Quantitative Methods 1

Associate of Science Degree in Management

Lecture 7

October 21, 2010

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Contents

1 Why Sample the Population? 1

1.1 Probability Sampling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

1.2 Methods of Probability Sampling . . . . . . . . . . . . . . . . . . . . . . . . 2

1.3 Population and Sampling Distributions . . . . . . . . . . . . . . . . . . . . . 2

1.4 Mean and Standard Deviation of x . . . . . . . . . . . . . . . . . . . . . . . 3

1.5 Sampling and Nonsampling Errors . . . . . . . . . . . . . . . . . . . . . . . . 4

1.6 Shape of the Sampling Distribution of x . . . . . . . . . . . . . . . . . . . . 5

1.6.1 Sampling from a Normally Distributed Population . . . . . . . . . . . 5

1.6.2 Sampling from a Population that is not Normally Distributed . . . . 6

1.6.3 The Central Limit Theorem . . . . . . . . . . . . . . . . . . . . . . . 6

1.7 Applications of the Sampling Distribution of x . . . . . . . . . . . . . . . . . 7

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1 Why Sample the Population?

• The physical impossibility of checking all items in the population.

• The cost of studying all the items in a population.

• The sample results are usually adequate.

• Contacting the whole population would often be time-consuming.

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1.1 Probability Sampling

A probability sample is a sample selected such that each item or person in the population

being studied has a known likelihood of being included in the sample.

1.2 Methods of Probability Sampling

Simple Random Sample: A sample formulated so that each item or person in the popu-

lation has the same chance of being included.

Systematic random Sampling: The items or individuals of the population are arranged

in some order. A random starting point is selected and then every k th member of the

population is selected for the sample.

Stratified Random Sampling: A population is first divided into subgroups, called strata,

and a sample is selected from each stratum.

1.3 Population and Sampling Distributions

• A population parameter is always constant and so there is only one value of the pop-

ulation mean µ.

• Different samples of the same size drawn from the population will yield different values

of the sample mean x. Consequently, the sample mean x is a random variable.

• Since every random variable must possess a probability distribution, the sample mean

x must possess a probability distribution called its sampling distribution which lists

the various values that x can assume and the probability of each value of x. .
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1.4 Mean and Standard Deviation of x

The mean and standard deviation of the sampling distribution of x are denoted by µx and

σx , respectively.

Mean of the Sampling Distribution of x - The mean of the sampling distribution of x

is always equal to the mean of the population. Thus,

µx = µ

• The sample mean, x is called an estimator of the population mean µ. When the

expected value (or mean) of a sample statistic is equal to the value of the corresponding

population parameter, that sample statistic is said to be an unbiased estimator.

• The standard deviation, σx , of x is not equal to the standard deviation σ of the

population distribution (unless n = 1).

• The standard deviation of x is equal to the standard deviation of the population divided
σ
by the square root of the sample size; that is σx = √ if the sample size is small.
n
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• The sample size is considered to be small compared to the population if the sample

size is equal to or less than 5% of the population size - that is the following condition

must be satisfied

n
≤ .05
N

If this condition is not satisfied , we use the following formula to calculate σx̄ :

r
σ N −n
σx = √
n N −1

where the factor

r
N −n
N −1

is called the finite population correction factor

1.5 Sampling and Nonsampling Errors

Usually different samples selected from the same population will give different results because

they contain different elements. The difference between the value of a sample statistic

obtained from a sample and the value of the corresponding population parameter obtained

from the population is called the sampling error. In the case of the mean,

Sampling error = x − µ

assuming that the sample is random and no nonsampling error has been made.

Its important to remember that:

1. A sampling error occurs because of chance.

2. The errors that occur for other reasons, such as errors made during collection, record-

ing, and tabulation of data, are called nonsampling errors.

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1.6 Shape of the Sampling Distribution of x

The shape of the sampling distribution of x relates to the following two cases.

1. The population from which samples are drawn has a normal distribution.

2. The population from which samples are drawn does not have a normal distribution.

1.6.1 Sampling from a Normally Distributed Population

When the population from which samples are drawn is normally distributed with its mean

equal to µ and the standard deviation equal to σ, then

1. The mean of x, µx is equal to the mean of the population, µ. That is

µx = µ

σ n
2. The standard deviation of x, σx is equal to √ , assuming ≤ .05. That is
n N

σ
σx = √
n

3. The shape of the sampling distribution of x is normal, whatever the value of n.

The spread of the sampling distribution of x decreases as the sample size increases.
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EXAMPLE 1

In a recent SAT, the mean score for all examinees was 1020. Assume that the distribution

of SAT scores of all examinees is normal with a mean of 1020 and a standard deviation of

153. Let x be the mean SAT score of a random sample of certain examinees. Calculate the

mean and standard deviation of x and describe the shape of its sampling distribution when

the sample size is

(a) 16

(b) 50

1.6.2 Sampling from a Population that is not Normally Distributed

Most of the time the population from which the samples are selected is not normally dis-

tributed. In such cases, the shape of the sampling distribution of x is inferred from a very

important theorem called the Central Limit Theorem.

1.6.3 The Central Limit Theorem

According to the Central Limit Theorem, for a large sample size, the sampling distribu-

tion of x is approximately normal, irrespective of the shape of the population distribution.

The mean and standard deviation of the standard distribution of x are

σ
µx = µ and σx = √
n

The sample size is usually considered to be large if n ≥ 30.

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1.7 Applications of the Sampling Distribution of x

From the Central Limit Theorem for large samples, the sampling distribution of x is approx-
σ
imately normal with mean µ and standard deviation σx = √ . The z value for a value of x
n
is calculated as:

x−µ
z=
σx
σ
where σx = √ .
n

EXAMPLE 2

Assume that the weights of all packages of a certain brand of cookies are normally distributed

with a mean of 32 ounces and a standard deviation of .3 ounces. Find the probability that

the mean weight , x, of a random sample of 20 packages of this brand of cookies will be

between 31.8 and 31.9 ounces.

EXAMPLE 3

The balances of all savings accounts at a local bank have a distribution that is skewed to

the right with its mean equal to $12,450 and standard deviation equal to $4300. Find the

probability that the mean balance of a sample of 50 savings accounts selected from this bank

will be

(a) more than $11,500

(b) between $12,000 and $13,800

(c) within $1500 of the population mean

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EXAMPLE 4

Molly’s Electronics makes light bulbs. It is known that the standard deviation of the lives

of these bulbs is 150 hours. The company’s research team takes a sample of 100 such bulbs

and finds that the mean life of these bulbs is 2250 hours. What is the probability that this

sample mean is within 25 hours of the mean life of all bulbs produced by this company.