Session 10 & 11 - Estimation
Session 10 & 11 - Estimation
Session 10 & 11 - Estimation
Session 10 & 11
Using Sample Statistics to Estimate
Population Parameters
Source: Black, K. (2010), Business Statistics for Contemporary Decision Making, John Wiley & Sons, p. 252
Point & Interval Estimate
Source: Black, K. (2010), Business Statistics for Contemporary Decision Making, John Wiley & Sons, p. 254
Confidence Interval to estimate µ: σ
known
The more common levels of confidence used by
business researchers are 90%, 95%, 98%, and
99%.
For 95% confidence, α = .05 and α/2 = .025. The
value of or zα/2 of z.025 is found by looking in the
standard normal table under 0.5000 - 0.0250 =
0.4750. This area in the table is associated with
a z value of 1.96.
What does a 95% confidence interval
indicate?
It indicates that, if the company researcher
were to randomly select 100 samples of
size n and use the results of each sample
to construct a 95% confidence interval,
approximately 95 of the 100 intervals
would contain the population mean.
It also indicates that 5% of the intervals
would not contain the population mean.
Exercise
Source: Black, K. (2010), Business Statistics for Contemporary Decision Making, John Wiley & Sons, p. 261
t Distribution
Degrees of freedom refers to the number of
independent observations for a source of variation minus
the number of independent parameters estimated in
computing the variation.
In this case, one independent parameter, the population
mean, µ, is being estimated by in computing s. Thus,
the degrees of freedom formula is n independent
observations minus one independent parameter being
estimated (n - 1).
The degrees of freedom for the t statistic are computed
by n - 1
Looking up the value of t for 90%
confidence
Source: Black, K. (2010), Business Statistics for Contemporary Decision Making, John Wiley & Sons, p. 262
Confidence interval to estimate µ: σ
unknown and population normally
distributed
Exercise
Suppose the following data are selected randomly from a
population of normally distributed values. Construct a
95% confidence interval to estimate the population
mean.
40, 51, 43, 48, 44, 57, 54, 39, 42, 48, 45, 39, 43