Business Statistics:

A Decision-Making Approach
6th Edition

Chapter 6
Introduction to
Sampling Distributions

Fundamentals of Business Statistics – Murali Shanker Chap 6-1

 Chapter Goals

 To use information from the sample to make inference

about the population
 Define the concept of sampling error
 Determine the mean and standard deviation for the sampling
distribution of the sample mean
_
 Describe the Central Limit Theorem and its importance

Fundamentals of Business Statistics – Murali Shanker Chap 6-2

 Sampling Error
Sample Statistics are used to estimate
Population Parameters
ex: X is an estimate of the population mean, μ
 Problems:
 Different samples provide different estimates of
the population parameter
 Sample results have potential variability, thus
sampling error exits

Fundamentals of Business Statistics – Murali Shanker Chap 6-3

 Statistical Sampling
 Parameters are numerical descriptive measures
of populations.
 Statistics are numerical descriptive measures of
samples
 Estimators are sample statistics that are used to
estimate the unknown population parameter.

 Question: How close is our sample statistic to

the true, but unknown, population parameter?

Fundamentals of Business Statistics – Murali Shanker Chap 6-4

 Notations

Parameter Statistic
 ˆ , X, Mode, Median
 ˆ , s 2

p pˆ
ˆ , s

X, 
ˆ, Median, Mode
p̂

Fundamentals of Business Statistics – Murali Shanker Chap 6-5

 Calculating Sampling Error

 Sampling Error:
The difference between a value (a statistic)
computed from a sample and the corresponding
value (a parameter) computed from a population

Example: (for the mean)

Sampling Error  x - μ
where:
x  sample mean
μ  population mean

Fundamentals of Business Statistics – Murali Shanker Chap 6-6

 Example

If the population mean is μ = 98.6 degrees

and a sample of n = 5 temperatures yields a
sample mean of x = 99.2 degrees, then the
sampling error is

Fundamentals of Business Statistics – Murali Shanker Chap 6-7

 Sampling Distribution

A sampling distribution is a distribution

of the possible values of a statistic
for a given sample size n selected
from a population

Fundamentals of Business Statistics – Murali Shanker Chap 6-8

 Sampling Distributions
Objective: To find out how the sample mean X
varies from sample to sample. In other
words, we want to find out the sampling
distribution of the sample mean.

Fundamentals of Business Statistics – Murali Shanker Chap 6-9

 Sampling Distribution
Example
 Assume there is a population …
 Population size N=4
 Random variable, X, A C D
B
is age of individuals
 Values of X: 18, 20,
22, 24 (years)

Fundamentals of Business Statistics – Murali Shanker Chap 6-10

 Developing a
Sampling Distribution (continued)

Summary Measures for the Population Distribution:

μ
 x i P(x)
N .3
18  20  22  24 .2
  21
4 .1
0
σ2 
 i
(x  μ) 2

5 18 20 22 24 x
N A B C D
Uniform Distribution

Fundamentals of Business Statistics – Murali Shanker Chap 6-11

 Developing a
Sampling Distribution (continued)

Now consider all possible samples of size n=2

1st 2nd Observation
Obs 18 20 22 24 16 Sample
18 18,18 18,20 18,22 18,24 Means

20 20,18 20,20 20,22 20,24 1st 2nd Observation

Obs 18 20 22 24
22 22,18 22,20 22,22 22,24
18 18 19 20 21
24 24,18 24,20 24,22 24,24
20 19 20 21 22
16 possible samples
(sampling with
22 20 21 22 23
replacement) 24 21 22 23 24
Fundamentals of Business Statistics – Murali Shanker Chap 6-12
 Developing a
Sampling Distribution (continued)

Sampling Distribution of All Sample Means

16 Sample Means Sample Means

Distribution
1st 2nd Observation
Obs 18 20 22 24 P(x)
.3
18 18 19 20 21
.2
20 19 20 21 22
.1
22 20 21 22 23
0 _
24 21 22 23 24 18 19 20 21 22 23 24 x
Fundamentals of Business Statistics – Murali Shanker (no longer uniform) Chap 6-13
 Developing a
Sampling Distribution (continued)

Summary Measures of this Sampling Distribution:

μx 
 x

18  19  21    24
i
 21
N 16

σx 
2  ( x i  μ x
) 2

N
(18 - 21) 2  (19 - 21) 2    (24 - 21) 2
  2.5
16

Fundamentals of Business Statistics – Murali Shanker Chap 6-14

 Expected Values
EX   P(x)
.3
_

.2
.1
0 _
18 19 20 21 22 23 24 X

 X  2


Fundamentals of Business Statistics – Murali Shanker Chap 6-15

 Comparing the Population with its
Sampling Distribution

Population: N = 4 Sample Means Distribution: n = 2

μ  21 μ x  21
σ 5 2 2
σ x  2.5
_ σ x  1.58
P(x) σ  2.236 P(x)
.3 .3

.2 .2
.1 .1
0
x
0 18 19 20 21 22 23 24
_
18 20 22 24 x
A B C D
Fundamentals of Business Statistics – Murali Shanker Chap 6-16
 Comparing the Population with its
Sampling Distribution

Population: N = 4 Sample Means Distribution: n = 2

μ  21 σ  5 σ  2.236
2 2
μ x  21 σ x  2.5 σ x  1.58

What is the relationship between the variance in the

population and sampling distributions

Fundamentals of Business Statistics – Murali Shanker Chap 6-17

 Empirical Derivation of Sampling Distribution

1. Select a random sample of n observations from a

given population
2. Compute X
3. Repeat steps (1) and (2) a large number of times
4. Construct a relative frequency histogram of the
resulting X

Fundamentals of Business Statistics – Murali Shanker Chap 6-18

 Important Points
1. The mean of the sampling distribution of X is
the same as the mean of the population being
sampled from. That is,
 
E X  X  X  
2. The variance of the sampling distribution of X
is equal to the variance of the population being
sampled from divided by the sample size. That
is,
2
 X2 
n

Fundamentals of Business Statistics – Murali Shanker Chap 6-19

 Imp. Points (Cont.)
3. If the original population is normally
distributed, then for any sample size n the
distribution of the sample mean is also normal.
That is,
 2 
X ~ N  ,   then X ~ N   , 
2

 n 

4. If the distribution of the original population is

not known, but n is sufficiently “large”, the
distribution of the sample mean is
approximately normal with mean and
variance given as X ~ N  ,  n  . This result is
2

known as the central limit theorem (CLT).

Fundamentals of Business Statistics – Murali Shanker Chap 6-20

 Standardized Values

 Z-value for the sampling distribution of x:

where: x = sample mean

μ = population mean
σ = population standard deviation
n = sample size

Fundamentals of Business Statistics – Murali Shanker Chap 6-21

 Example
Let X the length of pregnancy be X~N(266,256).
1. What is the probability that a randomly
selected pregnancy lasts more than 274 days.
I.e., what is P(X > 274)?

2. Suppose we have a random sample of n = 25

pregnant women. Is it less likely or more likely
(as compared to the above question), that we
might observe a sample mean pregnancy
length of more than 274 days. I.e., what is

P X  274 
Fundamentals of Business Statistics – Murali Shanker Chap 6-22
 YDI 9.8
 The model for breaking strength of steel bars is normal
with a mean of 260 pounds per square inch and a
variance of 400. What is the probability that a randomly
selected steel bar will have a breaking strength greater
than 250 pounds per square inch?

 A shipment of steel bars will be accepted if the mean

breaking strength of a random sample of 10 steel bars
is greater than 250 pounds per square inch. What is the
probability that a shipment will be accepted?

Fundamentals of Business Statistics – Murali Shanker Chap 6-23

 YDI 9.9
 The following histogram shows the population
distribution of a variable X. How would the
sampling distribution of X look, where the mean
is calculated from random samples of size 150
from the above population?

Fundamentals of Business Statistics – Murali Shanker Chap 6-24

 Example
 Suppose a population has mean μ = 8 and
standard deviation σ = 3. Suppose a random
sample of size n = 36 is selected.

 What is the probability that the sample mean is

between 7.8 and 8.2?

Fundamentals of Business Statistics – Murali Shanker Chap 6-25

 Desirable Characteristics of Estimators

 An estimator ˆ is unbiased if the mean of its

sampling distribution is equal to the population
parameter θ to be estimated. That is, ˆ is an

unbiased estimator of θ if E ˆ   . Is X an
unbiased estimator of μ?

Fundamentals of Business Statistics – Murali Shanker Chap 6-26

 Consistent Estimator
An estimator ˆ is a consistent estimator of a
population parameter θ if the larger the sample
size, the more likely ˆ will be closer to θ. Is X
a consistent estimator of μ?

Fundamentals of Business Statistics – Murali Shanker Chap 6-27

 Efficient Estimator
The efficiency of an unbiased estimator is
measured by the variance of its sampling
distribution. If two estimators based on the
same sample size are both unbiased, the one
with the smaller variance is said to have greater
relative efficiency than the other.

Fundamentals of Business Statistics – Murali Shanker Chap 6-28