Professional Documents
Culture Documents
and
Estimation
Car Mileage Case
Hybrid and electric cars are a vital part in reducing US’s gasoline consumption.
Most effective way to conserve gasoline is to design gasoline powered cars that are
more fuel efficient. Virtually every gasoline powered midsize cars equipped with
automatic transmission has an EPA combined city and highway mileage estimate of
26miles/gallon or less. Suppose that government has decided to offer tax credit to
any automaker selling midsize model which achieves an EPA of at least 31mpg.
Consider an automaker has recently introduced a new midsized model that this
qualifies for the tax credit. Consider the population of all cars of this type that will
or could be potentially be produced. The automaker will choose a sample of 50 of
these cars. The manufacturers production operation runs 8 hour-shifts, with 100
midsized cars produced on each shift. When all start up problems have been
corrected, automaker select 1 car at random from each of 50 shifts and they are
subjected to EPA test.
Sampling Distribution of the Sample Mean
E ( x) =
ˆ = x
s.e( x ) =
n
2 𝜎2
𝐼𝑓 𝑋~𝑁 𝜇, 𝜎 , 𝑥~𝑁(𝜇,
ҧ )
𝑛
Example
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.
X − 32 − 32.2
P(X 32) = P = P( Z − .67) = 1 − .2514 = .7486
.3
“there is about a 75% chance that a single bottle of soda contains more than
32oz.”
Example
Things we know:
X is normally distributed, therefore so will X.
= 32.2 oz.
Example
“There is about a 91% chance the mean of the four bottles will exceed
32oz.”
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?
Central Limit Theorem (CLT)
Mean 31.56
Standard Error 0.112812
Median 31.55
Mode 31.4
Standard Deviation 0.797701
Sample Variance 0.636327
Kurtosis -0.51125
Skewness -0.03422
Range 3.5
Minimum 29.8
Maximum 33.3
Sum 1578
Count 50
How to estimate parameters?
1 2
𝜎ො = 𝑠 = 𝑠𝑎𝑚𝑝𝑙𝑒 𝑠𝑑 = 𝑥 − 𝑥ҧ
𝑛−1
x 1.96 x = x 1.96
n
What is happening?
S ampling Dis tribution of the Me an
0.4
95%
0.3
f(x) 0.2
0.1
2.5% 2.5%
0.0
x
x + 1.96
x − 1.96 n
n
x
2.5% fall below
the interval x
x
x
x 2.5% fall above
the interval
x
x
x
x z 2 x
= x z 2
n
• The normal point zα/2 gives a right hand tail area under
the standard normal curve equal to α/2
• The normal point -zα/2 gives a left hand tail area under
the standard normal curve equal to a/2
• The area under the standard normal curve between zα/2
and zα/2 is 1 – α
General Confidence Interval
x z 2 = x − z 2 , x + z 2
n n n
95% Confidence Interval
x z 0.025 x = x 1.96
n
= x − 1.96 , x + 1.96
n n
99% Confidence Interval
x z 0.025 x = x 2.575
n
= x − 2.575 , x + 2.575
n n
The Effect of a on Confidence Interval Width
t-Based Confidence Intervals for a Mean:
σ Unknown
x −
t=
s n
• If the population is normal, then for any sample size n, this sampling
distribution is called the t distribution
The t Distribution
s
x t 2
n
0 .8
x = = = 0.113
n 50
t 0.025, 49 = 2.010
Car Mileage: 95% Confidence interval of
mean mileage
s
x t 2; n −1
n
= 31.56 ( 2.010 * 0.113)
= 31.56 0.22713
95% CI of
[31.33,31.79]
Practice Problem 1:
• A manufacturer of light bulbs claims that its light bulbs have a mean life hours
with a standard deviation of 85 hours. A random sample of 40 such bulbs is
selected for testing. If the sample produces a mean value of 1505 hours, find out
95% Confidence Interval of .
Solution: Given, n=40 (large), =85 (known), 1-=0.95, =0.05,
x = 1505
z / 2 = z 0.025 = 1.96
95% CI of is given by
85 85
1505 − 1.96 , 1505 + 1.96
40 40
= 1478.66 , 1531.34
Practice Problem 2:
• Waiting times (in hours) at a popular restaurant are found to have a mean
waiting time of 1.52 hours with sd 2.25hrs. for a sample of 50 customers.
Construct the 99% confidence interval for the estimate of the population mean.
Solution: Given, n=50 (large), s=2.25 (estimated), 1-=0.99, =0.01,
z / 2 = z 0.005 = 2.58
x = 1.52
Therefore,
99% CI of is given by
2.25 2.25
1.52 − 2.58 , 1.52 + 2.58
50 50
= 1.20 , 2.34
Use t based confidence interval and observe the difference (assuming normal
population).
Hypothesis Testing
Null and Alternative Hypotheses and
Errors in Hypothesis Testing
• Null hypothesis, H0, is a statement of the basic
proposition being tested
• Represents the status quo and is not rejected unless there is
convincing sample evidence that it is false
• Alternative hypothesis, Ha, is an alternative accepted
only if there is convincing sample evidence it is true
• One-Sided, “Greater Than” H0: μ μ0 vs. Ha: μ > μ0
• One-Sided, “Less Than” H0 : μ μ0 vs. Ha : μ < μ0
• Two-Sided, “Not Equal” H0 : μ = μ0 vs. Ha : μ μ0
where μ0 is a given constant value (with the appropriate
units) that is a comparative value
Car Mileage Case
Hybrid and electric cars are a vital part in reducing US’s gasoline consumption.
Most effective way to conserve gasoline is to design gasoline powered cars that are
more fuel efficient. Virtually every gasoline powered midsize cars equipped with
automatic transmission has an EPA combined city and highway mileage estimate of
26miles/gallon or less. Suppose that government has decided to offer tax credit to
any automaker selling midsize model which achieves an EPA of at least 31mpg.
Consider an automaker has recently introduced a new midsized model that this
qualifies for the tax credit. Consider the population of all cars of this type that will
or could be potentially be produced. The automaker will choose a sample of 50 of
these cars. The manufacturers production operation runs 8 hour-shifts, with 100
midsized cars produced on each shift. When all start up problems have been
corrected, automaker select 1 car at random from each of 50 shifts and they are
subjected to EPA test.
Car Mileage Case
• Null hypothesis, H0,
H0: μ 31
• Alternative hypothesis,
Ha: μ > 31
We write:
Suppose a bank knows that their customers are waiting in line an average of
10.2 minutes during the lunch hour. The branch manager has decided
to add an additional teller during the 12-2 p.m. period and wishes to test
the hypothesis that the average wait has decreased due to the additional
teller. Set up the null and alternative hypothesis for the bank manager.
H0: μ = 10.2
H1: μ < 10.2
Case:
Marketing Iced Coffee
• In order to capitalize on the iced coffee trend, Starbucks
offered for a limited time half-priced Frappuccino
beverages between 3 pm and 5 pm.
• Manager at a local Starbucks, determines the following
from past historical data:
• 43% of iced-coffee customers were women.
• 21% were teenage girls.
• Customers spent an average of $4.18 on iced coffee
with a standard deviation of $0.84.
Case:
Marketing Iced Coffee
• One month after the marketing period ends, Anne
surveys 50 of her iced-coffee customers and finds:
✓46% were women.
✓34% were teenage girls.
✓They spent an average of $4.26 on the drink.
• Manager wants to use this survey information to
calculate the probability that:
✓Customers spend an average of $4.26 or more on iced coffee.
✓46% or more of iced-coffee customers are women.
✓34% or more of iced-coffee customers are teenage girls.
Types of Decisions
• As a result of testing H0 vs. Ha, will decide either of the
following decisions for the null hypothesis H0:
• Do not reject H0 or reject H0
• Typically, = 0.05
• Strong evidence is required to reject H0
• Usually choose α between 0.01 and 0.05
• = 0.01 requires very strong evidence to reject H0
x − 31 31.56 − 31
z= = = 2.39
n 1.65 50
Steps in Testing a “Greater Than” Alternative
in car mileage Case
6. Decide whether to reject H0
• Compare the value of the test statistic to the rejection
point according to the rejection rule
• Here, z = 2.39 is greater than z0.05 = 1.645
• Therefore reject H0: μ ≤ 31 in favor of
Ha: μ > 31 at the 0.05 significance level
7. Interpret the statistical results
• Conclude mean mileage of the new make exceeds 31
mpg. The company is eligible to get the benefit.
The p-Value
LO 7.4
t Tests about a Population Mean: σ
Unknown
a. Set up the null and the alternative hypotheses to determine if the manager needs
to hire another employee.
b. Calculate the value of the test statistic. What assumption regarding the
population is necessary to implement this step?
c. Use the critical value approach to decide whether the manager needs to hire
another employee at α=0.10.
d. Repeat the above analysis with the p-value approach.
Example
An automatic bottling machine fills cola into two liter (2000 cc) bottles. A consumer
advocate wants to challenge this average amount. A random sample of 40 bottles coming
out of the machine was selected and the exact content of the selected bottles are recorded.
The sample mean was 1999.6 cc. The population standard deviation is known from past
experience to be 1.30 cc.
Test appropriate hypothesis.
Ho : = 2000
H 1 : 2000
Test statistic ; p-value
x −
z = 0 = 1999.6 - 2000
obs 1.3
n 40
= −1.95
z = 1.645
0.05
z -1.645
obs
p - value = P(Z -1.95)
= 0.0256 0.05
To test
H0: μ = 15
H1: μ ≠ 15
Test statistic ; p-value
x −
z = 0 = 16.3 -15
obs 3.6
n 8
= 1.02
z = 1.96
0.025
z 1.96
obs
p - value = P(Z 1.02) + P(Z −1.02)
= 0.1539* 2 = 0.3078 0.05
New software companies that create programs for web applications believe that average
staff age at these companies is 27. A random sample of 18 staff is chosen from these
companies and their age is given as follows: 41, 18, 25, 36, 26, 35, 24, 30, 28,
19, 22, 22, 26, 23, 24, 31, 22, 22. Test appropriate hypothesis.
H0: = 27 n = 18
H1: 27 x = 26.3
n = 18 s = 6.15
For = 0.05 and (18-1) = 17 df , x − 26.3 - 27
critical values of t are ±2.11 t = s 0 = 6.15
obs
x − 0 n 18
The test statistic is: t =
s = − 0.48 Do not reject H
n 0