Module 4

Statistical Inference: Estimation of Parameters

The used of different samples might lead to different conclusions, and hence, we can’t be certain that the
conclusions derived from the different samples are correct. Statistical inference uses the language of probability
to say how trustworthy these conclusions are. Module 4 introduces the point estimates and confidence intervals
for estimating the value of a population parameter. Estimation of parameters are based on the sampling
distributions of statistics. That is, it uses probability to predict what would happen if we applied the statistical
inference many times.

Lesson 1: Estimation of Parameters Part 1

Estimation of Parameters – involves the estimation of unknown population values (parameters) by the
known sample values (statistic).
Remark: Statistic are used to estimate the unknown parameters.

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Types of Estimation

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I. Point Estimate – consists of a single value used to estimate population parameters.

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II. A confidence – Interval Estimate – consists of an interval of numbers obtained from a point estimate,
together with a percentage specifying how confident we are that the parameters lies in the interval.
Example: Consider the following statement.
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A 95% confidence interval for the mean grade of business students is (1.0, 1.5).
Remark: The number 95% or 0.95 is called the confidence coefficient or the degree of confidence. The end
points (1.0, 1.5) that is 1.0 and 1.5 are respectively called the lower and upper confidence limits.
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The Nature of t-Distribution

Properties of the t-distribution

1. unimodal;
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 2. asymptotic to the horizontal axis;
3. symmetrical about zero;

4. dependent on v, the degrees of freedom (for the statistic under discussion, v=n-1).
5. more variable than the standard normal distribution,

6. approximately standard normal if v is large.

Definition: Degrees of freedom – the number of values that are free to vary after a sample statistic has been
computed, and they tell the researcher which specific curve to use when a distribution consists of a family of
curves.

Example: A study found that the average time it took a person to find a new job was 5.9 months. If a sample of

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36 job seekers was surveyed, find the 99% confidence interval of the true population mean. Assume that the

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standard deviation is 0.8 month.

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 Learning Check
Find the confidence interval estimate of the following problems on estimation of parameters. Then verify
your answer using excel.

1. An independent researcher wishes to estimate the average amount of money a young professional spends in

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clothing each month. A sample of 30 young professional who spend in clothing found the mean to be Php 500
and the standard deviation to be Php 60. Find 95% confidence interval of the population mean.

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2. The following are the IQ test scores of 31 randomly selected business students in a certain university.
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113 99 104 89 102 91 114 114 103 105 106
108 130 120 131 110 127 118 119 87 73
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111 103 74 112 107 103 98 96 112 113

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Estimate the mean IQ score for all business students using the following:
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a. 99% confidence interval

b. 95% confidence interval
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