Estimation

Confidence
Intervals
 Learning Objectives

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
 Thinking Challenge
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?
 Statistical Methods

Statistical
Methods

Descriptive Inferential
Statistics Statistics

Hypothesis
Estimation
Testing
 Estimation Process
Population Random Sample
I am 95%
Mean confident that m
Mean, m, is
`X = 50 is between 40 &
unknown 60.
 Unknown Population
Parameters Are Estimated

Estimate Population with Sample

Parameter... Statistic
Mean m `x
Proportion p p
2
s
2
Variance s
Differences m1 - m2 `x1 -`x2
 Estimator and Estimate
1. The Estimator is a Random Variable
Used to Estimate a Population Parameter
 Sample Mean, Sample Proportion, Sample
Median
 Sample Mean X is an Estimator of Population
Mean m
2. The estimate is the numerical value of
the estimator
 If X = 3 then 3 Is the Estimate of m
 Properties of Mean
 Unbiasedness
 Mean of Sampling Distribution Equals Population
Mean

 Efficiency
 Sample Mean Comes Closer to Population Mean
Than Any Other Unbiased Estimator

 Consistency
 As Sample Size Increases, Variation of Sample Mean
from Population Mean Decreases
 Unbiasedness
P(`X)
Unbiased Biased

A C

`X
mx= mx A mx C
 Efficiency
Sampling
P(`X) Distribution
of Mean
B
Sampling
Distribution
A of Median

`X
mx
 Consistency
Larger
P(`X) Sample
Size
B
Smaller
Sample
A Size

`X
mx
Estimation Methods

Estimation

Point Interval
Estimation Estimation

Confidence Boot- Prediction

Interval strapping Interval
 Point Estimation
 Provides Single Value
 Based on Observations from 1 Sample

 Gives No Information about How

Close Value Is to the Unknown
Population Parameter
 Sample Mean`X = 3 Is Point Estimate
of Unknown Population Mean
Estimation Methods

Estimation

Point Interval
Estimation Estimation

Confidence Boot- Prediction

Interval strapping Interval
 Interval Estimation
 Provides Range of Values
 Based on Observations from 1 Sample

 Gives Information about Closeness to

Unknown Population Parameter
 Stated in terms of Probability
– Knowing Exact Closeness Requires
Knowing Unknown Population Parameter

 e.g., Unknown Population Mean Lies

Between 50 & 70 with 95%
Confidence
 Key Elements of
Interval Estimation
A Probability That the Population Parameter Falls
Somewhere Within the Interval.
Sample Statistic
Confidence Interval
(Point Estimate)

Confidence Limit Confidence Limit

(Lower) (Upper)
 Confidence Limits
for Population Mean
Parameter =
Statistic ± Error (1) m  X  Error
(2) Error  X - m or X  m
X -m Error
(3) Z 
sx sx
(4) Error  Zs x
(5) m  X  Zs x
© 1984-1994 T/Maker Co.
 Many Samples Have Same
Confidence Interval

X = m ± Zs`x
sx_

`X
m-2.58s`x m-1.65s`x m m+1.65s`x m+2.58s`x
m-1.96s`x m+1.96s`x

90% Samples
95% Samples
99% Samples
 Level of Confidence
 Probability that the Unknown
Population Parameter Falls Within
Interval
 Denoted (1 - a) %
a Is Probability That Parameter Is Not
Within Interval
 Typical Values Are 99%, 95%, 90%
 Intervals &
Level of Confidence
s_
Sampling x
Distribution a/2 1-a a/2
of Mean _
X
m =m
x
Intervals (1 - a) % of
Extend from Intervals
`X - Zs`X to Contain m .
`X + Zs`X a % Do Not.

Large Number of Intervals

 Factors Affecting
Interval Width
 Data Dispersion Intervals Extend from
 Measured by s `X - Zs`X to`X + Zs`X

 Sample Size
 sx = s / n
 Level of Confidence
(1 - a)
 Affects Z
© 1984-1994 T/Maker Co.
Confidence Interval Estimates

Confidence
Intervals

Mean Proportion Variance

Finite
s Known s Unknown
Population
 Confidence Interval Estimate
Mean (sX Known)

 Assumptions
 Population Standard Deviation Is Known
 Population Is Normally Distributed
 If Not Normal, Can Be Approximated by
Normal Distribution (n  30)
 Confidence Interval Estimate
s s
X - Za / 2   m  X  Za / 2 
n n
 Estimation Example
Mean (sX Known)
The mean of a random sample of n = 25 is`X =
50. Set up a 95% confidence interval estimate
for mX if s = 10.
s s
X- Z   m X Z 
n n

10 10
50 - 196
.   m  50  196
. 
25 25
46.08  m  53.92
 Thinking Challenge
You’re a Q/C inspector
for Gallo. The s 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 amount in 2-liter 2 liter
bottles?
© 1984-1994 T/Maker Co.
 Confidence Interval
Solution*

s s
X- Z   m X Z 
n n

.05 .05
. - 1645
199 .   m  199
.  1645
. 
100 100

1982
.  m  1998
.
Confidence Interval Estimates

Confidence
Intervals

Mean Proportion Variance

Finite
sx Known sx Unknown
Population
 Confidence Interval Estimate
Mean (s Unknown)
 Assumptions
 Population Standard Deviation Is Unknown
 Population Must Be Normally Distributed
 n<30 (See comment)

 Use Student’s t Distribution

 Confidence Interval Estimate
S S
X - t   m  X  t 
n n
 Student’s t Distribution
Standard
Normal
Bell-Shaped
t (df = 13)
Symmetric
‘Fatter’ Tails t (df = 5)

Z
t
0
 Student’s t Table
Assume:
a n=3
Area in Both Tails df = n - 1 = 2
a = .10
df .50 .20 .10 a/2 =.05

1 1.000 3.078 6.314

.05
2 0.817 1.886 2.920 .05
3 0.765 1.638 2.353
0 t
t Values 2.920
 Degrees of Freedom (df)
 Number of Observations that Are
Free to Vary After Sample Statistic
Has Been Calculated degrees of freedom
 Example = n -1
= 3 -1
 Sumof 3 Numbers Is 6 =2
X1 = 1 (or Any Number)
X2 = 2 (or Any Number)
X3 = 3 (Cannot Vary)
Sum = 6
 Estimation Example
Mean (sX Unknown)
A random sample of n = 25 has`X = 50
& S = 8. Set up a 95% confidence
interval estimate for m.
S S
X -t   m  X t 
n n
8 8
50 - 2.064   m  50  2.064 
25 25
46.69  m  53.30
 Thinking Challenge

 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?
 Confidence Interval Solution*
S S
X -t   m  X t 
n n
 X = (3.6+4.2+4.0+3.5+3.8+3.1)/6 = 3.7
 S = .38987
 n = 6, df = n -1 = 6 -1 = 5
 Sx=S / n = 3.8987 / 6 = .1592
 t.05,5 = 2.0150
 3.7 - (2.015)(.1592)  m  3.7 + (2.015)(.1592)
 3.38  m  4.02
 Computer Printout
De scriptives

St atis tic St d. Error

MINUTES Mean 3. 700 .159
90% Confidence Lower
3. 379
Int erval for Mean Bound
Upper
4. 021
Bound
5% Trimmed Mean
3. 706

Median 3. 700
Variance .152
St d. Deviation
.390

Minimum 3. 1
Maximum 4. 2
Range 1. 1
Int erquartile Range
.650

Sk ewness -.364 .845

Kurtos is -.130 1. 741
Confidence Interval Estimates

Confidence
Intervals

Mean Proportion Variance

Finite
sx Known sx Unknown
Population
 Estimation for
Finite Populations
 Assumptions
 Sample Is Large Relative to Population
– n / N > .05

 Use Finite Population Correction Factor

 Confidence Interval (Mean, s Unknown)

S N-n S N-n
X - t    m  X t  
n N -1 n N -1
Confidence Interval Estimates

Confidence
Intervals

Mean Proportion Variance

Finite
sx Known sx Unknown
Population
 Confidence Interval Estimate
Proportion
 Assumptions
 Two Categorical Outcomes
 Population Follows Binomial Distribution
 Normal Approximation Can Be Used
– n·p  5 & n·(1 - p)  5

 Confidence Interval Estimate

p  (1 - p ) p  (1 - p )
p -Z  p  p Z
n n
 Estimation Example
Proportion
A random sample of 400 graduates
showed 32 went to grad school. Set up a
95% confidence interval estimate for p.

p  (1 - p ) p  (1 - p )
p - Za / 2   p  p  Za / 2 
n n
.08  (1-.08 ) .08  (1-.08 )
.08 - 196
.   p  .08  196
. 
400 400
.053  p  .107
 Thinking Challenge
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?
 Confidence Interval
Solution*

n·p  5
n·(1 - p)  5
p  (1 - p ) p  (1 - p )
p - Za / 2   p  p  Za / 2 
n n

.175  (.825) .175  (.825)

.175 - 1645
.   p  .175  1645
. 
200 200

.1308  p  .2192
 Confidence Interval of the
Difference between Two Means
• Two independent samples
• Two large samples - both samples >= 30
• Population standard deviations are unknown
• Answer finds the interval:

 u1 - u2 
 Confidence Interval of the
Difference between Two Means
n1 n 2
s x1 - x2
 
s1 s 2
2 2

where
(x - x )  z  s
1 2 x1 - x2
 Example 6.3, Page 283

Sample 1 Sample 2

x1 = $76 x2 = $65
s1 = $25 s2 = $22
n1 = 100 n2 = 100
 n1 n2 Sample 1
s x1 - x2
  2 Sample 2
s1 s
2 2 x1 = $76 x2 = $65
where s1 = $25 s2 = $22
n1 = 100 n2 = 100
( x1 - x )  z  s
2 x1 - x2

(25) 2 (22) 2
sx1 )- x 2    3.33
100 100

(76 - 65)  3(3.33)  11  9.99

$1  u1 - u2  $21
Confidence Interval of the Difference
between Two Proportions

• Two independent samples

• Two large samples - both samples >= 30
• Answer finds the interval:

 p1 - p2 
Confidence Interval of the Difference
between Two Proportions

p - p ) z  s
1 2 p1 - p 2

where
p1 q1 p 2 q 2
sp -p  
1 2
n1 n2
Selecting a Sample Size
 Selecting a Sample Size
 The Degree of Confidence
Selected
 The Maximum Allowable Error
 The Population Standard
Deviation
 Finding Sample Sizes
I don’t want to
X - mx Error sample too much
(1) Z  or too little!
sx sx
sx
(2) Error  Zs x  Z
n
2
Z sx
2
(3) n 2
Error
 Sample Size for Means

 z s   z s 
2 2 2

n   
 E 2
  E 
E is the allowable error
z is the z score associated with degree of confidence
s is the population standard deviation
The marketing manager
would like to estimate the
population mean annual
usage of home heating oil
to within 50 gallons of the
true value and desires to be 95% confident of
correctly estimating the true mean. Based on a
previous study taken last year,the marketing
manager feels that the standard deviation can be
estimated as 325 gallons. What is the sample
size need to obtain these results?
 Confidence = 95% z = 1.96
E = 50
s = 325

196
. ) (325)
2
z s
2 2 2
(384
. )(105,625)
n 2  2   162.31
E (50) 2500

 n 163 homes need to be sampled

 Sample Size for Proportions

p  1 - p)  z 2

n 2
E
E is the maximum allowable error
z is the z value associated with the degree of confidence
p is the estimated proportion
A political pollister would like to
estimate the proportion of voters who
will vote for the Democratic candidate
in a presidential campaign. The
pollster would like 95% confidence
that her prediction is correct to within
 .04 of the true proportion. What
sample size is needed?
 Confidence = 95% Z=1.96
E = .04
p = unknown use p = .5

p(1 - P) z .5(1-.5)(196
2
. ) 2

n 2  2  600.25
E (.04)

 n = 601 voters
 Conclusion
 Stated What Is Estimated
 Distinguished Point & Interval Estimates
 Explained Interval Estimates
 Computed Confidence Interval Estimates
for Population Mean & Proportion
 Computed Sample Size