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Statistics For Economics

The document discusses key concepts related to sampling distributions and the central limit theorem. It defines population parameters and sample statistics, and notes that sample statistics describe the sample while parameters describe the population. It also defines random samples and states that sample statistics like the mean and variance are random variables. The central limit theorem asserts that the distribution of the sample mean approximates a normal distribution for sufficiently large sample sizes. This allows inference about the population parameters based on the sampling distribution of statistics like the mean.

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Anushkaa Gupta
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43 views27 pages

Statistics For Economics

The document discusses key concepts related to sampling distributions and the central limit theorem. It defines population parameters and sample statistics, and notes that sample statistics describe the sample while parameters describe the population. It also defines random samples and states that sample statistics like the mean and variance are random variables. The central limit theorem asserts that the distribution of the sample mean approximates a normal distribution for sufficiently large sample sizes. This allows inference about the population parameters based on the sampling distribution of statistics like the mean.

Uploaded by

Anushkaa Gupta
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Important Concepts

● Population parameters ● Sample Statistic


○ Population Mean ○ Sample Mean
○ Population variance ○ Sample Variance

● Parameters: describe the ● Statistics: describe the sample


population

What do sample statistics tell us about the population parameters?


What is RANDOM?
● Sample (random sample)
● Statistic (statistic is a random variable whose value is determined by the sample data)
○ Sample mean is a random variable.
○ Sample variance is a random variable.

Whenever we have a random variable, we know that there is a probability distribution of the random variable.
What is RANDOM?
● Sample (random sample)
● Statistic (statistic is a random variable whose value is determined by the sample data)
○ Sample mean is a random variable.
○ Sample variance is a random variable.

Whenever we have a random variable, we know that there is a probability distribution of the random variable.

What are we trying to do now?

We are concerned with the probability distributions of certain statistics (sum, sample mean, sample
variance) that arise from a sample.

We are trying to figure out the distribution of these sample statistics!

Thus the topic: Sampling Distributions OR Distributions of sample statistics


What helps us to figure out the probability distribution of the sample statistics?

That’s where the CENTRAL LIMIT THEOREM helps!

Loosely speaking, this theorem asserts that the sum of a large number of independent random
variables has a distribution that is approximately normal.

The central limit theorem can be used to approximate the distribution of the sample mean.
Imp-for sufficiently large n (n>30)
What is the assumption for Xi’s?
If X is binomially distributed
with parameters (n, p), then it
follows from the central limit
theorem that for large n,

the above will


approximately be a
standard normal random
variable.
An instructor knows from past experience that student exam scores have mean 77 and standard deviation 15.
At present the instructor is teaching two separate classes — class 1 of size 25 and the other, class 2 of size
64.

(a) What is the mean and standard error of the sampling distribution of average exam scores of class 1?
(b) Approximate the probability that the average test score in the class of size 25 lies between 72 and 82.
(c) What is the approximate probability that the average test score in the class of size 25 is higher than that
of the class of size 64?
An instructor knows from past experience that student exam scores have mean 77 and standard deviation 15.
At present the instructor is teaching two separate classes — class 1 of size 25 and the other, class 2 of size
64.

(a) What is the mean and standard error of the sampling distribution of average exam scores of class 1?
(b) Approximate the probability that the average test score in the class of size 25 lies between 72 and 82.
(c) What is the approximate probability that the average test score in the class of size 25 is higher than that
of the class of size 64?

n1 = 25 n2 = 64

𝜇 = 77

𝜎 = 15

(77, 9)

(77, 3.52)
(c) The random variable is

The difference of normal random variables will also be normally distributed.


X = X1 + X2 + X3 + ……+ X16

Xi’s are independently and identically distributed.

To find P(X>10)
The amount of time that a certain type of battery functions is a random variable with mean 5 weeks
and standard deviation 1.5 weeks. Upon failure, it is immediately replaced by a new battery.
Approximate the probability that 13 or more batteries will be needed in a year (given that there are
52 weeks in a year).
The amount of time that a certain type of battery functions is a random variable with mean 5 weeks
and standard deviation 1.5 weeks. Upon failure, it is immediately replaced by a new battery.
Approximate the probability that 13 or more batteries will be needed in a year (given that there are
52 weeks in a year).

To find P(X < 52).

E(X) = 60
TRY THEM!

Answer

Answer
Interpreting a Confidence Interval
Interpreting a Confidence Interval

-ROSS, Ch 7
(You can also read the section ‘Interpreting the confidence level’ from Devore Ch7, 7.1)

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