Chapter 7 Confidence Interval Estimation

Estimation
There are 2 types of estimation in statistics: point estimation and interval estimation.
Point Estimation. With point estimation, a single statistic such as the sample mean,
sample median, sample proportion is given as an estimate of the parameter of interest.
Sometimes there are various choices when choosing a point estimate (ie sample mean
vs. sample median)

A confidence interval for a population parameter is an interval of possible values for

the unknown parameter. The interval is computed from sample data in such a way
that we have a high degree of confidence that the interval contains the true value of
the parameter. The confidence, stated as a percent, is the confidence level.

The confidence interval is given in the form:

estimate + margin of error

Three factors must be made to develop a confidence interval:
1) a good estimator of the parameter
2) The sampling distribution or approximate distribution of the estimate
(standard deviation of the estimate).
3) The desired confidence level.

7.1 Confidence Interval for population proportion π

In general , confidence interval of π of a sample with a large sample size n, is

p(1 − p )
p + z* *
n
The blue area is 1-α

Standard Normal

(1-α) 80% 90% 95% 98% 99%

z* 1.282 1.645 1.96 2.326 2.576
(1-α) is how confident we want to be that the confidence interval WILL contain
the parameter of interest. We’ll refer to these as the level of confidence.

Steps to calculate CI for π

1
 p(1 − p )
1) Calculate estimate p and SE(p) =
n
2) Find the critical value z* from the Table corresponding to the level (1-α)
*
3) ME= z *SE

4) CI=p + ME

So, 95% confidence interval for π is

p(1 − p )
p + ME=p + 1.96*
n
Question: How to find out CI with a confidence level other than 95%? Such as 80%
and 98%.
Example 1:
To find the proportion π of all students who study on weekends, survey 200
students and find out 60 students study on weekends, find out 80%, 95% and 98%.
confidence interval for π

Sample Size Determination for Estimating π

2
⎡ z* ⎤
The solution is n=⎢ p (1 − p ) ⎥
⎣B ⎦
Example 1 (continued) The estimate margin of error for the 95% confidence interval
is .0635, find the sample size necessary to reduce the margin to .03? How about .01?

7.2 Confidence interval for μ based on y when σ is known: the z-interval.

When σ is known, y is approximately normally distributed with mean μ

2
and standard deviation σ.
σ
a) Calculate estimate y and SE( y )=
n
b) Find critical value z* corresponding to the confidence level (1-α)

* * σ
c) ME= z *SE( y )= z
n
d) CI= (estimate – EM, estimate +EM)
σ σ
i.e. (y − z* , y + z* )
n n
Examples
1. Based on a sample of 35 cars of a particular model, the fuel tank capacity is
calculated for each. Based on this data, the sample mean is 18.99 gallons.
The population standard deviation is believed to be 3.5. Obtain a 90%
confidence interval for the mean fuel capacity of this model of car.
Solution:

2. Suppose a 95% confidence interval for μ is (4.2, 4.8). What is the sample
mean? What’s the width of this interval? What is the margin of error?

3. What’s the width of the interval below?

σ
X ± z*
n

Finding the sample size

2
⎡ z *σ ⎤
For a given bound B , on the margin of error, the sample size n=⎢ ⎥
⎣ B ⎦
Ex: (cont.) Based on a sample of 35 cars of a particular model, the fuel tank capacity
is calculated for each. Based on this data, the sample mean is 18.99 gallons. The
population standard deviation is believed to be 3.5. suppose that we want to obtain a
90% confidence interval for μ and we want the margin of error to be 0.2. Calculate
the sample size?

3
Solution:

7.3 Confidence Interval for μ based on y when σ is unknown: the

t-interval.

If n>30 or population distribution is normal , we can use t-interval to find out

CI:
S
a) Calculate estimate y and SE( y )= where s is the sample
n
standard deviation.
α
b) Find critical value t* from table. It’s the upper critical value
2
with degrees of freedom n-1.
c) A (1-α )100% confidence interval for μ is given by the limits
S S S
y +t * or ( y − t* , y + t* )
n n n

S
margin of error(ME)= t * *SE( y )= t *
n

2
⎡ t* ⋅ S ⎤
For a given bound B , on the margin of error, the sample size n=⎢ ⎥
⎣ B ⎦

Exercise: For the following cases, to find the corresponding critical value t*
a) 90% confidence level, n=20
b) 98% confidence level, n=30
c) 95% confidence level, n=47

Exercise: Based on a sample of 35 cars of a particular model, the fuel tank capacity is
calculated for each. Based on this data, the sample mean is 18.99 gallons. The
sample standard deviation is believed to be 3.5. Obtain a 90% confidence interval
for the mean fuel capacity of this model of car.

4
For the above example, suppose that we want to obtain a 90% confidence interval for
μ and we want the margin of error to be 0.2. Calculate the sample size?

Exercise
To find out the weight of a particle, it was measured 41 times, and sample mean

y =174 units with sample standard deviation s=1.1 units. Give a 95% CI of its true
weight.

Exercise: A real estate agent needs to estimate the average value of a residential
property of a given size in a given area. He believes that the standard deviation of the
property values is σ = $5,500, and that property values are approximately normally
distributed. A random sample of 16 units gives a sample mean of $89,673.12. What is
the 95% confidence interval for the average value of all properties of this kind?

Exercise: A manufacturer of pharmaceutical products analyzes a specimen from each

batch of a product to verify the concentration of the active ingredient. The chemical
analysis is not perfectly precise. Repeated measurements on the same specimen give
slightly different results. The results of repeated measurements follow a normal
distribution. The analysis procedure has no bias, so the mean of the population of all
measurements is the true concentration in the specimen. The standard deviation of
this distribution is known to be 0.0068 g/l. Three analyses of one specimen give the
following concentrations 0.8403 0.8363 0.8447
Calculate the 99% confidence interval for the true concentration