and 103.1 seconds.
Summary of Interval Estimation Procedures
for a Population Mean

If: Yes
Can the No If:
is known population standard is unknown
s given and n deviation s be assumed s given but n
is more than 30 known ? is LESS than 30
Use the sample
standard deviation
s Known s to estimate
Case
Use Use
s Unknown s
x z /2 Case x t /2
n n
Known or Unknown?

Population Standard Dev - Sample Standard Dev. - s


The population standard The sample standard
deviation deviation
Based on the census Based on the survey
Historical data The respondents
Estimate / assume the
standard deviation
Sample Problem

Problem 1: Problem 2:
In order to ensure efficient usage of a We have the following data from 10
server, it is necessary to estimate the randomly selected CS students:
mean number of concurrent users. X = $249 and S = $30. Assume that the
According to records, the sample amount spent on books by CS students
mean and sample standard devia- is normally distributed. Compute a 95%
tion of number of concurrent users at confidence interval for .
100 randomly selected times is 37.7
and 9.2, respectively.
Construct a 90% confidence interval
for the mean number of concurrent
users.
Sample Problem

Problem 1: Z Problem 2: T
Mean = 37.7 Mean = 249
Std. Dev = 9.2 Std. Dev = 30
n = 100 n = 10
Confidence Level = 90% Confidence Level = 95%
Critical Value = 1.645 Critical Value = 2.262
Sample Problem

Problem 1: Z Problem 2: T
Mean - E < < Mean + E Mean - E < < Mean + E

37.7 1.51 < < 37.7 + 1.51 249 - 21.46 < < 249 + 21.46

36.19 < < 39.21 227.54 < < 270.46