THEORY OF ESTIMATION

Estimation of population parameters such as the mean and variance from the corresponding
sample mean and variance is one of the very important problems of statistical inference. The
estimation of population parameters is important in making decisions in various areas. A
manufacturer may, for example, be interested in estimating the future demand for his products in
the market.

Confidence Intervals for the population mean μ

The objective of sampling is to estimate the population parameters. In particular, the population
mean can be estimated by the sample mean but because the two will most likely not be equal, an
interval within which the population mean might be expected to lie is found necessary. This
interval consists of two constants c1 and c2 such that:

P(c1    c 2 )  1  

We demonstrate this using the t-distribution as follows:

(1   )

 
2 2

c1 c2

Interval estimates are therefore estimates for which it can be asserted with (1- α) 100% degree of
confidence that they will contain the population mean μ. The interval [c1,c2] within which the
unknown value of μ is expected to lie is known as the (1 - α) 100% confidence interval. The
limits c1 and c2 are known as the (1 – α) 100% lower and upper confidence limits respectively.
This interval is given by:

s s
x  t  2 (n  1)    x  t  2 (n  1)
n n

Where x  sample mean, n  sample size

 1 
 fx 
2
 fx 
2


s = sample standard deviation = n 1
   where n   f
f

t  2 (n  1) is the value of t with (n – 1) degrees of freedom to the right of which the area under

the curve is 2

Degrees of freedom:

Degrees of freedom of an estimate are the number of pieces of independent information that
went into calculating the estimate. When we use the sample mean x as an estimate of the
population mean μ, then the number of degrees of freedom is given by n – 1 where n is the size
of the sample used. For instance, three numbers which can have a mean of 10 can be 9, 10, and
11. Once you have chosen the first two, the third will be fixed and hence only the first two
numbers are free to vary. So the number of degrees of freedom for a set of 3 numbers is 3 – 1 =
2. So if you have n numbers then n – 1 will be free to vary giving the number of degrees of
freedom.

Examples:

1. With 98% degree of confidence and a sample size of 7, the value of t is obtained as follows:

(1 – α) 100% = 98%

1 – α = 0.98 (1 – α)

α = 0.02 
2

2  0.01

2  0.01 t 0, 01 (6)  3.143
d.f = n – 1 = 7 – 1 = 6

2. The contents of a random sample of 15 similar containers of a chemical used in the

construction industry are as follows:

Content(lit) 9.6 9.8 10.0 10.2 10.4

N0. of containers 2 4 5 3 1
Construct a 95% confidence interval for population mean μ (the true mean content of the
containers).

Solution:

s s
x  t  2 (n  1)    x  t  2 (n  1)
The interval is given by: n n
x f fx fx2

9.6 2 19.2 184.32

9.8 4 39.2 384.16

10.0 5 50.0 500.0

10.2 3 30.6 312.12

10.4 1 10.4 108.16

 fx  149.4  9.96 1 
 fx 
 fx 
2


1  149.4 2 
x s 2
1488.76    0.229
 f 15 n 1 
  f 

14  15 

(1 – α) 100% = 95%

1 – α = 0.95

2  0.025
α = 0.05


2  0.025
t 0.025 (14 )  2.145
d.f = n – 1 = 15 – 1 = 14

To obtain:

 0.229   0.229 
9.96  2.145     9.96  2.145   9.83    10.09
 15   15 

We can therefore assert with 95% confidence that the true mean content of the containers lie
between 9.83 liters and 10.09 liters.

Exercise: A special treatment is applied to specimens of a tie before being tested for breaking
strength and the results obtained for the test are as follows:

Breaking strength (KN) 99.4 100 100.1 100.2 100.5 100.7 100.8
Frequency 2 2 4 5 3 2 2
Find a 99% confidence interval for the true mean breaking strength of the tie.

Confidence Interval for the difference between the means of two populations (μ1 – μ2)

Suppose that the random variable X 1 is based on a random sample of size n1 from a normal
population with mean μ1 and variance  2 . Also suppose that the random variable X 2 is based on
a random sample of size n2 from a normal population with mean μ2 and variance  2 . The
random variable X 1  X 2  is then normally distributed with mean u1   2  and variance
 2  2 
   The (1   )100 % confidence interval for 1   2 is given by:
 n1 n2 

2 2 2 2
( x1  x2 )  t 2 (n1  n2  2)   1   2  ( x 1  x2 )  t 2 (n1  n2  2) 
n1 n2 n1 n2

where n1  n2  2 is the number of degrees of freedom.

NB: If the two populations have different variances, a complication arises in calculating the
number of degrees of freedom.

Example:

A random sample from a population A had the observations 0.26, 0.43, 0.47, 0.49, 0.52, 0.75,
0.79, 0.86, 0.62 and 0.46. A second random sample from a population B had the observations
0.32, 0.53, 0.28, 0.37, 0.47, 0.43, 0.36, 0.42, 0.38 and 0.43. If the two populations are normally
distributed with a common variance of 0.02, construct a 99% confidence interval for the
difference between the means of the two populations.

Solution:

Let  1 and  2 be the population means from A and B respectively.

n1  10, n2  10,  2  0.02, x1 

x 1

5.65
 0.565, x2 
 x2  3.99  0.399
n1 10 n2 10
(1   )100 %  99 %

1    0.99

  0.01,  2  0.005 
=0.005
2

n1  n 2  2  18

t 0.005 (18)  2.878

To obtain:

0.02 0.02 0.02 0.02

(0.565  0.399)  2.878   1   2  (0.565  0.399)  2.878 
10 10 10 10

 0.016  1   2  0.348

Exercise:

A random sample from a population X consists of the observations 34, 55, 43, 37 and 48. A
second random sample from a population Y consists of the observations 20, 31, 23, 35, 41, 29
and 39. If the two populations are normally distributed with a common standard deviation of
2.81, find a 95% confidence interval for the difference between the means of the two
populations.