Chapter 9

Sampling Distributions

1
Sampling Distributions…
A sampling distribution is created by, as the name suggests,
sampling.
The method we will employ on the rules of probability and
the laws of expected value and variance to derive the
sampling distribution.

The sampling distribution of the sample mean is a

probability distribution consisting of all possible sample
means of a given sample size selected from a population.

For example, consider the roll of one and two dice…

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Sampling Distribution of the Mean…
A fair die is thrown infinitely many times,
with the random variable X = # of spots on any throw.

The probability distribution of X is:

x 1 2 3 4 5 6
P(x) 1/6 1/6 1/6 1/6 1/6 1/6

…and the mean and variance are calculated as well:

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Sampling Distribution of Two Dice
A sampling distribution is created by looking at
all samples of size n=2 (i.e. two dice) and their means…

While there are 36 possible samples of size 2, there are only

11 values for , and some (e.g. =3.5) occur more
frequently than others (e.g. =1).
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Sampling Distribution of Two Dice…
The sampling distribution of is shown below:
6/36
P( )
1.0 1/36 5/36
1.5 2/36
2.0 3/36
4/36
)
2.5 4/36
3.0 5/36
P(

3.5 6/36 3/36

4.0 5/36
4.5 4/36 2/36
5.0 3/36
5.5 2/36
6.0 1/36 1/36

1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0

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Compare…
Compare the distribution of X…

1 2 3 4 5 6 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0

…with the sampling distribution of .

As well, note that:

6
Generalize…
We can generalize the mean and variance of the sampling of
two dice:

…to n-dice:
The standard deviation of the
sampling distribution is
called the standard error:

7
Central Limit Theorem…
The sampling distribution of the mean of a random sample
drawn from any population is approximately normal for a
sufficiently large sample size.

The larger the sample size, the more closely the sampling
distribution of X will resemble a normal distribution.

8
Central Limit Theorem…
If the population is normal, then X is normally distributed
for all values of n.

If the population is non-normal, then X is approximately

normal only for larger values of n.

In most practical situations, a sample size of 30 may be

sufficiently large to allow us to use the normal distribution
as an approximation for the sampling distribution of X.

9
Sampling Distribution of the Sample Mean
1.

2.

3. If X is normal, X is normal. If X is nonnormal, X is

approximately normal for sufficiently large sample sizes.
Note: the definition of “sufficiently large” depends on the
extent of nonnormality of x (e.g. heavily skewed;
multimodal)

10
Sampling Distribution of the Sample Mean
We can express the sampling distribution of the mean simple
as

X−µ
Z=
σ/ n

11
Sampling Distribution of the Sample Mean
The summaries above assume that the population is infinitely
large. However if the population is finite the standard error is
σ N−n
σx =
n N −1

where N is the population size and

N−n
N −1

is the finite population correction factor.

12
Sampling Distribution of the Sample Mean
If the population size is large relative to the sample size the
finite population correction factor is close to 1 and can be
ignored.

We will treat any population that is at least 20 times larger than

the sample size as large.

In practice most applications involve populations that qualify

as large.

As a consequence the finite population correction factor is

usually omitted.
13
Example 9.1(a)…
The foreman of a bottling plant has observed that the amount
of soda in each “32-ounce” bottle is actually a normally
distributed random variable, with a mean of 32.2 ounces and
a standard deviation of .3 ounce.

If a customer buys one bottle, what is the probability that the

bottle will contain more than 32 ounces?

14
 Example 9.1(a)…
We want to find P(X > 32), where X is normally distributed
and µ = 32.2 and σ =.3
 X − µ 32 − 32.2 
P(X > 32) = P >  = P( Z > − .67) = 1 − .2514 = .7486
 σ .3 

“there is about a 75% chance that a single bottle of soda

contains more than 32oz.”

15
Example 9.1(b)…
The foreman of a bottling plant has observed that the amount
of soda in each “32-ounce” bottle is actually a normally
distributed random variable, with a mean of 32.2 ounces and
a standard deviation of .3 ounce.

If a customer buys a carton of four bottles, what is the

probability that the mean amount of the four bottles will be
greater than 32 ounces?

16
Example 9.1(b)…
We want to find P(X > 32), where X is normally distributed
With µ = 32.2 and σ =.3

Things we know:
1) X is normally distributed, therefore so will X.

2) = 32.2 oz.

3)

17
Example 9.1(b)…
If a customer buys a carton of four bottles, what is the
probability that the mean amount of the four bottles will be
greater than 32 ounces?

“There is about a 91% chance the mean of the four bottles

will exceed 32oz.”

18
Graphically Speaking…
mean=32.2

what is the probability that one bottle will what is the probability that the mean of
contain more than 32 ounces? four bottles will exceed 32 oz?

19
Chapter-Opening Example
Salaries of a Business School’s Graduates
In the advertisements for a large university, the dean of
the School of Business claims that the average salary
of the school’s graduates one year after graduation is
$800 per week with a standard deviation of $100.

A second-year student in the business school who has

just completed his statistics course would like to check
whether the claim about the mean is correct.

20
Chapter-Opening Example
Salaries of a Business School’s Graduates
He does a survey of 25 people who graduated one year ago
and determines their weekly salary.

He discovers the sample mean to be $750.

To interpret his finding he needs to calculate the probability

that a sample of 25 graduates would have a mean of $750 or
less when the population mean is $800 and the standard
deviation is $100.

After calculating the probability, he needs to draw some

conclusions.
21
Chapter-Opening Example
We want to find the probability that the sample mean is less
than $750. Thus, we seek

P( X < 750)
The distribution of X, the weekly income, is likely to be
positively skewed, but not sufficiently so to make the
distribution of X nonnormal. As a result, we may assume that X
is normal with mean
µ x = µ = 800

and standard deviation

σ x = σ / n = 100 / 25 = 20

22
Chapter-Opening Example
Thus,

P( X < 750)
 X − µx 750 − 800 
= P < 

 σ x 20 
= P( Z < − 2.5)
= .5 − .4938
= .0062
The probability of observing a sample mean as low as $750 when
the population mean is $800 is extremely small. Because this event
is quite unlikely, we would have to conclude that the dean's claim is
not justified.

23
Using the Sampling Distribution for Inference
Here’s another way of expressing the probability calculated from a
sampling distribution.
P(-1.96 < Z < 1.96) = .95
Substituting the formula for the sampling distribution

X−µ
P(−1.96 < < 1.96) = .95
σ/ n

With a little algebra

σ σ
P(µ − 1.96 < X < µ + 1.96 ) = .95
n n

24
Using the Sampling Distribution for Inference
Returning to the chapter-opening example where µ = 800, σ = 100,
and n = 25, we compute
100 100
P(800 − 1.96 < X < 800 + 1.96 ) = .95
25 25

or

P(760.8 < X < 839.2) = .95

This tells us that there is a 95% probability that a sample mean will
fall between 760.8 and 839.2. Because the sample mean was
computed to be $750, we would have to conclude that the dean's
claim is not supported by the statistic.
25
Using the Sampling Distribution for Inference
Changing the probability from .95 to .90 changes the probability
statement to
σ σ
P(µ − 1.645 < X < µ + 1.645 ) = .90
n n

26
Using the Sampling Distribution for Inference
We can also produce a general form of this statement

σ σ
P(µ − z α / 2 < X < µ + zα / 2 ) =1− α
n n
In this formula α (Greek letter alpha) is the probability that
does not fall into the interval.

To apply this formula all we need do is substitute the values for

µ, σ, n, and α.

27
Using the Sampling Distribution for Inference
For example, with µ = 800, σ = 100, n = 25 and α= .01, we
produce
σ σ
P(µ − z .005 < X < µ + z .005 ) = 1 − .01
n n

100 100
P(800 − 2.575 < X < 800 + 2.575 ) = .99
25 25

P(748.5 < X < 851.5) = .99

28
Sampling Distribution of a Proportion…
The estimator of a population proportion of successes is the
sample proportion. That is, we count the number of
successes in a sample and compute:

(read this as “p-hat”).

X is the number of successes, n is the sample size.

29
Sampling Distribution of a Sample Proportion…

30
Example 9.2
In the last election a state representative received 52% of the
votes cast.

One year after the election the representative organized a

survey that asked a random sample of 300 people whether
they would vote for him in the next election.

If we assume that his popularity has not changed what is the

probability that more than half of the sample would vote for
him?

31
Example 9.2
The number of respondents who would vote for the representative
is a binomial random variable with n = 300 and p = .52.

We want to determine the probability that the sample proportion is

greater than 50%. That is, we want to find

P(P̂ > .50)

We now know that the sample proportion P̂ is approximately

normally distributed with mean p = .52 and standard deviation

p(1 − p) / n = (.52)(1 − .52) / 300 = .0288

32
Example 9.2
Thus, we calculate

P(P̂ > .50)

 P̂ − p .50 − . 52 
= P > 
 p(1 − p) / n . 0288 
 
= P( Z > − .69)
= .7549

If we assume that the level of support remains at 52%, the

probability that more than half the sample of 300 people
would vote for the representative is 75.49%.
33
Sampling Distribution: Difference of two means
The final sampling distribution introduced is that of the
difference between two sample means. This requires:

independent random samples be drawn from each of two

normal populations

If this condition is met, then the sampling distribution of the

difference between the two sample means, i.e.
will be normally distributed.
(note: if the two populations are not both normally
distributed, but the sample sizes are “large” (>30), the
distribution of is approximately normal)

34
Sampling Distribution: Difference of two means
The expected value and variance of the sampling
distribution of are given by:

mean:

standard deviation:

(also called the standard error if the difference between two

means)
35
Example 9.3…
Since the distribution of is normal and has a

mean of

and a standard deviation of

We can compute Z (standard normal random variable) in this

way:

36
Example 9.3…
Starting salaries for MBA grads at two universities are
normally distributed with the following means and standard
deviations. Samples from each school are taken…
University 1 University 2
Mean 62,000 $/yr 60,000 $/yr
Std. Dev. 14,500 $/yr 18,300 $/yr
sample size n 50 60

What is the probability that the sample mean starting salary of

University #1 graduates will exceed that of the #2 grads?

37
Example 9.3…
“What is the probability that the sample mean starting salary
of University #1 graduates will exceed that of the #2 grads?”

We are interested in determinging P(X1 > X2). Converting

this to a difference of means, what is: P(X1 – X2 > 0) ?

= 1 – P(Z< -0.64) = 1- 0.2611

= 0.7389

Z
“there is about a 74% chance
that the sample mean starting salary of U. #1 grads will
exceed that of U. #2”
38
From Here to Inference
In Chapters 7 and 8 we introduced probability distributions,
which allowed us to make probability statements about
values of the random variable.

A prerequisite of this calculation is knowledge of the

distribution and the relevant parameters.

39
From Here to Inference
In Example 7.9, we needed to know that the probability that
Pat Statsdud guesses the correct answer is 20% (p = .2) and
that the number of correct answers (successes) in 10
questions (trials) is a binomial random variable.

We then could compute the probability of any number of

successes.

40
From Here to Inference
In Example 8.2, we needed to know that the return on
investment is normally distributed with a mean of 10% and a
standard deviation of 5%.

These three bits of information allowed us to calculate the

probability of various values of the random variable.

41
From Here to Inference
The figure below symbolically represents the use of
probability distributions.

Simply put, knowledge of the population and its

parameter(s) allows us to use the probability distribution to
make probability statements about individual members of the
population.

Probability Distribution ---------- Individual

42
From Here to Inference
In this chapter we developed the sampling distribution,
wherein knowledge of the parameter(s) and some
information about the distribution allow us to make
probability statements about a sample statistic.

Population Sampling distribution

----- Statistic
& Parameter( s )

43
From Here to Inference
Statistical works by reversing the direction of the flow of
knowledge in the previous figure. The next figure displays
the character of statistical inference.

Starting in Chapter 10, we will assume that most population

parameters are unknown. The statistics practitioner will
sample from the population and compute the required
statistic. The sampling distribution of that statistic will
enable us to draw inferences about the parameter.

44
From Here to Inference

Sampling distribution
Statistic ------ Parameter

45
 Chapter 10

Introduction to Estimation

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Where we have been…
Chapters 7 and 8:
Binomial, Uniform, and Normal distributions allow us to
make probability statements about X (a member of the
population).

To do so we need the population parameters.

Binomial: p
Uniform: a and b
Normal: µ and σ
Where we have been…
Chapter 9:
Sampling distributions allow us to make probability
statements about statistics.

We need the population parameters.

Sample mean: µ and σ
Sample proportion: p
Difference between sample means: µ 1,σ1 ,µ 2, and σ2
Where we are going…
However, in almost all realistic situations parameters are
unknown.

We will use the sampling distribution to draw inferences

about the unknown population parameters.
Where we are going…
Inference generally involves one of two tasks:
–Providing an estimate of a parameter, with the appropriate
confidence interval;
OR
–Testing to see if there is statistical evidence that an estimated
statistic is similar to or different from an hypothesized value

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Statistical Inference…
Statistical inference is the process by which we acquire
information and draw conclusions about populations from
samples.
Statistics

Data Information

Population

Sample

Inference

Statistic
Parameter

In order to do inference, we require the skills and knowledge of descriptive statistics,

probability distributions, and sampling distributions.

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Estimation…
There are two types of inference: estimation and hypothesis
testing; estimation is introduced first.

The objective of estimation is to determine the approximate

value of a population parameter on the basis of a sample
statistic.

E.g., the sample mean ( ) is employed to estimate the

population mean ( ).

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Types of Statistics
We make inference about three types of statistics:
1.The Mean
2.The Variance
3.A Proportion of the data that meets some qualitative requirement

Further, we can make these inferences on lone populations

or comparing two populations

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Estimation…
The objective of estimation is to determine the approximate
value of a population parameter on the basis of a sample
statistic.

There are two types of estimators:

Point Estimator

Interval Estimator

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Point Estimator…
A point estimator draws inferences about a population by
estimating the value of an unknown parameter using a single
value or point.

Drawbacks to using point estimators

We saw earlier that point probabilities in continuous
distributions were virtually zero. Likewise, we’d expect that
the point estimator gets closer to the parameter value with an
increased sample size, but point estimators don’t reflect the
effects of larger sample sizes. Hence we will employ the
interval estimator to estimate population parameters…
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Interval Estimator…
An interval estimator draws inferences about a population
by estimating the value of an unknown parameter using an
interval.

That is we say (with some ___% certainty) that the

population parameter of interest is between some lower and
upper bounds.

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Point & Interval Estimation…
For example, suppose we want to estimate the mean summer
income of a class of business students. For n = 25 students,
is calculated to be 400 $/week.

point estimate interval estimate

An alternative statement is:

The mean income is between 380 and 420 $/week.

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Qualities of Estimators…
Qualities desirable in estimators include unbiasedness,
consistency, and relative efficiency:

An unbiased estimator of a population parameter is an

estimator whose expected value is equal to that parameter.

An unbiased estimator is said to be consistent if the difference

between the estimator and the parameter grows smaller as
the sample size grows larger.

If there are two unbiased estimators of a parameter, the one

whose variance is smaller is said to be relatively efficient.
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 Types of Estimates
The table summarizes some of the estimation we will be learning over the next few
chapters
Population Estimator
Variable
Parameter (Statistic)
Mean µ X
Standard Deviation σ s
Difference of Means µ1 − µ 2 X1 − X 2
Ratio of Variances σ12 σ22 s12 s22
Proportion p P̂
Difference of
Proportions p1 − p2 Pˆ1 − Pˆ2

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Unbiased Estimators…
An unbiased estimator of a population parameter is an
estimator whose expected value is equal to that parameter.

E.g. the sample mean X is an unbiased estimator of the

population mean µ , since:

E(X) = µ

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Unbiased Estimators…
An unbiased estimator of a population parameter is an
estimator whose expected value is equal to that parameter.

E.g. the sample median is an unbiased estimator of the

population mean µ since:

E(Sample median) = µ

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Consistency…
An unbiased estimator is said to be consistent if the
difference between the estimator and the parameter grows
smaller as the sample size grows larger.

E.g. X is a consistent estimator of µ because:

V(X) is σ2/n

That is, as n grows larger, the variance of X grows smaller.

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Consistency…
An unbiased estimator is said to be consistent if the
difference between the estimator and the parameter grows
smaller as the sample size grows larger.

E.g. Sample median is a consistent estimator of µ because:

V(Sample median) is 1.57σ2/n

That is, as n grows larger, the variance of the sample median

grows smaller.

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Relative Efficiency…
If there are two unbiased estimators of a parameter, the one
whose variance is smaller is said to be relatively efficient.

E.g. both the the sample median and sample mean are
unbiased estimators of the population mean, however, the
sample median has a greater variance than the sample mean,
so we choose since it is relatively efficient when
compared to the sample median.

Thus, the sample mean is the “best” estimator of a

population mean µ.

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 Interval Estimate of the Mean

With Known Standard Deviation

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 Estimating μ when σ is known…

Known, i.e.
Known, i.e. sample mean
standard normal
Unknown, i.e. we
distribution
want to estimate
the population
mean

Known, i.e. its

assumed we know Known, i.e. the
the population number of items
standard sampled
deviation…

66
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Estimating when is known…
In Chapter 8 we produced the following general probability
statement about X
P( − Z α / 2 < Z < Z α / 2 ) = 1 − α

And from Chapter 9 the sampling distribution of X is

approximately normal with mean µ and standard deviation σ / n

Thus
X −µ
Z=
σ/ n

is (approximately) standard normally distributed.

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Estimating when is known…
Thus, substituting Z we produce
x −µ
P(− z α / 2 < < zα / 2 ) = 1 − α
σ/ n
In Chapter 9 (with a little bit of algebra) we expressed the following
 σ σ 
P µ − z α / 2 < x < µ + zα / 2  =1− α
 n n

With a little bit of different algebra we have

 σ σ 
P x − z α / 2 < µ < x + zα / 2  =1− α
 n n

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Estimating µ when σ is known…
This
 σ σ 
P x − z α / 2 < µ < x + zα / 2  =1− α
 n n

is still a probability statement about x.

However, the statement is also a confidence interval estimator of µ

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Estimating when is known…
The interval can also be expressed as

 σ 
Lower confidence limit =  x − zα / 2 
 n 
 σ 
Upper confidence limit =  x + z α / 2 
 n 

The probability 1 – α is the confidence level, which is a measure of

how frequently the interval will actually include µ.

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Confidence Interval Estimator for μ :
The probability 1– is called the confidence level.
Usually represented upper confidence
with a “plus/minus” ( limit (UCL)
± ) sign

lower confidence limit

(LCL)

width

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Interpreting Confidence Intervals
• The Confidence Level (1-α) is a probability
• (1-α) is the probability that the interval contains the true
mean
• Therefore a confidence interval is a probability statement
•the probability of the CI not containing the true mean is α
• Standard Confidence Intervals are on the next slide

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Confidence Intervals

Confidence Total Each Critical

Level Tails Tail Value
1-α α α/2
α/ Zα/2
90% = .90 .10 .05 1.645
95% = .95 .05 .025 1.96
98% = .98 .02 .01 2.33
99% = .99 .01 .005 2.57
99.5% = .995 .005 .0025 2.81

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Example 10.1…
The Doll Computer Company makes its own computers and
delivers them directly to customers who order them via the
Internet.

To achieve its objective of speed, Doll makes each of its five

most popular computers and transports them to warehouses
from which it generally takes 1 day to deliver a computer to
the customer.

This strategy requires high levels of inventory that add

considerably to the cost.

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Example 10.1…
To lower these costs the operations manager wants to use an
inventory model. He notes demand during lead time is
normally distributed and he needs to know the mean to
compute the optimum inventory level.

He observes 25 lead time periods and records the demand

during each period. Xm10-01

The manager would like a 95% confidence interval estimate

of the mean demand during lead time. Assume that the
manager knows that the standard deviation is 75 computers.

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Example 10.1…
235 374 309 499 253
421 361 514 462 369
394 439 348 344 330
261 374 302 466 535
386 316 296 332 334

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Example 10.1…
“We want to estimate the mean demand over lead time with
95% confidence in order to set inventory levels…”

IDENTIFY

Thus, the parameter to be estimated is the population mean:µ

And so our confidence interval estimator will be:

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Example 10.1… COMPUTE

In order to use our confidence interval estimator, we need the

following pieces of data:

370.16 Calculated from the data…

1.96

75
Given
n 25

therefore:

The lower and upper confidence limits are 340.76 and 399.56.

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Example 10.1 Using Excel COMPUTE

By using the Data Analysis Plus™ toolset, on the Xm10-01

file, we get the same answer with less effort…
Click Add-In > Data Analysis Plus > Z-Estimate: Mean

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Example 10.1

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Example 10.1… INTERPRET

The estimation for the mean demand during lead time lies
between 340.76 and 399.56 — we can use this as input in
developing an inventory policy.

That is, we estimated that the mean demand during lead time
falls between 340.76 and 399.56, and this type of estimator
is correct 95% of the time. That also means that 5% of the
time the estimator will be incorrect.

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Interval Width…
A wide interval provides little information.
For example, suppose we estimate with 95% confidence that
an accountant’s average starting salary is between $15,000
and $100,000.

Contrast this with: a 95% confidence interval estimate of

starting salaries between $42,000 and $45,000.

The second estimate is much narrower, providing accounting

students more precise information about starting salaries.

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Interval Width…
The width of the confidence interval estimate is a function of
the confidence level, the population standard deviation, and
the sample size…

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Interval Width…
The width of the confidence interval estimate is a function of
the confidence level, the population standard deviation, and
the sample size…

A larger confidence level

produces a w i d e r
confidence interval.

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Interval Width…
The width of the confidence interval estimate is a function of
the confidence level, the population standard deviation, and
the sample size…

Larger values of σ
produce w i d e r
confidence intervals.

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Interval Width…
The width of the confidence interval estimate is a function of
the confidence level, the population standard deviation, and
the sample size…

Increasing the sample size decreases the width of the

confidence interval while the confidence level can remain
unchanged.

Note: this also increases the cost of obtaining additional data

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 Selecting the Sample Size…
In Chapter 5 we pointed out that sampling error is the
difference between an estimator and a parameter.

We can also define this difference as the error of

estimation.

In this chapter this can be expressed as the difference

between X and µ.
Page 342

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 Selecting the Sample Size…

x−µ
P (− zα / 2 < < zα / 2 ) = 1 − α
σ/ n

P(− zα / 2σ / n < x − µ < zα / 2σ / n ) = 1 − α

σ
Zα / 2
n
σ
Zα / 2
n

2
 z α / 2σ 
n =  
 B 
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 Selecting the Sample Size…
To illustrate suppose that in Example 10.1 before gathering
the data the manager had decided that he needed to estimate
the mean demand during lead time to with 16 units, which is
the bound on the error of estimation.

We also have 1 –α = .95 and σ = 75. We calculate

2 2
 zα / 2σ   (1.96)(75) 
n =   =   = 84.41
 B   16 

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 Selecting the Sample Size…
Because n must be an integer and because we want the
bound on the error of estimation to be no more than 16 any
non-integer value must be rounded up.

Thus, the value of n is rounded to 85, which means that to be

95% confident that the error of estimation will be no larger
than 16, we need to randomly sample 85 lead time intervals.

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