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Chapter-Four
Estimates
168.87, 35,671.13)
2050
V 256
G
99% confidence interval is:
2050
256
(35,089.44, 35,750.56)
4d. Interpretation (b)
!f we select 100 samples of size 100 from the population of all middle managers and compute
the sample means and confidence intervals, the population mean annual income would be
found in about 95 out of 100 confidence intervals. About 5 out of 100 confidence interval would
not contain the population mean annual income.
Check your progress-1
Exercise:_A research firm conducted a survey to determine the mean amount smokers spent on
cigarette during a week. A sample of 49 smokers fevealed that the sample mean is Br. 20 with standard
deviation of Birr 5. Construct 95% confidence interval for the mean amount spent.
4 Confidence interval for population proportion.
The confidence interval for a population proportion is estimated as:
nls
Example: Suppose 1600 out of 2000 union members said they plan to vote for the proposal to merge
with a national unign. Union by laws state that at least 75% of all members must approve for the merger
to be enacted. Using 0.95 degrees of confidence, what is the interval estimate for population
proportion? Based on the confidence interval, what conclusion can be drawn?
Solution:
1600
P* 3000 -0.08 + 1.96 V0.00008
(0.782, 0.818)
Based on the sample results when all union members vote, the proposal will probably pass because 0.75
lie below the interval between 0.782 and 0.818.
Check your progress-2
Exercise: A sample of 200 were assumed to identify their major source of news information., 110 stated
that their major source was television news Coverage. Construct a 95% confidence interval for the
proportion who consider their major source of news information
4.5 Finite population Correction Factor
If we have sampled population so far has been very large or assumed to be infinite. If the sampled
population is not infinite or not larger we need to make some adjustment in the standard error of the
mean and the standard error of the proportion. This is done to reduce the error we commit in estimating
a parameter.
,A population that has a fixed upper bound is said to be finite. finite population can be small or larger.
For fipite population, where the total number of objects is N, and the size of the sample is n the
following adjustment is made to the standard errors of the mean and the proportion.
The standard error of the mean,
o N-n
a = =, |
* dn VN =-1
The standard error of the proportion,
This adjustment is called finite population correction factor.
1000 — 100
Suppose the population is 1000 and the sample is 100. Then thisrati, JQQQ —]
= —<—— — 900
999 __ - Taking square root gives the correction factor 0.9492, Multiplying the standard error
reduces the error by about 5%. This reduction of the size of standard error yields a smaller range
of values in estimatifg'The population mean, If the sample size is 200 the correction factor is
0.8949. Meaning the standard error is has been reduced by more than 10%.
n
TThe usual rule is that if the ratio ofthe sample to the population is Ay is less than 0.03,
the finite population factor is ignored.
Example: There are 250 families in a town, a poll of 40 families revealed that the mean annual
contribution is 450 with a standard deviation of 75. Construct 95% confidence interval for mean
annual contribution. >
Solution
First note that the population size is finite (N-250) and sampling fraction
BM oy
which is larger than 0,05 and we can introduce the finite
N 250 —
population correction factor (ipe).
The confidence interval is given by:
450 £1.96 —2—,|250 = 40
v40 250 -1
450 + 23 .24-V0.8433 -450 + 21 .34
(428.66, 471.34)
4.6 Confidence interval for small sample (Student's t-distribution)
When the population is large and normal and the standard deviation is known the standard normal
distribution is employed to construct the confidence interval for the mean and proportion. If the sample
size is ableasf30, the sample standard deviation can substitute the population standard deviation and
the results are deemed satisfactory.
If the sample size is less than,30, and the population standard deviation is unknown, the standard
normal distribution, Z is not appropriate. The student's t-distribution is used. Characteristics of Student's t-distribution
Assuming the population of interest is normal or approximately normal, the following are the
characteristics of the t-distributi
Itis continuous distribution
b. tis bell shaped and symmetrical
c. There is not one t-distribution, but rather a “family” of t-distribution. All have the same mean of
zero but their standard deviation differ according to the sample size, n. The t-distribution differs
for different sample sizes.
4, It's more spread out and fatter atthe center than isthe Zcistribution. However, as the sample
size increases the curve representing t-distribution approaches the Z-distribution.
Student's t
Probability density function
‘As the sample size decreases the curve representing the t-distribution will have wider tails and
will be more fat at the center
For a given confidence level, say 95%, the t-value is greater than the Z values. This is so because there is
more variability in sample means computed from smaller samples. Thus our confidence in the resulting
estimate is not strong. t-values are found referring to the appropriate degrees of freedom in the table.
Degrees of freedom means the freedom to freely move data points or the freedom to freely assign
values arbitrarily
Degrees of freedom (df}=n-1, where n is the sample size.
This implies that we can freely move or assign values for all data points except the last nth value. If the
mean of the distribution is specified there is freedom to assign any value for all data points except the
last point.
Example: The mean five data point is 12, Then it follows that the sum of all the five points is 60 (5*12).
“Thus five points are constrained to have a sum of 60 or a mean of 12, we have 5-1=4 degrees of
freedom. if all the five data points are missing , we are free to assign any value as long as their sum is 60.
Say 14, 12, 10, 9, 15.
If 4 are missing we are free to assign any value 60 minus the known value of data point.
If two are unknown ; 14,16,10, x4, x5. Since 14+16+10+ x4+x5=
a Then xaexs:
10. We can assign any value as long as their sum is 20. It can be 10 , 10 or 11, 9, 15, 5, ..ete.
But if four data points are known (10,14,16,12) the 5® data point will have a predetermined value, that
is 60-52=8. Now we are not free to assign arbitrary value for this data point. Degrees of freedom
can be obtained from the deviation based on the assumption that sum of differences (d)
between the mean and all values of the rendom variable (X) is zero. That is if we subtract the
mean from all values of X the sum of difference will be zero. Consider the above five data points.
Their mean is 12 and their sum is 60.Thus
¥ (x, -12)=0
Now we free to assign any value for only four missing differences as long as this sum is zero. So have
n-l degrees of freedom.
Computing t-value:
‘The t-variable representing the student's t-distribution is defined as:
r=2#
~ s/ Jn woe © isthesample mean ofn observations, M isthe
population mean and s is the sample standard deviation.
x -
. amt o ,
Note that t is like é / [iy except we replace O with s, Unlike our methods of
large samples, O can not be approximated by s when sample size is less than 30 and we can
not use the standard normal distribution. The table for t-distribution is constructed for selected
levels of significance up to 30, To use the table we need to know two numbers the level of
significance @ and degrees of freedom.
The confidence interval for the population mean is:
Example: A traffic department in town is planning to determine mean number of accidents at a high risk
intersection. Only a random sample of 10 days measurements were obtained.
Number of accidents per day:
Days [2 2 3 [4 [5s fe [7 [se [9 Jao
Record [8 [7 [10 (15 [11 [6 |e [5 [a3 [a2
Construct
a) 95% confidence interval
b. 99% confidence interval (exercise) Solution :
a) Sample mean is 9.5 per day
The confidence interval is:
to.cas (9) = 2.262
ett, (n=)=—=
+ “r
9.5 + 2.262
ie
9.5 + 2.3 =92,118)
With 95% confidence the mean number of accident at this particular intersection is between 7
and 12.
Check your progrees-3
Exercise: A quality controller of a company plans to inspect the average diameter of small bolts made. A
Fandom sample of 6 bolts was selected. The sample mean is computed to be 2.0016 mm and the sample
standard deviation is 0.0012. Construct 99% confidence interval for the mean of bolts made.
4.7 Selecting a sample size
= Size of the sample must be determined scientifically. Care must be taken not to select a sample too large
or too small. There are two misconceptions about how many to sample
a). Sample consisting 5% ( or similar constant percentage) is adequate for all problems. 5% can be too
much for a particular population say 10 million or can be small another 200.
b) A sample, for example must be selected from heavily populated area. To avoid such problems the
sample should be mathematically determined,
4.7.1 Sample size for the mean
There are three factors that determine the size of the sample.
a. The degree of confidence level
-10- b. The maximum allowable error
cc. The variability in the population
2a) The degree of confidence:- This is usually 95% or 99%. But it may be any level. It is specified by the
statistician. The higher the degree of confidence, the larger the sample size required. if we want to be
sure that the truer mean willie between the intervals, we would have to survey the entire population.
For example, suppose the parameter to be estimated is the arithmetic mean, and degrees of confidence
is 90%. Based on a sample, it was estimated that the population mean is in the interval between 850 and
1050. Logically, if the degree of confidence were increased to 95% or 99% the sample size would have to
increase
}) Maximum allowable error:-It is the maximum error that will be tolerated at a specific level of
confidence. Suppose a statistician is interested to estimate the mean income of residents of an area.
There re indications that the family incomes range from a probable low of 19,00 Oto a high of about
39,000. On the assumption that these are reasonable estimates. Does it seem likely that the statistician
would satisfied with this statement resulting from a sample area of residents. “The population mean is
between, 23,000 and 35,000” probably not. Because confidence limits that wide indicate little or nothing.
about the populatior iinstéad, the statistician stated, “using the 0.95 confidence level, the total
error is predicting the population mean should not exceed by 200”. The maximum allowable error is
denoted “e"= | — | . This means based on a sample size n, if the estimates of population
mean is computed to be 35,000, then we will assume that the population mean is in the interval
between 34,800 and 35,200. Found by 35,000+200. For the 0.95 degrees of confidence selected
the maximum error of the mean, J ¥ simply divide by the total error of 200 by 1,96=102.04
- 20. 102 .04
1.96
| cannot exch
A. 97.96 102.04 5 102.04 19795
1960-1 0 +1 (1.96 >
| Population mean must be inthe Zz
interval + 200 from the sample
mean
‘The size of the sample is by computed by solving for n in the formula.
-II- note that since we dre using a sample standard deviation, i.e
is substituted for O =
From this equality we have,
Z,8)°
2
E
)) Variance in the population
There are still two unknowns. To solve for the number to be sampled we need to estimate
tegen in the population. The standard deviation is a measure of variation. Thus the standard
deviation of a population must be estimated. This can be done either,
a. By taking a small pilot survey and using the standard deviation of the pilot samples as an
estimate of the population standard deviation.
b. By estimating the standard deviation based on knowledge of the population.
Suppose a pilot survey is conducted and sample standard deviation estimates is computed to be 3000
for 95% confidence level and margin of error 200. ~
The number to be sampled can now be estimated,
*
n= 1.96 * 3000 = 864 36
200
Example:- A marketing research firm wants to conduct a survey to estimate the average amount spent
on entertainment by each person visiting a popular pub. The people who plan the survey would like to
be able to determine the ayerageamount spent by all people visitng the pub to within br 120, with 95%
confidence. From the past experience of the pub, an estimate of the population standard deviation is br.
400. What is the minimum required sample size?
= —_19 Solution
* 2
_ { 1.96 * 400 = 42.68
120
Check your progress-4
Exercise: A processor of carrot cuts the green top of each carrot washes the carrots, and insets six toa
package. Twenty packages are inserted in a box for shipment. To see the weight of the boxes, a few
were checked. The mean weight was 10kg and the standard deviation is 0.25kg. How many boxes must
the processor sample to be 95% cont wt! that the sample mean, cere not differ from the population
mean by more than 0.1kg? 98 Ke Uw
Ca
4.7.2 Sample size for proportion _ 3 i Ws ais
The procedure used to determine the sample size for the mean is applicable to determine a os
ple size for the n ppl ‘L& 2 Aaty
proportions are involved. —S
‘Three things must be specified:
Decide the level of confidence
> Indicate how precise the estimate of population proportion must be
> Approximate the population proportion ,P, either from the past experience or from small pilot
survey,
¥
The formula for determining the sample size n is for a proportion i
2
Z
«| 2] wise
n=|—>| PUl-P)
where 2 is estimated proportion
Z
@ ‘is value of standard Z-value from the normal table
a
E---- the maximum allowable error
‘xample: A member of parliament wants to determine her popularity in her region, She indicates
that the proportion of voters who will vote her must be estimated within +2 percent of the
population proportion. Further, the 95% degrees of confidence is to be used. In past elections, she
received 40% of the popular vote in that.area, She doubts whether it has changed much. How
many registered voters should be sampled? ~
We. Ss g 6
Solution
- olf
por" |3- 1.96 )*
——-] 0.401- 0.4
0.02 ( ).
Note that if there is no logical estimate of p is available, the sample size can be estimated by
p=0.5,
2304,96=2305
Example:- Suppose the president wants an estimate of the proportion that supports his current
policy on unemployment. The president wants the estimate to be within 0.04 of the true
proportion, Assume 95% confidence level and the proportion supporting current policy is 0.6.
a) How large a sample is required?
b) How large would be if the estimate was not available?
Solution
2
= {1% \o6a- 0.6).
0.04 =576.24
For estimate not available
a =600.25
1.96
=|——-| 0.50- 0.5
0.02 } -- 43)
Exercises
. A marketing department of a company wishes to study the loyalty pattern of his
customers. Loyalty pattern ranges from extremely loyal to brand snitcher. If the
department wishes to estimate the proportion of consumers who are extremely loyal to
this brand, what sample size would be necessary to estimate this proportion within 0.05
with 95% confidence?
2. Awine importer needs to report the average percentage of alcohol in bottles of new
wine.
From experience with various kinds of wines, the importer believes the population
standard deviation is 1.2%. The importer randomly sampled 60 bottles of the new wine
and obtain a sample mean of 9.3%. Give a 90% confidence interval for the average
percentage of alcohol in all bottles of the new wine.
alr The manufacturers of a sports car want to estimate the proportion of people in a given
income bracket, who are interested in a model. The company wants to know the
population proportion to within 0.10 with 99% confidence. Current company records
indicate that the proportion may be around 0.25. what is the minimum required sample
size for this survey.
A survey of a random sample of 1000 managers found that 81% of them had a high need
for power. This led to a conclusion that power is a motivator for managers. Construct a
90% confidence interval for the proportion of all managers in the population under study
who are motivated by power.
The average score of trainees who participated in a special training program is 120 with a
standard deviation of 15. A company who sent its employees sampled 36 employees and
calculates their mean scores. What is the probability that the sample mean will be less
than 115?
A business faculty in a university is planning to introduce a new performance evaluation
technique. Instructors are required to evaluate their respective department heads. A
random sample of 7 instructors from the marketing department was selected and their
evaluation recorded. The results were
72, 81, 69, 78, 80, 75, 79
Construct a 95% and 99% confidence interval for the average performance evaluation
of all the instructors in the department. Exercises
1. An investment consultant reports the average 12-month return on a random sample of $0
projects was 20.74%. If the standard deviation was 5% for the entire large group of
stocks from which the sample of projects was chosen, construct a 95% confidence
interval for the average 12-month return for all projects?
2. An advertising executive thinks that the proportion of consumers who have seen his
company’s advertisement in newspaper is round 0.65. The executive wants to estimate
the customer population proportion within +0.05 have a 98% confidence in the estimate.
How large a sample should be taken?
16 i.
12
A. company wants to estimate the proportion of its employees, who are satisfied with new
incentive scheme, Out of a total of 1,242 employees 160 were randomly selected and
interviewed. Of the one interviewed, 85 indicated that that they were satisfied with the
new incentive scheme. Construct 90% confidence interval for the proportion of all
employees who are satisfied with new decision,
A survey being planned to determine thé mean amount of time senior executives watch
TV. A pilot survey indicated that the mean time per week is 12 hrs with standard
deviation of 3hrs. Is desired to estimate the mean viewing time within 0.25 hrs. The 95%
confidence is used to be. How many executives should be surveyed?
What are the properties of good estimators?
sample of 200 people were asked to identify their major source of news information 110
said their major sources was radio.
a. Construct 95% confidence interval for the proportion of people in the population that,
consider radio their major source of news information
b, How large a sample would be necessary to estimate the population proportion with a
sampling error of 0.05 at 95% confidence?
What are the factors that determine the size of the sample
‘The registrar of a college wants to estimate the arithmetic mean of final GPA of all
graduating senior students. GPA’s range from 2.0 to 4.0. The mean GPA is to be
estimated with plus or minus 0.05 of the population mean. The 99% confidence level is to
be used, The standard deviation of the pilot survey is 0.279. How many grade reports
should be sampled?
Ina small town there are 250 families. From 50 families sample 15 regularly attend
community meetings. Construct 95% confidence interval for the proportion of families
attending the meeting regularly.
‘A wine reporter needs to report the average percentage of alcohol in bottles of new wine.
From experiments with various kinds of wine, the importer believes the population
standard deviation is 1.2%, The importer randomly sampled 60 bottles of the new wine
and obtain a sample mean of 9.3%. Give 90% confidence interval for average percentage
of aleohol in all bottles of the new wine.
‘The manufacturer of a sports car want to estimate the proportion of people in a given
income bracket, who are interested in a model. The company wants to know the
population proportion to within 0.10 with 99% confidence. Current company records
indicate that the proportion may be around 0.25. What is the minimum required sample
size for this survey?
A survey of a random sample 1000 mangers found that 81% of them had a high need for
power. This led to a conclusion that power is a motivation for managers, Construct 90%
confidence interval for all mangers in the population under study who are motivated by
power.
. The average score of trainees who participated in a special training program is 120 with
standard deviation 15. A company who sent its employees sampled 36 employees and
calculates their mean scores. What is the probability that the sample mean will be less
than 115?
17 14, A business faculty in a university is planning to introduce a new performance evaluation
technique. Instructors are required to evaluate their respective department heads. A
random sample of 7 instructors from the marketing department was selected and their
evaluation recorded as follows:
72, 81, 69, 78, 80, 75, 79
Construct 90% confidence interval for the average performance evaluation of all he
instructors in the department.
18. Tables | 1-11
Table entry for p and Cis
the critical value t with
probability p ying to its
Fight and probability ¢ lying
between —f and f,
eae
t distribution critical values
Uppental probably
a [2s ssw 00250010008
1 | 1000 as76" as TL 1889 12733183 6386
2] Osis Vast 392003 48a 1032233 310
3 | o76s 097s 2353 m2 382 7433 Woz) zs
3 | 07a goat 2132 277% 2999 5308 7173 S610
5 | on? 920 20s 2871 2.787 4773 5x3 850
6 | 0718 0906 fess 2447 2612 431752085959
7] 071 0396 vaoy 23652517 $029 $785 Sap
| 0706 o8s9 Vag 2305 2449 38) Sor Sal
3 | 0703 oes Sr Ye 2598 300 S207 781
1 | 0700 asi. riz 2559 S310 fuss 4387
i | 0687 ose 788. 2328 Bier xs 37
12 | 098s 0873 Vim 2503 3428 3930 4318
8 | oes aK Urn Fie 2282 3372 ass? 4221
14 | 062 OR68 176 2488 2268 3325 377 4140
15 | oss: oes \isi 2TH 2209 ame 3733 407s
1s | 0600 o8ss trae 2302238 3282 386 4015
17 | Oexs o8s3 1780 110 2204 3222386 3.965
ts | 068s o8s2 1736 Ztor 2314 ST Ret 392
19 | 0683 0361 Mae 3 2205 317s 3519 3am
20 | 0687 ose0 Vs 2086 2197 BIS}. 352 350
21 | bese 0839 Vial 2osd 2189 sus 357 isis
2 | oes oss tnt 207s Zins Bly 35053782
23 | oss 088s Und 20683177 310s 3853768
| bess 0.887 (20682172 S001 Sae7 a8
25 | dest vase 170 2.060 2167 307s 3480 as
Sosr 3435-3707
Sor 341 3.600
307 3405 3674
3088 3399 3.659
30303385 S80
2onr S307 3 sr
20 3261 3.496
dois 328 3.e0
Der 398 Sale
er 3a 3380
de | oss ose
rr | osss oss
28 | 068s O85
3 | oss 0854
30. Oss
ay | oh ce
so | osts oso
so | osTs os
*) | ost Ose
ron | 0677 oss
ioe dase ee
tins ise 318s
Hor neg tek
ta dees bie
ter jae Se
fee BE 2h
Se tam 309
Vt iw 30
tect 13 2oee
Hea toe don
wooo | 0675 olRaa Kets 1962 2086 2813 383300
rv | ost ost Peds 1360 2054 2507 3.081 3291
So
Confidence level C
