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Chapter 6 Statistics

Chapter 6 of 'Statistics for Business and Economics' focuses on making inferences based on a single sample, covering topics such as estimating target parameters, constructing confidence intervals for population means and proportions, and determining sample sizes. It explains the use of normal and t-statistics for confidence intervals, emphasizing the importance of sample size and distribution characteristics. The chapter includes examples and conditions required for valid confidence intervals, providing a comprehensive overview of statistical inference methods.

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0% found this document useful (0 votes)
10 views60 pages

Chapter 6 Statistics

Chapter 6 of 'Statistics for Business and Economics' focuses on making inferences based on a single sample, covering topics such as estimating target parameters, constructing confidence intervals for population means and proportions, and determining sample sizes. It explains the use of normal and t-statistics for confidence intervals, emphasizing the importance of sample size and distribution characteristics. The chapter includes examples and conditions required for valid confidence intervals, providing a comprehensive overview of statistical inference methods.

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Copyright
© © All Rights Reserved
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Statistics for Business and

Economics
Fourteenth Edition

Chapter 6
Inferences
Based on a
Single Sample

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 1
Content
1. Identifying and Estimating the Target Parameter
2. Confidence Interval for a Population Mean: Normal (z)
Statistic
3. Confidence Interval for a Population Mean: Student’s t-
Statistic
4. Large-Sample Confidence Interval for a Population
Proportion
5. Determining the Sample Size
6. Finite Population Correction for Simple Random Sampling

7. Confidence Interval for a Population Variance

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 2
Where We’re Going

1. Estimate a population parameter (means,


proportion, or variance) based on a large
sample selected from the population
2. Use the sampling distribution of a statistic to
form a confidence interval for the population
parameter
3. Show how to select the proper sample size for
estimating a population parameter

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 3
Section 6.1 Identifying and
Estimating the Target Parameter

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 4
Target Parameter (1 of 2)

The unknown population parameter (e.g., mean or


proportion) that we are interested in estimating is
called the target parameter.

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 5
Target Parameter (2 of 2)

Determining the Target Parameter

Type of Data
Parameter Key Words of Phrase

 Mean; average Quantitative

Proportion; percentage
p fraction; rate
Qualitative

Variance; variability;
2 spread
Quantitative

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 6
Point Estimator

A point estimator of a population parameter is a


rule or formula that tells us how to use the sample
data to calculate a single number that can be used
as an estimate of the target parameter.

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 7
Interval Estimator

An interval estimator (or confidence interval) is


a formula that tells us how to use the sample data
to calculate an interval that estimates the target
parameter.

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 8
Section 6.2 Confidence Interval for
a Population Mean: Normal (z)
Statistic

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 9
Confidence Interval (1 of 2)
According to the Central Limit Theorem, the sampling
distribution of the sample mean is approximately normal for
large samples. Let us calculate the interval estimator:

1.96
x 1.96 x  x 
n
That is, we form an interval from 1.96 standard deviations
below the sample mean to 1.96 standard deviations above
the mean. Prior to drawing the sample, what are the
chances that this interval will enclose μ, the population
mean?

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 10
Confidence Interval (2 of 2)
If sample measurements yield a value of x that falls
between the two lines on either side of µ, then the interval
x 1.96 x will contain µ.
The area under the normal
curve between these two
boundaries is exactly 0.95.
Thus, the probability that a
randomly selected interval
will contain µ is equal to 0.95.

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 11
Example: Delinquent Debtors (1 of 2)
A large bank that wants to estimate the average amount of
money owed by its delinquent debtors,  . The overdue
amounts for the n = 100 accounts are shown in the table
below. Use the data to find a 95% confidence interval for
 and interpret the result.

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 12
Example: Delinquent Debtors (2 of 2)
Find the sample mean x and the sample deviation s with
technology:
x 233.28 and s 90.34.
Substituting these values into the interval estimator formula:

x 1.96 / n  x 1.96 s / n
233.28 (1.96)(90.34)
233.28 17.71 or (215.57,250.99)
The estimate is that the mean amount of delinquency for
all accounts falls within the interval $215.57 to $250.99.
Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 13
Confidence Coefficient

The confidence coefficient is the probability that


a randomly selected confidence interval encloses
the population parameter - that is, the relative
frequency with which similarly constructed
intervals enclose the population parameter when
the estimator is used repeatedly a very large
number of times. The confidence level is the
confidence coefficient expressed as a percentage.

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 14
95% Confidence Level
If our confidence level is 95%, then in the long run, 95% of
our confidence intervals will contain µ and 5% will not.
For a confidence coefficient of 95%, the area in the two
tails is 0.05. To choose a different confidence coefficient we
increase or decrease the area (call it α) assigned to the
tails. If we place  / 2 in each tail and
is the z-value, the confidence
interval with coefficient (1 − α) is

x  z 2  x .

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 15
Large-Sample (1 − α)% Confidence
Interval for μ

x  z 2  x  x z 2  / n  
where z /2 is the z-value with an area  / 2 to its
right and in the standard normal distribution. The
parameter σ is the standard deviation of the sampled
population, and n is the sample size.
Note: When σ is unknown and n is large (n ≥ 30), the
confidence interval is approximately equal to


x z 2 s / n 
where s is the sample standard deviation.
Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 16
Conditions Required for a Valid Large-
Sample Confidence Interval for μ

1. A random sample is selected from the target


population.
2. The sample size n is large (i.e., n ≥ 30). Due to
the Central Limit Theorem, this condition
guarantees that the sampling distribution of is
approximately normal. Also, for large n, s will be
a good estimator of σ.

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 17
Interpretation of a Confidence
Interval for a Population Mean (1 of 2)

When we form a 100(1 – )% confidence interval for  ,


we usually express our confidence in the interval with a
statement such as, “We can be 100(1 – )% confident that
m lies between the lower and upper bounds of the
confidence interval,” where for a particular application, we
substitute the appropriate numerical values for the
confidence and for the lower and upper bounds. The
statement reflects our confidence in the estimation process
rather than in the particular interval that is calculated from
the sample data.

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 18
Interpretation of a Confidence
Interval for a Population Mean (2 of 2)
We know that repeated application of the same procedure
will result in different lower and upper bounds on the
interval. Furthermore, we know that 100(1 – )% of the
resulting intervals will contain  . There is (usually) no way
to determine whether any particular interval is one of those
that contain m, or one that does not. However, unlike point
estimators, confidence intervals have some measure of
reliability, the confidence coefficient, associated with them.
For that reason they are generally preferred to point
estimators.

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 19
Section 6.3 Confidence Interval for
a Population Mean: Student’s t-
Statistic

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 20
Small Sample σ Unknown

Instead of using the standard normal statistic


x µ x µ
z 
x  n
use the t - statistic
x µ
t
s n

in which the sample standard deviation, s,


replaces the population standard deviation, σ.
Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 21
Student’s t-Statistic

The t-statistic has a sampling distribution very


much like that of the z-statistic: mound-shaped,
symmetric, with mean 0.

The primary difference


between the sampling
distributions of t and z
is that the t-statistic is
more variable than the
z-statistic.

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 22
Degrees of Freedom

The actual amount of variability in the sampling


distribution of t depends on the sample size n. A
convenient way of expressing this dependence is
to say that the t-statistic has (n − 1) degrees of
freedom (df).

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 23
Student’s t Distribution

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 24
t - Table

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 25
t-value
If we want the t-value with an area of .025 to its right
and 4 df, we look in the table under the column
t.025 for the entry in the row corresponding to 4 df.
This entry is t.025 2.776. The corresponding
standard normal z-score is z.025  1.96.

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 26
Small-Sample Confidence Interval for μ

 s 
x t 2 
 n 

where t /2 is based on (n − 1) degrees of freedom.

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 27
Conditions Required for a Valid Small-
Sample Confidence Interval for μ

1. A random sample is selected from the target


population.
2. The population has a relative frequency
distribution that is approximately normal.

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 28
Estimation Example Mean (σ Unknown)

A random sample of n = 25 has x 50 and s = 8.


Set up a 95% confidence interval estimate for μ.
s s
x  t /2    x  t /2 
n n
8 8
50  2.064   50  2.064 
25 25
46.70  53.30

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 29
Section 6.4 Large-Sample
Confidence Interval for a
Population Proportion

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 30
Sampling Distribution of p hat
1. The mean of the sampling distribution of p̂
is p; that is, p̂ is an unbiased estimator of p.
2. The standard deviation of the sampling
distribution of pˆ is pq n that is,  p̂  pq n
where q = 1−p.
3. For large samples, the sampling distribution of p̂
is approximately normal. A sample size is
considered large if both npˆ 15 and nqˆ 15.
Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 31
Large-Sample Confidence Interval
for p hat

pq ˆˆ
pq
pˆ z 2 pˆ  pˆ z 2  pˆ z 2
n n

x
where pˆ  and qˆ 1  pˆ .
n
Note: When n is large, p̂ can approximate the
value of p in the formula for  pˆ .
Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 32
Conditions Required for a Valid Large-
Sample Confidence Interval for p

1. A random sample is selected from the target


population.

2. The sample size n is large. (This condition will


be satisfied if both npˆ 15 and nqˆ 15 Note that
npˆ and nqˆ are simply the number of
successes and number of failures, respectively,
in the sample.).

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 33
Example: Estimation of Proportion
A random sample of 1,000 consumers showed 313 prefer
the company’s cereal brand. Set up a 95% confidence
interval estimate for p.
ˆˆ
pq ˆˆ
pq 313
pˆ  Z /2  p  pˆ  Z /2 pˆ  0.313
n n 1000
0.313 0.687  0.313 0.687 
0.313  1.96  pˆ 0.313  1.96
1000 1000
0.284  pˆ 0.342
The company can be 95% confident that the interval from
28.4% to 34.2% contains the true percentage of all
consumers who prefer its brand.
Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 34
Adjusted left parenthesis 1 minus alpha
right parenthesis 100% Confidence
Interval for a Population Proportion, p

p1  p 
p z 2
n4
x2
where p  n  4 is the adjusted sample proportion
of observations with the characteristic of interest, x
is the number of successes in the sample, and n is
the sample size.

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 35
Section 6.5 Determining the Sample
Size

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 36
Sampling Error

In general, we express the reliability associated


with a confidence interval for the population mean
μ by specifying the sampling error within which
we want to estimate μ with 100(1 − α )%
confidence. The sampling error (denoted S E),
then, is equal to the half-width of the confidence
interval.

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 37
Sample Size Determination for 100 left
parenthesis 1 minus alpha right
parenthesis% Confidence Interval for µ
In order to estimate µ with a sampling error (SE)
and with 100(1 –  )% confidence, the required
sample size is found as follows:
  
z 2   SE
 n
The solution for n is given by the equation
2
 z /2 
n 
 SE 
Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 38
Example: Mean Inflation Pressure of
Footballs (1 of 2)

The manufacturer of official NFL footballs uses a


machine to inflate its new balls to a pressure of
13.5 pounds but factors cause the pressures to
vary randomly from about 13.3 to 13.7 pounds. To
estimate the mean inflation pressure to within .025
pound of its true value with a 99% confidence
interval. What sample size should be used?

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 39
Example: Mean Inflation Pressure of
Footballs (2 of 2)
Given that SE = 0.025 pound.
Define a 99% confidence interval: z 2  z0.005 2.576
No estimate of s is given; however know range
R = 13.7 – 13.3 = 0.4. A conservative estimate
(based on Chebychev’s Rule) is

2 2
 ( z 2 )   2.576 0.1 
Find n: n     106.17 107
 ( SE )   0.025  

A sample size of 107 footballs should be used.


Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 40
Sample Size Determination for 100 left
parenthesis 1 minus alpha right
parenthesis% Confidence Interval for P
In order to estimate µ with a sampling error (SE)
and with 100(1 –  )% confidence, the required
sample size is found by solving the following
equation for n:
pq
z 2 SE
n
The solution for n can be written as follows:
z  pq 
2
 2
Note: Always round n
n up to the nearest
SE 2 integer value.
Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 41
Example: Sample Size
What sample size is needed to estimate p within
0.03 with 90% confidence?
Be conservative and use p = 0.5 and q = 0.5.
width 0.03
SE   0.015
2 2
( Z 2 ) pq  1.645 0.5 0.5
2 2

n  3006.69 3007
0.015
2 2
( SE )

Use a sample size of 3,007.


Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 42
Section 6.6 Finite Population
Correction for Simple Random
Sample

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 43
Finite Population Correction Factor

In some sampling situations, the sample size n


may represent 5% or perhaps 10% of the total
number N of sampling units in the population.
When the sample size is large relative to the
number of measurements in the population (see
the next slide), the standard errors of the
estimators of μ and p should be multiplied by a
finite population correction factor.

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 44
Rule of Thumb for Finite Population
Correction Factor

Use the finite population correction factor when


n N  0.05.

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 45
Simple Random Sampling with Finite
Population of Size N (1 of 2)

Estimation of the Population Mean

Estimated standard error:

s N n
ˆ x 
n N

Approximate 95% confidence interval: x 2ˆ x

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 46
Simple Random Sampling with Finite
Population of Size N (2 of 2)

Estimation of the Population Proportion

Estimated standard error:

p̂(1  p̂) N  n
̂ p̂ 
n N

Approximate 95% confidence interval: p̂ 2̂ p̂

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 47
Finite Population Correction Factor Example
(1 of 2)

Find an approximate 95% confidence interval for


where x 47.4, s =12.4, N =1482, and n = 100.
Since
n 100 0.086
N 1462

is greater than 0.05, use the finite correction factor.

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 48
Finite Population Correction Factor Example
(2 of 2)

Find an approximate 95% confidence interval for  :

 s  N n  12.4  1462  100


x 2   47.3 2  
 n N  100  1462
47.4 2.39
45.01, 49.79 

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 49
Section 6.7 Confidence Interval for
a Population Variance

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 50
Confidence Interval for a Population
Variance

A 100(1 - α ) Confidence Interval for σ 2


2 2
X
where  2 and X (1  2) are values corresponding
to an area of  2 in the right(upper) and left
(lower) tails, respectively, of the chi-square
distribution based on (n − 1) degrees of freedom.

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 51
Conditions Required for a Valid
Confidence Interval for sigma squared
1. A random sample is selected from the target
population.
2. The population of interest has a relative
frequency distribution that is approximately
normal.

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 52
Key Ideas (1 of 8)
Population Parameters, Estimators, and
Standard Errors

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 53
Key Ideas (2 of 8)

Population Parameters, Estimators, and


Standard Errors
Confidence Interval: An interval that encloses an
unknown population parameter with a certain level
of confidence (1 − α)
Confidence Coefficient: The probability (1 − α)
that a randomly selected confidence interval
encloses the true value of the population
parameter.

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 54
Key Ideas (3 of 8)

Key Words for Identifying the Target Parameter


μ - Mean, Average
p - Proportion, Fraction, Percentage, Rate,
Probability

 2 - Variance

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 55
Key Ideas (4 of 8)

90% CI: (1 − α)= .10 z.05  1.645

95% CI: (1 − α) = .05 z.025  1.96

98% CI: (1 − α) = .02 z.005  2.326

99% CI: (1 − α) = .01 z.005  2.575

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 56
Key Ideas (5 of 8)

Determining the Sample Size n

Estimating μ: n  z 2    SE 
2 2
2

Estimating p: n  z 2   pq  SE 
2 2

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 57
Key Ideas (6 of 8)

Finite Population Correction Factor

Required when n / N  .05

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 58
Key Ideas (7 of 8)

Illustrating the Notion of “95% Confidence”

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 59
Key Ideas (8 of 8)

Illustrating the Notion of “95% Confidence”

Copyright © 2022, 2018, 2014 Pearson Education, Inc. All Rights Reserved Slide - 60

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