STA 404 : STATISTICS FOR BUSINESS AND SOCIAL SCIENCES CHAPTER 3

CHAPTER 3: ESTIMATION

3.1 SAMPLING DISTRIBUTION OF SAMPLE MEAN

1. Sampling distribution of sample mean is the distribution of the mean of all the possible
random variable of size n that could be selected from a given population.

f f

x
f

x x
x
THE POPULATION f THE SAMPLING
DISTRIBUTION DISTRIBUTION OF MEANS

THE POSSIBLE SAMPLE DISTRIBUTION

2. Sampling distribution for sample mean:

THE CENTRAL LIMIT THEOREM:

When all possible random samples of sizes n are selected from a population with
a mean µ and a standard deviation of σ, then sampling distribution of means is
approximately normally distributed with the mean μx =μ and standard deviation
σ
(standard error), σ x  for a sufficiently large n.
n

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3.2 STANDARD ERROR

1. The standard error is the standard deviation of a sampling distribution

Example 1: The standard error for a sampling distribution of means,

σ s
σx  [ σˆ x  ]
n n

3.3 ESTIMATION

1. Estimation is the process of estimating an unknown parameter using a statistic.

2. Estimator is any statistics that is used to estimate the parameter.

Example 2: sample mean, x  population mean, 

sample variance, s2  population variance, 2

3. Estimates is the specific value or quantity obtained for a statistic.

Estimation

Point Estimation Interval Estimation

4. A point estimation is the process of estimating the value of an unknown parameter by

using a single value.

Example 3: μ = RM 1000

5. An interval estimation is the process of drawing inferences about a population by

estimating the value of an unknown parameter using an interval.

Example 4: RM 12  μ  RM 1000

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3.4 POINT ESTIMATION

1. A point estimator for population mean,  is given by the sample mean, x .

∑x
μ̂ = x =
n

Example 5: You wish to estimate the average weight of all the students in your
class. You only know the weight of 5 of the students in your class:
45.0kg, 49.5kg, 50.0kg, 53.6kg, 59.6kg

45.0 + 49.5 + 50.0 + 53.6 + 59.6

Sample mean, x = .
5

So, you can estimate the average weight of all the

students, μ̂ = x = 51.54kg

2. A point estimator for population variance, 2 is given by the sample variance, s 2 .


σ̂ = s  1  x 2 
2 2
 x 2 
n 1  n 
 

Example 6: You wish to check if the production of sulfuric acid in

your factory is in control. One of the ways to evaluate this is by
measuring the variation in the product produced. Suppose that
contents of 7 similar containers of sulfuric acid in liters are as
follows:

9.8 10.2 10.4 9.8 10.0 10.2 9.6.

1  70 2 
Sample variance, s2 =  700. 48    0.08
7 1  7 

So, you can estimate the variance of the content of sulfuric acid in
your factory, σ̂ 2 = s2 = 0.08  2

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3.5 INTERVAL ESTIMATION OF POPULATION MEAN

3.5.1 CONFIDENCE INTERVAL OF MEAN FOR LARGE AND SMALL

SAMPLES

a) CONFIDENCE INTERVAL OF  FOR LARGE SAMPLE (n  30)

1. We wish to get an interval estimates x 1  μ  x 2 with certain probability of

covering the parameter .

Assume probability of covering the parameter  as (1-). (1-) = level of confidence

 = level of significance
Pa  X  b  = (1-)

 
   
X -μ
P  Z    Z   = (1-) 2 2
 2 σ 2 1- 
 
 n 
 σ σ   Z Z
P  Z   X  μ  Z  = (1-) 2 2
 2 n 2 n
 σ σ 
P X  Z   μ  X  Z  = (1-)
 2 n 2 n

So, the 100(1-)% confidence interval for mean (when n is large) is

σ σ
X  Z  μ  X  Z
2 n 2 n

σ
X  Zα
2 n

2. When the population variance, 2 is unknown, it can be replaced by sample

variance, s2 (when n is large).

s
X  Zα
2 n

Example 7: The mean and standard deviation for the time spent (in hours) for
revision per day of a random sample of 36 college students are
calculated to be 2.6 and 0.3 respectively. Find the 95% and 99%
confidence interval for the mean of the entire senior class.

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b) CONFIDENCE INTERVAL OF  FOR SMALL SAMPLE (n < 30)

3. Provided that the population distribution is normal, when sample size, n

is small and population variance,2 is known,
σ
X  Zα
2 n

4. Provided that the population distribution is normal, when sample size, n

is small and population variance, 2 is unknown,

s
X  tα , n -1
2 n

Here we use the t-distribution rather than Z-distribution (standard normal

distribution).

t-distribution has the following properties:

a) It is similar to Z-distribution with a zero mean and symmetrical shape

about the mean.
b) Shape depends on the sample size.

A small sample corresponding to t-distribution which is less peaked

than the Z-distribution. As the sample size increases, the t- distribution
loses the flatness and approximately the shape of the Z-distribution.

n=
n=20
n=5
n=2

Normal Distribution

Example 8: The contents of 7 similar containers of sulfuric acid in liters

are as follows:
9.8 10.2 10.4 9.8 10.0 10.2 9.6.

Find a 95% confidence interval for the mean content of all such
containers, assuming an approximate normal distribution for
container content.

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Example 9: (SPSS output)

One-Sample Statistics

Std. Error
N Mean Std. Deviation Mean
Vehicle Weight (lbs.) 406 2969.56 849.827 42.176

One-Sample Test

Test Value = 3200

95% Confidence
Interval of the
Mean Difference
t df Sig. (2-tailed) Difference Lower Upper
Vehicle Weight (lbs.) -5.464 405 .000 -230.438 -313.35 -147.53

From the SPSS output above, what is the 95% confidence interval
for the average of all the vehicle weights?

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3.5.2 CONFIDENCE INTERVAL OF DIFFERENCE BETWEEN TWO MEAN

FOR LARGE AND SMALL SAMPLES

a) CONFIDENCE INTERVAL OF (1-2) FOR LARGE SAMPLES

1. Suppose we are interested to compare means for 2 independent normal

distributions.

Let X1~N(1, 12)

X2~N(2, 22)

2
σ1
Then X 1 ~ N(μ 1 , )
n1
2
σ2
X 2 ~ N(μ 2 , )
n2
 σ2 
X 
2 2
σ1
 X ~ N  (μ - μ ), (  ) 
1 2
 1 2 n n
 1 2 

Pa  X1 - X 2  b   1  α

 
 

P  Z  
X1 - X 2   μ 1  μ 2  
 Z   1  α
 2
σ1
2
σ2
2 2
  
 n1 n2 

 σ12 σ 2 2 σ1 2 σ 2 2 
P  Z 
 2 n1

n2
 
 X1  X 2  μ 1  μ 2   Z 
2 n1

n2 
 1 α
 
 

 
P X 1  X 2  Z 
2
σ1 2 σ 2 2
n1

n2
 
 μ 1  μ 2   X1  X 2  Z 
2
σ1 2 σ 2 2
n1

n2
  1 α

 

So, the 100(1-)% confidence interval of the differences between two means (when
n1 and n2 are large) is

2 2 2 2
X 1 
 X 2  Z
2
σ1
n1
σ
n2

 2  μ 1  μ 2   X1  X 2  Z 
2

σ1
n1
σ
 2
n2

σ1 2 σ 2 2
X1 - X 2   Zα 
2 n1 n2

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2. When the population variances, 12 and 22 are unknown, it can be replaced by the
sample variances, s12 and s22 (when n1 and n2 are large).

2 2
s1 s
X1 - X 2   Zα  2
2 n1 n 2

b) CONFIDENCE INTERVAL OF (1-2) FOR SMALL SAMPLE

1. Provided that both of the population distributions are normal, when

population variances, 12 and 22 are known,

2 2
σ1 σ
X1 - X 2   Zα  2
2 n1 n2

2. Provided that both of the population distributions are normal, when

population variances, 12 and 22 are unknown; 12 = 22

sp2 sp2 n 1  1s12  n 2  1s 2 2

X1 - X 2   tα , n1  n 2  2
 where s p 2 
n1  n 2  2
2 n1 n2

X 1 - X2   tα ,n n2 2
2 1
sp
1

1
n1 n 2

NOTE: This still give good result when 12  22, provided that n1 = n2.

3. Provided that both of the population distributions are normal, when

population variances, 12 and 22 are unknown; 12  22

2
 s1 2 s 2 2 
  
s1 2 s 2 2  n1 n 2 
X1 - X 2   tα ,
 where    
2 n1 n 2 2 2
 s1 2   s22 
   
 n1   n2 
   
n 1  1 n 2  1

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Example 10: (SPSS output)

From the SPSS output below, assuming that the variances of the
male and female graduates starting salary to be the same, what is
the 95% confidence interval for the difference in the starting salary
of male and female graduates?

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3.5.3 CONFIDENCE INTERVAL OF DIFFERENCE BETWEEN TWO MEAN

(DEPENDENT SAMPLE)

1. Dependency between 2 groups (population) usually occurs because of repeated

measures are obtained from the same set of individuals are matched according to
certain characteristics.

2. The differences between the paired observations are illustrated as below:

GROUP
OBSERVATION 1 2 DIFFERENCE, d
1 X 11 X21 d1= X11 -X21
2 X 12 X22 d2= X12 -X22
. . . .
n X 1n X2n dn= X1n -X2n

3. Provided the samples are randomly drawn from a normally distributed

population, then

Example 11: The time taken by ten men to perform a task were measured. After a
training which is designed to reduce the time, the men were tested
again. The time in seconds were found to be as follows:

Before 27 45 51 33 49 22 23 35 41 25
After 22 37 45 26 44 20 16 35 42 23

Assuming the time taken to perform the task to be normally

distrinuted, find the 95% confidence interval for the difference in the
mean time take before and after the training.

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Example 12: (SPSS output)

A financial analyst is interested in whether there is a significant

change in profits for utility stocks before and after the September 11
event. From the SPSS output below, find the 95% confidence
interval for the difference of the paired sample. Is there a change in
the profit after the September 11 event?

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