CHAPTER 9:

Estimation From
Sampling Data
Business Mathematics 41
 Introduction
 Point estimate is a single number that estimates the exact
value of the population parameter of interest (e.g. µ or )
 Interval estimate includes a range of possible values
that are likely to include the actual population parameter.

 When the interval estimate is associated with a degree of

confidence that it actually includes the population
parameter, it is referred to as a confidence interval.
 Point
Estimate
 An important consideration in choosing a sample statistic as a point estimate of the value
of a population parameter is that the sample statistic be an unbiased estimator.
 An estimator is unbiased if the expected value of the sample statistic is the same as the
actual value of the population parameter it is intended to estimate.
 Three important point estimators introduced in the chapter are those for a population mean (𝜇),
a population variance (𝜎2), and a population proportion (𝜋).
 Interval
 Estimate
Interval Estimate - a range of values within the
actual value of the population parameter may fall.
 Interval Limits - the lower and upper values of the
interval estimate.
 Confidence Interval - An interval estimate for which
there is a specified degree of certainty that the actual
value of the population parameter will fall within the
interval.
 Confidence Coefficient - For a confidence interval,
the

proportion of such intervals that would include the

population parameter if the process leading to the interval

 Interval
 Estimate
Confidence Level - Like the confidence
coefficient, this expresses the degree of certainty
that an interval will in clude the actual value of the
population parameter, but it is stated as a
percentage. For example, a 0.95 confide nce
coefficient is equivalent to a 95% confidence level.
 Accuracy - The difference between the observed
sample statistic and the actual value of the
population paramet er being estimated. This may
also be referred to as estimation error or sampling
error.
 Interval
Example 1 Estimates
“In our simple random sample of 2000 households, we found the average income to be
with a standard deviation, 𝑠 =$12,000. Based on these data, we have 95% confidence
that the population mean is somewhere between $64,474 and $65,526.”
Solution:
 Point Estimate of 𝜇 $65, 000
 Point Estimate of 𝜎 $12, 000
 Interval Estimate of 𝜇 $64, 474 to $65, 526
 Lower and upper interval limits for 𝜇 $64, 474 and $65, 526
 Confidence Coefficient 0.95
 Confidence Level 95%
 Accuracy For 95% of such intervals, the sample mean would not
differ from the actual population mean by more than $526.
Overview of
Methods
 Confidence Interval for the Mean: 𝝈 is
known

 This application assumes that either (1) the underlying population is normally
distributed or (2) the sample size is n ≥ 30. Also, an alternative way of describing the z
value is to refer to it as , with being the area to the right. For example, 𝑧0.025 would be 1.96.
The most commonly used confidence intervals and the corresponding z values typically
used to obtain them are shown below:
 z-interval,
Example 2 Mean
From past experience, the population standard deviation of rod diameters produced by a machine has
been found to be 𝜎 = 0.053 inches. For a simple random sample of n = 30 rods, the average diameter is

found to be . What Is the 95% Confidence Interval for the Population Mean, 𝜇 ?
𝑥± 𝑧
𝜎
√𝑛
=1.400 ± 1.96
(
0.053
√30 ) 𝑏𝑒𝑡𝑤𝑒𝑒𝑛 1.381 𝑎𝑛𝑑 1.419
 z-interval,
Example 3 Mean
A simple random sample of 25 has been collected from a normally distributed
population for which it is known that 𝜎 =17.0. The sample mean has been
calculated as 342.0, and the sample standard deviation is s = 14.9. Construct
and interpret the 95% and 99% confidence intervals for the population mean.
 The Student’s t
Distribution
 The t distribution is the probability distribution for the random
variable
 It has a mean of zero, but its shape is determined by what is called the number
of degrees of freedom (df).
 For confidence interval applications, the specific member of the family is

 determined by . of freedom refers to the number of values that remain free to

The term degrees
vary once some information about them is already known.

 For example, if four items have a mean of 10.0, and three of these items are
known to have values of 8, 12, and 7, there is no choice but for the fourth item to
have a value of 13. In effect, one degree of freedom has been lost.
 The Student’s t
Distribution
 Using the t Distribution Table. A table for t values that correspond to selected areas
beneath the t distribution appears on the pages immediately preceding the back cover.
In general, it is used in the same way as the standard normal table, but there are two
exceptions: (1) the areas provided are for the right tail only, and (2) it is necessary to
refer to the appropriate degrees of freedom (df) row in finding the appropriate t value.

Example
• For a Sample Size of n = 15, What t Values Would Correspond to an Area Centered at t = 0
and Having an Area beneath the Curve of 95%?
• For a Sample Size of n = 99, What t Values Would Correspond to an Area Centered at t = 0
and Having an Area beneath the Curve of 90%?
 Confidence Interval Using t
Distribution
 The appropriate t value is used instead of z, and s replaces 𝜎.

 The t distribution assumes the underlying population is approximately normally

distributed, but this assumption is important only when the sample is small—that is, n <
30.
 t-interval,
Example 4 Mean
A simple random sample of n = 90 manufacturing
employees has been selected from those working
throughout a state. The average number of overtime
hours worked last week was with a sample standard
deviation of s = 3.61 hours. What Is
the 98% Confidence Interval for the Population
Mean, 𝜇 ?

𝑥±𝑡
𝑠
√𝑛
=8.46 ± 2.369
( )
3.61
√ 90

𝑏𝑒𝑡𝑤𝑒𝑒𝑛 7.56 𝑎𝑛𝑑 9.36 h𝑜𝑢𝑟𝑠

 t-interval,
Example 5 Mean
Given the following observations in a simple random sample from a population that is
approximately normally distributed, construct and interpret the 90% and 95% confidence
intervals for the mean:

67 79 71 98 74 70 59 102 92 96
 Confidence Interval Estimates for the
Population Proportion
 Determining a confidence interval estimate for the population proportion requires
that we use the sample proportion (p) for two purposes: (1) as a point estimate of
the (unknown) population proportion,𝜋 , and (2) in combination with the sample
size (n) in estimating the standard error of the sampling distribution of the sample
proportion for samples of this size.
 z-interval,
Example 6 Proportion
In an April 2007 NBC News/Wall Street Journal poll,
1008 adults were randomly sampled from across the
United Stat es. In response to the question, “All in all,
do you think that things in the nation are generally
headed in the right direc tion, or do you feel that
things are off on the wrong track?” 22% responded
“headed in the right direction.”

What Is the 95% Confidence Interval for the Population

Proportion Who Would Have Answered “Headed in the
Right Direction” to the Question Posed?
𝑝±𝑧
√ 𝑝(1 −𝑝)
𝑛
=0.22 ±
√0.22(1− 0.22)
1008
¿ 0.194 𝑡𝑜 0.246
 z-interval,
Example 7 Proportion
A pharmaceutical company found that 46% of 1000 U.S. adults surveyed knew neither their blood pressure
nor their cholesterol level. Assuming the persons surveyed to be a simple random sample of U.S. adults,
construct a 95% confidence interval for 𝜋 = the population proportion of U.S. adults who would have given
the same answer if a census had been taken instead of a survey
Estimating the Population
Mean
 Sample Size, Estimating a
Example 8 Mean
A state politician would like to determine the average amount earned during summer employment by
state teenagers during the past summer’s vacation period. She wants to have 95% confidence that the
sample mean is within $50 of the actual population mean. Based on past studies, she has estimated the
population standard deviation to be 𝜎 =$400. What Sample Size Is Necessary to Have 95% Confidence
That will be within $50 of the Actual Population Mean?

2 2 2 2
𝑧 ∙𝜎 1.96 ∙ 400
𝑛= 2
= 2
=¿ 245.9 246 𝑝𝑒𝑟𝑠𝑜𝑛𝑠
𝑒 50
Estimating the Population
Proportion
 Sample Size, Estimating a Population
Example 9 Proportion
A tourist agency researcher would like to determine the proportion of U.S. adults who have ever vacationed
in Mexico and wishes to be 95% confident that the sampling error will be no more than 0.03 (3 percentage
points). Assuming the Researcher Has No Idea Regarding the Actual Value of the Population Proportion, What
Sample Size Is Necessary to Have 95% Confidence That the Sample Proportion Will Be within 0.03 (3
Percentage Points) of the Actual Population Proportion?
2 2
𝑧 ∙𝑝 (1 −𝑝 ) 1.96 ∙(0.5)(1 − 0.5)
n=
𝑒2
=
0.03 2
=¿ 1067.1 1068 𝑎𝑑𝑢𝑙𝑡𝑠

If the Researcher Believes the Population Proportion Is No More Than 0.3, and Uses p = 0.3 as the Estimate,
What Sample Size Will Be Necessary?

2 2
𝑧 ∙𝑝 (1 −𝑝 ) 1.96 ∙(0.3)(1 − 0.3)
n= = =¿ 896.4 897 𝑎𝑑𝑢𝑙𝑡𝑠
𝑒2 0.03 2