Interval Estimation

Chapter 8

Slide
1
 Overview

Population Mean: s Known

Population Mean: s Unknown

Determining the Sample Size

Population Proportion

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:
s 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 s , or
• the sample standard deviation s
 s is rarely known exactly, but often a good
estimate can be obtained based on historical
data or other information.
 We refer to such cases as the s known case.

Slide
5
Interval Estimate of a Population Mean:
s Known
There is a 1 -  probability that the value of
a z /2  x
sample mean will provide a margin of error of
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:
s Known

Sampling
distribution
of x
1 -  of all
/2 /2
x values
interval
does x

not interval
z /2  x z /2  x
include includes
m [------------------------- x -------------------------] m
[------------------------- x -------------------------]
[------------------------- x -------------------------]
Slide
7
 Interval Estimate of a Population Mean:
s Known
 Interval Estimate of m


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
s is the population standard deviation
n is the sample size

Slide
8
 Interval Estimate of a Population Mean:
s Known
 Values of za/2 for the Most Commonly
Used Confidence Levels

Confidence Table
Level a a/2 Look-up Area
za/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 m.

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: Discount Sounds
Discount Sounds has 260 retail outlets
throughout
the United States. The firm is evaluating a
potential
location for a new outlet, based in part, on the
mean
A sample
annual of of
income size n individuals
the = 36 was taken;
in thethe
sample
marketing
mean
area ofincome is location.
the new $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 Slide
11
estimate is .95.
 Interval Estimate of a Population Mean:
 Known
 Example: Discount Sounds
95% of the sample means that can be observed
x
are within + 1.96 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: Discount Sounds
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
 Example: Discount Sounds

Confidence Margin
Level of Error Interval Estimate
90% 3.29 78.71 to
85.29
95% 3.92 78.08 to
85.92
99% 5.15 76.85 to
87.15
In order to have a higher degree of confidence,
the margin of error and thus the width of the
confidence interval must be larger.

Slide
14
 Interval Estimate of a Population Mean:
s 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
15
 Interval Estimate of a Population Mean:
s 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 1
can be used.

Slide
16
 Interval Estimate of a Population Mean:
s Unknown
 If an estimate of the population standard
deviation s cannot be developed prior to
sampling, we use the sample standard
 deviation
This is thesstounknown s.
estimate case.
 In this case, the interval estimate for m is based
on the t distribution.
 (We’ll assume for now that the population is
normally distributed.)

Slide
17
 t Distribution

William Gosset, writing under the name “Student”,

is the founder of the t distribution.

Gosset was an Oxford graduate in mathematics

and worked for the Guinness Brewery in Dublin.

He developed the t distribution while working on

small-scale materials and temperature experiments

Slide
18
 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
19
 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
20
 t Distribution

t
Standard distribution
normal (20 degrees
distribution of freedom)

t
distribution
(10 degrees
of
freedom)
z, t
0

Slide
21
 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
22
 t Distribution

Degrees Area in Upper Tail

of Freedom .20 .10 .05 .025 .01 .005
. . . . . . .
50 .849 1.299 1.676 2.009 2.403 2.678
60 .848 1.296 1.671 2.000 2.390 2.660
80 .846 1.292 1.664 1.990 2.374 2.639
100 .845 1.290 1.660 1.984 2.364 2.626
 .842 1.282 1.645 1.960 2.326 2.576

Standard
normal
z values
Slide
23
 Interval Estimate of a Population Mean:
s 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
24
 Interval Estimate of a Population Mean:
s 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 one-bedroom apartments within a half-mile
of
Let us provide a 95% confidence interval
campus resulted in a sample mean of $750 per
estimate
month
of the mean rent per month for the population
and a sample standard deviation of $55.
of one-
bedroom efficiency apartments within a half-
mile of
campus. We will assume this population to be Slide
25
 Interval Estimate of a Population Mean:
s 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.
Degrees Area in Upper Tail
of Freedom .20 .100 .050 .025 .010 .005
15 .866 1.341 1.753 2.131 2.602 2.947
16 .865 1.337 1.746 2.120 2.583 2.921
17 .863 1.333 1.740 2.110 2.567 2.898
18 .862 1.330 1.734 2.101 2.520 2.878
19 .861 1.328 1.729 2.093 2.539 2.861
. . . . . . .
Slide
26
 Interval Estimate of a Population Mean:
s 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 mon

for the population of one-bedroom apartments within
a half-mile of campus is between $720.70 and $779.3

27 27
Slide
 Interval Estimate of a Population Mean:
s Unknown
 Adequate Sample Size

In most applications, a sample size of n = 30 is

adequate when using the expression
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
28
 Interval Estimate of a Population Mean:
s 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
29
 Summary of Interval Estimation
Procedures
for a Population Mean
Can the
Yes No
population standard
deviation s be assumed
known ?
Use the sample
standard deviation
s Known s to estimate s
Case
Use Use
 s Unknown s
x z / 2 Case x t / 2
n n

Slide
30
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
31
 Sample Size for an Interval Estimate
of a Population Mean
 Margin of Error

E z /2
n

 Necessary Sample Size

( z / 2 ) 2  2
n
E2

Slide
32
Sample Size for an Interval Estimate
of a Population Mean

The Necessary Sample Size equation requires a

value for the population standard deviation s .

If s is unknown, a preliminary or planning value

for s 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 an

use the sample standard deviation from the stud

3. Use judgment or a “best guess” for the value of

Slide
33
 Sample Size for an Interval Estimate
of a Population Mean
 Example: Discount Sounds
Recall that Discount Sounds is evaluating a
potential location for a new retail outlet, based
in
part, on the mean annual income of the
individuals in
Suppose that Discount Sounds’
the marketing area
management teamof the new location.
wants an estimate of the population mean such
that
there is a .95 probability that the sampling
How large a sample size is needed to meet
error is
the
$500 or less.
required precision?

Slide
34
 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 2
311.17  312
(500)

A sample of size 312 is needed to reach a desired

precision of + $500 at 95% confidence.

Slide
35
 Interval Estimate
of a Population Proportion
The general form of an interval estimate of a
population proportion is
p  Margin of Error

Slide
36
 Interval Estimate
of a Population Proportion

p
The sampling distribution of plays a key role in
computing the margin of error for this interval
estimate.

p
The sampling distribution of can be approximated
by a normal distribution whenever np > 5 and
n(1 – p) > 5.

Slide
37
 Interval Estimate
of a Population Proportion
 Normal Approximation of Sampling Distributionp
of
Sampling p(1 p)
distribution p 
n
of p

/2 1 -  of all /2

p values
p
p
z / 2 p z / 2 p

Slide
38
 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
39
 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
40
 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
41
 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
42
 Sample Size for an Interval Estimate
of a Population Proportion
 Margin of Error

p (1  p )
E z / 2
n

Solving for the necessary sample size, we

get ( z / 2 ) 2 p (1  p )
n
E2
However, p will not be known until after we
have selected the sample. We will use the
planning
p value
p* for .

Slide
43
 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. Slide
44
 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.
How large a sample size is needed to meet
the
required precision? (A previous sample of
similar
units yielded .44 for the sample proportion.)

Slide
45
 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.(z )2 p*(1 p* ) 2
/ 2 (2.576) (.44)(.56)
n 2
 2
 1817
E (.03)

A sample of size 1817 is needed to reach a desired

precision of + .03 at 99% confidence.

Slide
46
 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
47