Business Statistics

Sampling Distribution

Definition (Population)
A population (universe) is the collection of all members of a
group.

Example
All students of CBS.

Definition (Sample)
A sample is a portion of the population selected for analysis.

Examples
• 50 students of CBS.

Census
Gathering data from the entire population
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Sampling Distribution

Reasons for Sampling

• Sampling can save money.
• Sampling can save time.
• For given resources, sampling can broaden the scope of the
data set.
• Because the research process is sometimes destructive,
the sample can save product.
• If accessing the population is impossible; sampling is the
only option.

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Sampling Distribution

Sampling is Necessary under Certain Conditions

• In order to find the acreage under rice in India by the census
method, each and every plot of land on which rice is grown
within the geographical limits of Indian Union has to be vis-
ited and area under rice cultivation has to be measured.
• The method is quite impracticable, because of enormous
task of visiting the plots and the consequential time and
money involved.

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Sampling Distribution

Sampling is Necessary under Certain Conditions Cont...

• When a new mine is discovered and it is necessary to know
the quality of contents, only a few ounces of ore, drilled out
from here and there, are sufficient for chemical analysis.
• It is impossible and unnecessary to dig out the whole mine
and then examine the quality.

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Sampling Distribution

Definition (Parameter)
A parameter is a numeric quantity, usually unknown, that de-
scribes a certain population characteristic. It is represented by
Greek letters; mean and variance are represented by the Greek
letters µ and σ 2 , respectively.

Example
The true average height of adult human males.

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Definition (Statistic)
A statistic is a quantity, calculated from a sample of data, used
to estimate a parameter. It is represented by Latin letters with
other symbols; the mean and variance are denoted by the x̄ and
s2 , respectively.

Example
The average height of a random sample of 1,000 adult human
males.

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Sampling Distribution

Types of Sampling

Sampling

Random Non-random

Simple Random Systematic Stratified Cluster

Sampling Sampling Sampling Sampling

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Sampling Distribution

Random sampling
• Every unit of the population has the same probability of be-
ing included in the sample
• A chance mechanism is used in the selection process
• Eliminates bias in the selection process

Nonrandom Sampling
• Every unit of the population does not have the same proba-
bility of being included in the sample.
• Open the selection bias
• Not appropriate data collection methods for most statistical
methods

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Sampling Distribution

Simple Random Sampling

• Every individual or item from the population has an equal
chance of being selected
• Selection may be with replacement or without replacement
• Samples obtained from table of random numbers or com-
puter random number generators
• May not be a good representation of the populations under-
lying characteristics

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Sampling Distribution

Systematic Sampling
• Purchase orders for the previous fiscal year are serialized 1
to 10,000 (N = 10,000).
• A sample of fifty (n = 50) purchases orders is needed for an
audit.
• k = 10,000/50 = 200
• First sample element randomly selected from the first 200
purchase orders. Assume the 45th purchase order was se-
lected.
• Subsequent sample elements: 245, 445, 645,....

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Sampling Distribution

Stratified Sampling
• Divide population into two or more subgroups (called strata)
according to some common characteristic
• A simple random sample is selected from each subgroup,
with sample sizes proportional to strata sizes.
• Samples from subgroups are combined into one
• Ensures representation of individuals across the entire pop-
ulation.

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Sampling Distribution

Stratified Sampling
Stratified Random Sample: Population of FM Radio Listeners

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Sampling Distribution

Cluster Sampling
• Population is divided into several clusters, each representa-
tive of the population
• A simple random sample of clusters is selected
• All items in the selected clusters can be used, or items can
be chosen from a cluster using another probability sampling
technique
• cost effective
• Less efficient (need larger sample to acquire the same level
of precision)

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Sampling Distribution

Nonrandom Sampling
• Convenience Sampling: sample elements are selected for
the convenience of the researcher
• Judgment Sampling: sample elements are selected by the
judgment of the researcher
• Quota Sampling: sample elements are selected until the
quota controls are satisfied
• Snowball Sampling: survey subjects are selected based on
referral from other survey respondents

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Sampling Distribution

Types of Survey Errors

• Coverage error or selection bias
Exists if some groups are excluded from the frame and have
no chance of being selected
• Nonresponse error or bias
People who do not respond may be different from those who
do respond
• Sampling error
Variation from sample to sample will always exist
• Measurement error
Due to weaknesses in question design, respondent error,
and interviewers effects on the respondent

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Sampling Distribution

Definition (Sampling Distributions)

• A sampling distribution is a distribution of all of the possible
values of a statistic for a given size sample selected from a
population

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Sampling Distribution

Developing a Sampling Distribution

• Assume there is a population...
• Population size N=4
• Random variable, x, is age of individuals
• Values of X: 18, 20, 22, 24 (years)

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Sampling Distribution

Developing a Sampling Distribution Cont...

• Summary
P Measures for the Population Distribution:
xi
µ=
N
18 + 20 + 22 + 24
= = 21
rP 4
(xi − µ)2
σ= = 2.236
N

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Sampling Distribution

Developing a Sampling Distribution Cont...

• Now consider all possible samples of size n=2

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Sampling Distribution

Developing a Sampling Distribution Cont...

• Summary
P Measures of this Sampling Distribution:
x̄i 18 + 19 + 21 + ... + 24
µx̄ = = = 21
rNP 16
(x̄i − µx̄ )2
σx̄ =
r N
(18 − 21)2 + (19 − 21)2 + ... + (24 − 21)2
= = 1.58
16

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Sampling Distribution

Comparing the Population with its Sampling Distribution

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Sampling Distribution

Definition (Standard Error of the Mean)

• Different samples of the same size from the same popula-
tion will yield different sample means
• If the standard error is small, most of the sample means will
be near the center of population mean.
• Thus a particular sample mean has a good chance of being
close to the population mean, and will be a good estimator
of the population mean.
• Conversely, a large standard error means that the given
sample mean will be a poor estimator of the population
mean.

Remark
The standard error of the mean decreases as the sample size
increases
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Sampling Distribution

Sampling from Normal Populations

• If a population is normal with mean µ and standard de-
viation σ, the sampling distribution of x̄ is also normally
distributed with
µx̄ = µ
σ
σx̄ = √
n

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Sampling Distribution

Sampling Distribution Properties

μX = μ

σ
σX =
n

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Sampling Distribution

Sampling Distribution Properties Cont...

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Sampling Distribution

Sampling from Nonnormal Populations

• Apply Central Limit Theorem.

Theorem (Central Limit Theorem)

If x̄ is the mean of a random sample of size n from a population
with mean of µ and standard deviation of σ, then as n increases
the distribution of x̄ approaches a normal distribution with mean
σ
µx̄ = µ and standard deviation σx̄ = √ .
n

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Sampling Distribution

Distribution of Sample Means for Various Sample Sizes

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Sampling Distribution

Definition (Z-value for Sampling Distribution of the Mean)

Z-value for the sampling distribution of x̄ :
(x̄ − µx̄ ) (x̄ − µx̄ )
z= = σ
σx̄ √
n

Example
Suppose a population has mean µ = 8 and standard deviation
σ = 3. Suppose a random sample of size n = 36 is selected.
What is the probability that the sample mean is between 7.8 and
8.2 ?

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Sampling Distribution

Sampling from a Finite Population

• In this case, the standard deviation of the distribution of
sample means is smaller than when sampling from an in-
finite population
• The correct value of this standard deviation is computed by
applying a finite population multiplier to the standard devia-
tion for sampling from a infinite population.
• If the sample size is less than 5% of the population size, the
adjustment is unnecessary.

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Sampling Distribution

Modified Formulae
r
N−n
• Finite population multiplier =
N−1
• Standardr error of the mean from finite population
σ N−n
σx̄ = √
n N−1
• Modified Z Formula (Finite population),
x̄ − µ
Z= r
σ N−n
√
n N−1

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Sampling Distribution

Definition (Sampling Distribution of Proportion)

• The sample proportion is the percentage of successes in n
binomial trials. It is the number of successes, x, divided by
the number of trials, n.
x
• Sample proportion: p̂ =
n

• Approximately normal if np > 5 and n(1 − p) > 5 (p is the

population proportion)
• As the sample size, n, increases, the sampling distribution
of p̂ approaches a normal distribution with mean p̂ and stan-
dard
r deviation
p(1 − p)
n

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Sampling Distribution

Example
1 Suppose that 25% of all Indian in a given income and
lifestyle category are interested in buying a particular brand
of car. A random sample of 100 Indian consumers in the
category of interest is to be selected. What is the probabil-
ity that at least 20% of those in the sample will express an
interest in that particular brand of car ?
2 Suppose that during any hour in a large department store,
the average number of shoppers is 448, with a standard de-
viation of 21 shoppers. What is the probability that a random
sample of 49 different shopping hours will yield a sample
mean between 441 and 446 shoppers?

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