7

Sampling and Sampling

Distributions

Business Statistics:
Communicating with Numbers, 4e

By Sanjiv Jaggia and Alison Kelly

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7-1
Chapter 7 Learning Objectives (LOs)
LO 7.1 Explain common sample biases.
LO 7.2 Describe various sampling methods.
LO 7.3 Describe the sampling distribution of the
sample mean.
LO 7.4 Explain the importance of the central limit
theorem.
LO 7.5 Describe the sampling distribution of the
sample proportion.
LO 7.6 Use a finite population correction factor.
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 7.1 Sampling (1)
• A major portion of statistics is concerned with statistical
inference use to
1. Estimate population parameters
2. Test hypothesis about such parameters
Population parameters – descriptions of a group such as range, var, std
dev., average or percentages.
• Population: all items of interest in a statistical problem
– If we had access to the entire population (census), the parameters
would be known
– Not feasible to gather data on an entire population.
• Sample: subset of the population
– Use the sample statistic to make inferences about the unknown
population parameter such as range, var, std.
– Credibility of statistical inference depends on the quality of the
sample
– The sample/survey should be the representative of the
population

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 7.2 The Sampling Distribution of the Sample Mean

• Parameter - (Population Data)

numerical value that describes the
characteristics of a population
Statistic –(Sample)
numerical value that describes the characteristic
of a sample

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 7.1 Sampling (2)
• Sampling Bias: a sample statistic systematically
overestimates or underestimates a population
parameter.
– Examples: convenience sampling and voluntary response
sampling
– Samples are NOT representative of the population
– Samples NOT typical of the population in a systematic way
– Example, There are 10 people in a room, and you ask if they
prefer grapes or bananas. If you only surveyed the three
females and concluded that the majority of people like grapes,
you'd have demonstrated sampling bias.
– This is called Selection bias.

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 7.1 Sampling (2)
Types of bias
• Selection bias: a systematic underrepresentation of certain
groups in the sample
• Nonresponse bias: systematic difference in preferences
between respondents and non-respondents
– Some respondents refused to participate
– Poor constructed surveys or Simply forgot to return the form
– Results : higher variances for the estimates, as the sample size
ended up smaller than the original target responded.
• Social-desirability bias: tendency to respond in ways that we
feel are more appropriate or socially acceptable to others.
- tendency to answer in ways that make them look good in
the eyes of others, regardless of the accuracy of their answers

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 7.1 Sampling methods
A good sample is representative of the population.
Types of sample that will results in statistically sound
conclusions:
1. Simple Random Sample
– A sample of n observations has the same probability of being selected
as any other sample of n observations
– Most statistical methods presume simple random samples
– Example : names of 25 employees being chosen out of a hat from a
company of 250 employees
2. Stratified Random Sample
– The population is divided up into mutually exclusive and collectively
exhaustive groups called strata such as age, socio economic,
nationality, religion, etc.
– Randomly sample observations from each stratum
– The number of observations are proportional to each stratum’s size
– Guarantees the population subdivisions are represented
– Parameter estimates have greater precision than from simple random
sampling
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 7.1 Sampling Methods
3. Cluster Sampling
– The population is divided up into mutually exclusive and
collectively exhaustive groups called clusters
– Include all observations from randomly selected clusters
– Useful for a population naturally clustered (e.g. geographic
regions)
– Attractive when you cannot list the population
– Provides less precision
– Cheaper than other methods
• Sample data are void of error, if
– Sample are from the correct population
– No biases
– Collected, analyzed and reported the data properly
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Simple random sampling Stratified random Cluster Sampling
sampling
Randomly select Create a groups (strata) Divide the country into
customers who purchased based on ethnicity, groups of stores clusters,
Airpods from all the randomly select randomly select
stores, ask about their customers and ask their customers,
age. age. Ask their age

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 7.2 The Sampling Distribution of the Sample Mean
• Researcher generally interested in the characteristics
of a population (mean, proportion).
• It is important that there is only one population, but
many possible samples of a given size can be drawn
from the population.
• Population parameter is constant, its value may be
unknown
• It is number that describe something about the entire
group or population.
– Describes a characteristic of a normal distribution (mean
and Standard deviation).
– Population mean(𝜇)describes a quantitative variable
– Population proportion(p) describes a qualitative variable
(fraction of the population that has certain characteristics
say fraction of people with curly hair)
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 7.2 The Sampling Distribution of the Sample Mean
• A Statistic is a random variable whose value
depends on the sample
– Describes a characteristic of a sample (one of many
possible samples)
– Sample mean and sample proportion
• The sample mean (𝑿! ) is a random variable whose
value depends on the chosen sample.
– The sample is also called Estimator of the population
mean
" (random variable) is an estimate
– A value of 𝒙
– Estimator or point estimator: a statistic used to
estimate a parameter
– Estimate: a particular value of the estimator
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 7.2 The Sampling Distribution of the Sample Mean
• The sampling distribution of the sample mean 𝑋$ is the
probability distribution derived from all the means that come
from all possible samples of a given size.
– Consider a sample mean derived from n observations
– Another sample mean can be derived from a different sample of n
observations
– Repeat the process a large number of times
– The frequency distribution of the sample means is the sampling
distribution
• Let 𝑿 represent a certain characteristic of a population.
– Population mean 𝐄 𝑿 = 𝝁
– variance 𝐕𝐚𝐫 𝑿 = 𝝈𝟐
) be based on a random sample of n
– Let the sample mean 𝑿
observations

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7.2 Sample Mean: Expected Value & Standard Error
! is the same as the expected
• The expected value of 𝑿
value of 𝑋.
• E 𝑋" = E X = 𝜇
• The average of the sample means is the average of the
population
• The sample mean is unbiased: expected value of an
estimator equals the population parameter
!!
• The variance of 𝑋$ is 𝑉𝑎𝑟 𝑋$ = "
.
• 𝑉𝑎𝑟 𝑋" is less than Var X = 𝜎 "
• Each sample will contain both high and low values that cancel
on another
• The standard deviation of 𝑋$ is the refer to as
!
$
standard error: se 𝑋 =
"
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7.2 Sample Mean: Expected Value & Standard Error
• Example: size of a pizza is normally distributed with a mean of 16
inches and a standard deviation of 0.8 inch. The pizza chefs strive
to make each pizza 16 inches but are not able to make them all 16
inches.
• What are the expected value and standard error of the sample
mean derived from a random sample of 2 pizzas? n = 2
# %.'
E X = 𝜇; se 𝑋" = ; E 𝑋" = 16 and se 𝑋" = = 0.57
$ "
• What are the expected value and standard error of the sample
mean derived from a random sample of 4 pizzas?
%.'
" "
E 𝑋 = 16 and se 𝑋 = = 0.40
(
• Compare the expected value and the standard error of the sample
mean with those of an individual pizza.
– The expected values are the same
– The standard errors of n = 4 is lower than when n = 2 This result
confirms that averaging reduces variability.
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 7.2 Sampling from a Normal Population
• Let 𝑋 be normally distributed with expected value 𝜇 and
standard deviation 𝜎.
• For any sample size 𝑛, 𝑿" is also normally distributed
!
with expected value 𝝁 and standard error se 𝑋$ = "
̅
$%&
• Any value can be transformed into 𝑧 = !⁄ ".
• Example: the size of pizzas is normally distributed with a
mean of 16 inches and a standard deviation of 0.8 inch.
a. What is the probability that a randomly selected pizza is
less than 15.5 inches? P(𝑋$ <15.5) =
b. What is the probability that the average of 2 randomly
selected pizzas is less than 15.5 inches?
c. What is the probability that the average of 4 randomly
selected pizzas is less than 15.5 inches?
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 7.2 Sampling from a Normal Population
• Example continued: mean of 16 inches and a standard deviation of 0.8
inch
"#.#%"&
a. 𝑃 𝑋+ < 15.5 = 𝑃 𝑍 < = 𝑃 𝑍 < −0.63 = 0.2643 *look at z table
'.(
"#.#%"&
b. 𝑃 𝑋+ < 15.5 = 𝑃 𝑍 < !.# = 𝑃 𝑍 < −0.88 = 0.1894
) $
"#.#%"&
c. 𝑃 𝑋+ < 15.5 = 𝑃 𝑍 < !.# = 𝑃 𝑍 < −1.25 = 0.1056
) %

Since the population is

̅
$%&
• 𝑧= !⁄ "
normally distributed, the
sampling distribution of
the sample mean is also
normally distributed. This
is shows in the shapes

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 7.2 Central Limit Theorem for the Sample Mean

• For making statistical inferences, it is essential that the sampling

distribution of 𝑋" is normally distributed.
• What if the underlying population is NOTt normally distributed?
• The Central Limit Theorem (CLT) states that the sum or the
average of a large number of independent observations from the
same underlying distribution has an approximate normal
distribution. (𝑛 ≥ 30).
• The approximation steadily improves as the number of
observations increases.
• As a sample increases, the mean of the distribution approaches a
normal distribution and variability decreases
• Population non-normal; 𝑋" ≈ normal if n large (𝑛 ≥ 30).
#
• Note E 𝑋" = E X = 𝜇 and se 𝑋" =
$
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 7.2 The Sampling Distribution of the
Sample Mean (11)
• Example: recall the promotion in the introductory case
– Before promotion: Customers spent an average of $4.18 on iced
coffee with a standard deviation of $0.84
– After promotion: Based on 50 customers, the average amount spent
is $4.26
– If the coffee chain chose not to pursue the marketing campaign, how
likely is it that customers will spend an average of $4.26 or more on
iced coffee?
(.*+%(.,-
$
• 𝑃 𝑋 ≥ 4.26 = 𝑃 𝑍 ≥ !.#$
. %!

= 𝑃 𝑍 ≥ 0.67 = 1 − .7486 = 0.2514

• It is quite plausible that in a sample of 50 customers, the
sample mean is $4.26 or more
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 7.2 The Sampling Distribution of the
Sample Mean (12)
• Example continued

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Review of Sample Distribution of the
Sample Means

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The Sampling Distribution of the
Sample Proportion

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7.3 The Sampling Distribution of the Sample Proportion
• In many business applications, we are concerned with the
population proportion 𝑝.
Example: banker interested in the probability of mortgage holder;
CHED concerns proportion on cases on COVID 19 to determine
face to face classes.

• Recall that the binomial distribution describes the number of

successes 𝑋 in 𝑛 trials of a Bernoulli process where 𝑝 is the
probability of success.
)
• Use the sample proportion 𝑃" = (no. of successes X / sample
$
size), so the Expected Value :
• 𝑬 𝑷 ? = 𝑝; sample proportion is unbiased

𝒑(𝟏-𝒑)
? =
• 𝒔𝒆 𝑷
𝒏
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 Expected Value and Std Deviation of
Sample Proportion
• Expected Value :
–𝑬 𝑷! = 𝑝; sample proportion
• Standard Deviation (Standard error)
𝒑(𝟏=𝒑)
! =
– 𝒔𝒆 𝑷
𝒏
!
• By the CLT, the sampling distribution of 𝑷
is approximately normal when 𝒏 ∗ 𝒑 ≥ 𝟓
and 𝒏 ∗ (𝟏 − 𝒑) ≥ 𝟓.

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 7.3 The Sampling Distribution of the
Sample Proportion
• Example: a study found that 55% of British
firms experienced a cyber-attack in the past
year.
a. What are the expected value and the
standard error of the sample proportion
derived from a random sample of 100
firms?
𝑝 = 0.55 and 𝑛 = 100
• 𝐸 𝑃+ = 0.55
'.##("%'.##)
• 𝑠𝑒 𝑃+ = = 0.0497
"''

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 7.3 The Sampling Distribution of the
Sample Proportion
b. What are the expected value and the standard error of the
sample proportion derived from a random sample of 200
firms?
𝑝 = 0.55 and 𝑛 = 200
– 𝐸 𝑃$ = 0.55
/.00(,%/.00)
– 𝑠𝑒 𝑃$ = *//
= 0.0352

c. Comment on the value of the standard error as the sample

size gets larger.

𝑛 = 100; se = 0.0497 while 𝑛 = 200; se = 0.035

As the sample size gets larger, the standard error gets smaller
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 7.3 The Central Limit Theorem for the
Sample Proportion
• By the CLT, the sampling distribution of 𝑃! is
approximately normal.
– As the the proportion deviates from p=0.50, we
need a larger sample size for the approximation
– The approximation is justified when 𝒏 ∗ 𝒑 ≥ 𝟓
and 𝒏 ∗ 𝟏 − 𝒑 ≥ 𝟓
– Example: 40(0.65) = 26 > 5 or 40(1-0.65)=14 > 5

• Transform 𝑃! into its corresponding z value

𝑝̅ − 𝑝
𝑧=
𝑝(1 − 𝑝)
𝑛
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 7.3 The Central Limit Theorem for the
Sample Proportion

Sampling distribution of 𝑃3 Sampling distribution of 𝑃3

when the population proportion when the population proportion
is p = 0.10, n= 20 does not is p = 0.30, bell-shaped with
resemble the bell shape of the n=100, normal because
normal distribution since the approximation condition is
approx. condition is not satisfied.
satisfied.
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 7.3 The Central Limit Theorem for the
Sample Proportion
• Example: recall the promotion in the introductory
case. Before promotion: 43% of the customers
were women and 21% were teenage girls
a. If Camila chose not to pursue the promotion, how
likely is it that 46% or more of iced-coffee
customers are women?

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 7.3 The Central Limit Theorem for the
Sample Proportion
• Example continued
• If Camila chose not to pursue the promotion, how likely is it
that 46% or more of iced-coffee customers are women?
a. 𝑝 = 0.43, we find 𝑃 𝑃$ ≥ 0.46 =
0.46 − 0.43
𝑃 𝑍 ≥= = 𝑃 𝑍 ≥ 0.43 = 1 − 0.6664
0.43(1 − 0.43)
50
= 0.3336

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 7.3 The Central Limit Theorem for the
Sample Proportion
• Example continued
• If Camila chose not to pursue the promotion, how likely is it
that 34% or more of iced-coffee customers teenage girls?
b. 𝑝 = 0.21, we find 𝑃 𝑃$ ≥ 0.34 =
0.34 − 0.21
𝑃 𝑍 ≥= = 𝑃 𝑍 ≥ 2.26 = 1 − 0.9881
0.21(1 − 0.21)
50
= 0.0119

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 7.4 The Finite Population
Correction Factor
• One implicit assumption is that the sample size n is
much smaller than the population size N.
• If the sample size is large relative to the population
size, 𝑛 ≥ 0.05𝑁, then the standard errors must be
multiplied by a correction factor called:
• Finite population correction factor
– Accounts for the added precision gained by sampling a
larger percentage of the population
– Used to reduce the sampling variation of the
mean/proportion (formula on the next slide)
– Always less than one when N is large relative to n,
factor is close to 1
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 7.4 The Finite Population
Correction Factor (2)
• If the sample size is large relative to the population
size, 𝒏 ≥ 𝟎. 𝟎𝟓𝑵 (n is more than 5% of N), the finite
population correction factor is used.
• This applied to both the sample mean and proportion
! 5%"
– Mean: 𝑠𝑒 𝑋$ =
" 5%,

6(,%6) 5%"
– Proportion : 𝑠𝑒 𝑃$ = " 5%,
• Transform 𝑋+ to z according with these standard
errors.

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 7.4 The Finite Population Correction
Factor (FPCF)– Sample Mean (𝑋) !
• Example: a large class with 340 students has been divided
up into 10 groups. Connie is in a group of 34 students that
averaged 72 on the midterm. The class average was 73
with a standard deviation of 10.
a. Calculate the expected value and the standard error of the
sample mean based on a random sample of 34 students.
– 𝐸 𝑋+ = 𝜇 = 73. 𝑁 = 340, 𝑛 = 34 and 𝜎 = 10 (5% of N = 17,
therefore applied FPCF)
, .%- "' /0'%/0
– 𝑆𝐸 𝑋+ = = = 1.6294.
- .%" /0 /0'%"
"'
– Note : without the correct factor, SE is higher at = 1.7150
/0
b. How likely is it that a random sample of 34 students will
average 72 or lower?
𝑥̅ − 𝜇 72 − 73
𝑧= 𝑃 𝑋̅ ≤ 72 = 𝑃 𝑍 ≤ = 𝑃 𝑍 ≤ −0.61 = 0.2709
𝜎⁄ 𝑛 1.6294
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 7.4 The Finite Population Correction
Factor – Sample Proportion (𝑷)
• Example: A random sample of 80 households is taken from
a small island community with 1000 households. The home
ownership rate on the island is 65%.
a. Calculate the expected value and the standard error of the
sample proportion.
– 𝐸 𝑃+ = 𝑝 = 0.65, 𝑁 = 1000, 𝑛 = 80
1("%1) .%- '.&#("%'.&#) "'''%('
– 𝑠𝑒 𝑃+ = = = 0.0512
- .%" (' "'''%"
b. What is the probability that the sample proportion is within
0.02 of the population proportion?
0.63 − 0.65 0.66 − 0.65
𝑃 0.63 ≤ 𝑃$ < 0.67 = 𝑃 ≤𝑍≤
0.0512 0.0512
= 𝑃 −0.39 ≤ 𝑍 ≤ 0.39 = 0.6517 − 0.3483 = 0.3108
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 BUSINESSCopyright
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