SMS3033

Statistical Methods
and Its Applications
 Course Learning Objectives (CLO)
CLO1: Determine the parameter estimation; point and interval estimate for parameter mean, proportion
and variance. (C3, PLO1, MQF1)

CLO2: Analyze the problems that involved in estimating and hypothesis testing of real-life situations. (A3,
PLO3,MQF3)

CLO3: Analyze the problems using suitable methods; z-test, t-test, ANOVA, chi-square, regression and
correlation. (A3, PLO2,MQF2)

CLO4: Work in team to complete the assigned task. (A5, PLO5)

 Content
Chapter 1: Parameter Estimation
Estimation of mean, proportions, and variance or standard deviation for single and two populations.

Chapter 2: Hypothesis Testing

Test of significant for mean, proportion and variance/ standard deviation in one and two populations.

Chapter 3: Chi-Square Test

Chi-square distribution, test of goodness of fit, test of independence, test of homogeneity.

Chapter 4: Analysis of variance (ANOVA)

Analysis of variance (ANOVA) concept; oneway ANOVA, two-way ANOVA.

Chapter 5: Correlation and Regression

Correlation, test of significance of correlation, simple linear regression.
CHAPTER 1:

PARAMETER
ESTIMATION
 (1.1)

ESTIMATION OF THE MEAN:

ONE POPULATION
ESTIMATION: An Introduction

Estimation : is the procedure by which a numerical value or values are

assigned to a population parameter based on the information collected from
a sample.

Estimate and estimator:

The value(s) assigned to a population parameter based on the value of

sample statistics is called an estimate. The sample statistic used to
estimate a population parameter is called an estimator. Thus, the sample
mean x is an estimator of the population mean  .

The estimation procedure involves the following steps:

1. Select a sample.
2. Collect the required information from the members of the sample.
3. Calculate the value of the sample statistics.
4. Assign value(s) to the corresponding population parameter.
Three properties of a good estimator:

1. The estimator should be an unbiased estimator. That is, the expected

value or the mean of the estimate obtained from samples of a given size is
equal to the parameter estimated.

2. The estimator should be consistent. For a consistent estimator, as sample

size increases, the value of the estimator approaches the value of the
parameter estimated.

3. The estimator should be a relatively efficient estimator. That is, of all the
statistics that can be used to estimate a parameter the relatively efficient
estimator has the smallest variance.
POINT AND INTERVAL ESTIMATES

1) A point estimate
• Definition : the value of a sample statistics that is used to estimate a population
parameter.

• Thus, the best point estimate of the population mean  is the sample mean x .

Example 1.1 :

• Suppose that a college president wishes to estimate the average age of students
attending classes this semester. The president could select a random sample of
100 students and find the average age of these students, say, 22.3 years. This
type of estimate is called a point estimate.

• We use sample mean to estimate the population mean because the means of
samples vary less than other statistics (such as median and mode) when many
samples are selected from the same population. Therefore, the sample mean is
the best estimate of the population mean other than other measures of central
tendency.
2) An Interval estimate
• Definition:
An interval estimate of a parameter is an interval or a range of values used to
estimate the parameter. This estimate may or not contain the value of the
parameter being estimated.

• In interval estimation, an interval is constructed around the point estimate, and it

is stated that this interval is likely to contain the corresponding population
parameter.

• Example 1.2 : An interval estimate for the average age of all students might be
21.9    22.7 and 22.3  0.4 years.

•The question arises, what number should we subtract from and add a point
estimate to obtain an interval estimate? The answer to this question depend on
two considerations:

1. This standard deviation  x of the sample mean X

2. The level of confidence to be attached to the interval.

• First, the larger the std. dev. of X , the greater is the number subtracted from
and added to the point estimate.

• Second, the quantity subtracted and added must be larger if we want to have
a higher confidence in our interval. We always attach a probabilistic statement
to the interval estimation which is given by confidence interval level. An interval
that is constructed based on this confidence interval is called confidence
interval.

• The confidence interval is denoted by (1   )100% . When expressed as

probability, it is called confidence coefficient and is denoted by (1  .)
(note: is called the significance level).

• Although any value of the confidence level can be chosen to construct a

confidence level, the more common values are 90%, 95% and 99%. The
corresponding confidence coefficient are 0.90, 0.95 and 0.99.
Confidence level and confidence interval:

1) The confidence level of an interval estimate of a parameter is the

probability that the interval estimate will contain the parameter.

2) Confidence Interval:
• A confidence interval is a specific interval estimate of a parameter
determined by using data obtained from a sample and by using the
specific confidence level of the estimate.

3) Relationship between significance level, , and confidence level:

• The relationship between significance level and confidence level is
that the stated confidence level is the percentage equivalent to the
decimal value of 1   , and vise versa.

• When the 95% confidence interval is to be found,   0.05 ,

since 1 – 0.05, or 95%.

• when   0.01, then 1    1  0.01  0.99 , and the 99%

confidence interval is being calculated.
INTERVAL ESTIMATION OF A POPULATION MEAN: LARGE SAMPLES

• The sample size is considered to be large when n is 30 or larger.

• Therefore, when the sample size is 30 or larger, we will use the normal
distribution to construct a confidence interval for  . We also know that the

standard deviation of X is  x  . However, if the population standard
n

deviation  , is not known, then we use the sample standard deviation, s, for .
. Consequently, we use s x  s .
n

• Note that the value of s x is a point estimate of  x.

Confidence interval for  (large samples)

The (1   )100% confidence interval for  is

If  is known If  is not known

    s 
X  z   X  z  
2 n 2 n

The value of z used here is read from the standard normal distribution table for
the given confidence level.
MAXIMUM ERROR OF ESTIMATE FOR .
  
• The term z 2   is called the maximum error of estimate. For a
 n

specific value say,   0.05 , 95% of the sample means will fall within this
error value on either side of the population mean.

• Definition :
Maximum error of estimate is the maximum likely difference
between the point estimate of a parameter and the actual value of
the parameter.
How to find the z-value from the standard normal distribution table?

• The value of z in the confidence interval formula is obtained from the

standard normal distribution table for the given confidence level. Suppose we
want to construct a 95% confidence level, we perform the following two steps.

1. Divide 0.95 by 2, which gives 0.4750

2. Locate 0.4750 in the body of the normal distribution table and record the
corresponding value of z. This value of z is 1.96.

NOTE: for a 90% C.I., z  1.65 ; for a 95% C.I., z  1.96

2 2

for a 99% C.I., z 2  2.58.

Total shaded area is

0.95 or 95%

z
-1.96 0 1.96
• For a (1   )100% confidence level, the area between –z and z is 1  
because the total area under the normal curve is 1.0 the total area under the
curve in the two tails is  . This, as mentioned earlier, is called the significance
level.

• For a 95% confidence level,   1  0.95  0.05 . Therefore the area under the
curve in each of the two tails is  2 . The value of z associated with (1   )100%
confidence level is sometimes denoted by z 2 .

 
2 2
1

z
-z z
EXAMPLE 1.3:
The president of a large university wished to estimate the average age of the
students presently enrolled. From past studies, the standard deviation is
known to be 2 years. A sample of 50 students is selected, and the mean is
found to be 23.2 years. Find the 95% confidence interval of the population
mean.

SOLUTION:
Since the 95% confidence interval is desired, z  1.96 . Hence,
2
substituting in the formula
  
X  z  
2 n
     
X  z      X  z  
2 n 2 n 
 2   2 
23.2  1.96     23.2   
 50   50 
23.2  0.6    23.2  0.6
22.6    23.8

Or 23.2  0.6 years. Hence, the president can say, with 95% confidence, that
the average age of the students is between 22.6 and 23.8 years, based on
50 students.
EXERCISES 1.1

1. What is the difference between a point estimate and an interval estimate

of a parameter? Which is better? Why?

2. What is the meant by the 95% confidence interval of the mean?

3. Find each.
a) z 2 for the 98% confidence interval
b) z 2 for the 90% confidence interval
c) z 2 for the 94% confidence interval
INTERVAL ESTIMATION OF A POPULATION MEAN: SMALL SAMPLES

Conditions under which the t-distribution is used to make a confidence interval

about  :
1. The population from which the sample is drawn is (approximately) normally
distributed.

2. The sample size is small (that is, n<30)

3. The population standard deviation,  , is not known.

The t-distribution is a specific type of bell-shaped distribution with a lower

height and wider spread than the standard normal distribution. As the
sample size becomes larger, the t-distribution approaches the standard
normal distribution. The t-distribution has only one parameter, called the
degrees of freedom (df). The mean of the t-distribution is equal to 0 and its
standard deviation is df /( df  2) .
Characteristics of the t-distribution

• The t-distribution shares some characteristics of the normal distribution and

differs from it in others. The t-distribution is similar to the standard normal
distribution in these way:

1. It is bell-shaped.
2. It is symmetric about the mean.
3. The mean, median, and mode are equal to 0 and are located at the center
of the distribution.
4. The curve never touches the x-axis.

• The t-distribution differs from the standard normal distribution in the

following ways:

1. The variance is greater than 1

2. The t-distribution is actually a family of curves based on the concept of
degrees of freedom, which is related to sample size.
3. As the sample size increases, the t-distribution approaches the standard
normal distribution.
EXAMPLE 1.4:

Find the value of t for 16 degrees of freedom and 0.05 area in the right tail of
a t-distribution curve.

SOLUTION:

From the t-distribution table, the value of t=1.746

df=16 0.05 The value of t for 16 df and

0.05 area in the right tail

0 1.746

df=16
The value of t for 16 df and
0.05
0.05 area in the left tail

1.746 0
CONFIDENCE INTERVAL FOR  USING THE t-Distribution

Confidence interval for  for small samples:

The (1   )100% confidence interval for  is:

 s 
X  t  Or X  ts x sx 
s
 n Where
n

The value of t is obtained from the t-distribution table for n – 1 degrees of

freedom and given the confidence level.
EXAMPLE 1.5:

Ten randomly selected automobiles were stopped and the tread depth of the
right front tire was measured. The mean was 0.32 inch, and the standard
deviation was 0.08 inch. Find the 95% confidence interval of the mean depth.
Assume that the variable is approximately normally distributed.

SOLUTION:
Since  is unknown and must s must replace it, the t-distribution must be
used for 95% confidence interval. Hence, with 9 degrees of freedom, t 2  2.262

The 95% confidence interval of the population mean is found by substituting in

the formula X t
 s 
  
 n
2

 s   s 
X  t      X  t  
2 n 2 n
 0.08   0.08 
0.32  2.262     0.32  2.262 
 10   10 
 0.08 
0.32  0.057    0.32  2.262 
 10 
0.26    0.38

Therefore, one can be 95% confident that the population mean thread depth of
all right front tires is between 0.26 and 0.38 inch based on a sample of 10 tires.
EXERCISES 1.2

1. When should the t distribution be used to find a confidence interval for the
mean?

2. A recent study of 25 students showed that they spent an average of

RM18.53 for gasoline per week. The standard deviation of the sample was
RM3.00. Find the 95% confidence interval of the true mean.
 TASK 1

1) A sample of the reading scores of 32 students has a mean of 82. The

standard deviation of the sample is 15.
a) Find the 95% confidence interval of the mean reading scores of all
students.
b) Find the 99% confidence interval of the mean reading scores of all
students.
c) Which interval is larger? Explain why.

2) A sample of 17 states had these cigarette taxes (in cents):

112 120 98 55 71 35 99 124

64 150 150 55 100 132 20 70 93

Find the 98% confidence interval for the cigarette tax in all 50 states.