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Interval Estimation

This document discusses interval estimation and how to calculate confidence intervals for a single population mean and proportion when the population standard deviation is known or unknown. It provides examples of calculating 95% and 99% confidence intervals for mean grocery purchases, commute times, and the proportion of street vendors impacted by local bylaws.

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55 views2 pages

Interval Estimation

This document discusses interval estimation and how to calculate confidence intervals for a single population mean and proportion when the population standard deviation is known or unknown. It provides examples of calculating 95% and 99% confidence intervals for mean grocery purchases, commute times, and the proportion of street vendors impacted by local bylaws.

Uploaded by

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

An interval estimate is a range of values defined around a sample statistic. The population
parameter is expected to lie within this interval with a specified level of confidence (or probability).
It is therefore called a confidence interval. It is written as (L; U) where L is the lower limit and U is the
upper limit.

For example (5; 9) means we are confident that the true population parameter lies between 5 and 9.

7.4 Confidence Interval for a single population mean ( μ) when the population standard deviation (
σ ) is known.
Example 7.1

A survey of a random sample of 300 grocery shoppers in Kimberley found that the mean value of
their grocery purchases was R78. Assume that the population standard deviation of grocery
purchase values is R21. Find the 95% confidence limits for the average value of a grocery purchase
by all grocery shoppers in Kimberley.

μ=x ¿

The 95% Confidence interval is therefore (R____; R__) This means there is a 95% chance that the
true mean value of all grocery purchases by grocery shoppers in Kimberley lies between
_________and _________.

A Note on Precision of a Confidence Interval

 The width of a confidence interval is a measure of its precision. The narrower the confidence
interval, the more precise is the interval estimate and vice versa.
 The width of a confidence interval is influenced by its margin of error which is determined by
1. The specified confidence level,
2. The sample size,
3. The population standard deviation.

Example 7.2

From a random sample of 100 Cape Town car commuters, the sample mean time to commute to
work daily was found to be 35.8 minutes. Assume that the population standard deviation is 11
minutes and that commuting times are normally distributed.

(a) Set the 99% confidence limits for the actual mean time taken by all car commuters in Cape
Town to travel to work daily.
x¿
Answer = _______________________________________

This means there a 99% chance that a Cape Town car commuter takes, on average, between _____
minutes and _______ minutes to travel to work daily.

Z score for 90% confidence interval =1.645, 95% Confidence Interval =1.960, 99%Confidence
interval=2.58.
NB: Note that we have so far assumed that the population standard deviation is known. If the
population standard deviation is unknown and needs to be estimated from the sample standard
deviation, s, then the t-distribution is used to derive the limits for the confidence level.

μ=x ¿

Example: 7.5

Jed Home stores analyzed the value of purchases made on credit card by a random sample of 25 of
their credit card customers. The sample mean was found to be R170 with a sample standard
deviation of R22. Assume credit purchase values are normally distributed and construct a 99%
confidence interval for the actual mean value of credit card purchases by all their credit card
customers.
__________________________________________________________________________________

7.9 Confidence Interval for a single population proportion ( π )

A recent survey amongst 240 randomly selected street vendors in Johannesburg showed that 84 of
them felt that local by-laws still hampered their trading. Find the 95% confidence interval for the
true proportion, π , of all JHB street vendors who believe that local by-laws still hamper their trading.

p−z
√ p(1− p)
n
≤ π ≤ p+ z
√
p(1− p)
n

There is a 90% chance that the true percentage of all JHB street vendors who feel that the local by-
laws still hamper their trading lies between _____% and ______%.

Z score for 90% confidence interval =1.645, 95% Confidence Interval =1.960, 99%Confidence
interval=2.58.

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