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Definition :

Point estimation is a choice

of statistics, i.e. a single

number calculated from

sample data for which we

have some expectation, or

assurance that it is reasonably

close to the parameter it is

supposed to estimate.

Point estimation of a mean :

Parameter: Population

mean µ

Data: A random sample

X 1 ,......, X n

Estimator: X

Estimate of standard error:

S

n

θ

Unbiased estimator :

θ

Let be the parameter of

θ

interest and ˆ be a statistic.

Then a statistics ˆ is said to

be an unbiased estimator, or

its value an unbiased

estimate, if and only if the

mean of the sampling

θ

distribution of the estimator

θ

equals , whatever the value

of .

Remark :

It is a mathematical fact that

X is an unbiased estimator of

the population mean µ

provided the observations are

a random sample.

More efficient unbiased

estimator :

A statistics θˆ1 is said to be a

more efficient unbiased

estimator of the parameter θ

than the statistics θˆ2 if

**1. θˆ1 and θˆ2 are both unbiased
**

estimators of θ ;

2. the variance of the

sampling distribution of the

first estimator is no larger

than that of the second and is

smaller for at least one value

of θ .

Maximum error of estimate

Error of estimate = | X − µ |

**To examine this error, if we
**

assert with probability 1 − α

that the inequality

X −µ

− zα 2 ≤ ≤ zα 2

σ n

|X − µ |

or ≤ zα 2 is satisfied,

σ n

then maximum error of

estimate is

σ

E = zα 2 .

n

i.e. the error will be less than

σ

zα 2 . with probability 1 − α

n

(or we say with (1 − α )100%

confidence that the error is at

most E ).

Sample size determination :

Solving the above equation

for n we get, sample size

zα 2 .σ

2

n=

E

Remark : Note that the

method discussed so far

require that σ be known or

that it can be approximated

with sample standard devia-

tion s .

Maximum error of estimate

(σ unknown) :

If sampling is done from a

normal population, we can

find the maximum error of

estimate by using the fact that

X −µ

t=

S n

is a random variable having

the t distribution with n − 1

degrees of freedom.

Thus we have,

s

E = tα 2 .

n

where, tα 2 has probability α 2

of being exceeded by a t

random variable having n − 1

degree of freedom.

Interval Estimation :

Definition :

Interval estimate is an

interval for which we can

assert with a reasonable

degree of certainty that they

will contain the parameter

under consideration.

Large sample confidence

interval for µ (σ known) :

Suppose that we have a large

( n ≥ 30) random sample from

a population with the

unknown mean µ and the

known variance σ . 2

Then, referring to the

inequality

X −µ

− zα 2 ≤ ≤ zα 2

σ n

and calculating x , we obtain

σ σ

x − zα 2 . < µ < x + zα 2 .

n n

Interval of this kind is

known as a confidence

interval for µ having the

degree of confidence 1 − α or

(1 − α )100% and its endpoints

are called confidence limits.

Large sample confidence

interval for µ (σ unknown) :

Since, σ is unknown in most

applications, we may have to

make the further approxim-

ation of substituting for σ the

sample standard deviation s .

Thus,

s s

x − zα 2 . < µ < x + zα 2 .

n n

Small sample confidence

interval for µ :

For small sample (n < 30) ,

with tα 2 , we have the follo-

wing (1 − α )100% confidence

interval formula

s s

x − tα 2 . < µ < x + tα 2 .

n n

Ex. 7.6(Pg 225):

To estimate the average time

it takes to assemble a certain

computer component, the

industrial engineer at an

electronic firm time 49

technicians in the performa-

nce of this task, getting a

mean of 12.00 min. and a

standard deviation of 1.9

min.

(a) What can we say with

95% confidence about the

maximum error if x = 12.00 is

used as a point estimate of

the actual average time

required to do the job?

Sol. :

(a) n=49, x = 12.00, s=1.9

1 − α =0.95, z0.025 =1.96

s 1.9

∴ E = zα 2 = 1.96 ×

n 49

= 0.532

Thus we can say with 95%

confidence that maximum

error of estimate is 0.532.

(b) Use the given data to

construct a 99% confidence

interval for the true average

time it takes to assemble the

computer component.

(b) n=49, x = 12.00, s=1.9

1 − α = 0.99 , z.005 = 2.575

Using confidence interval

formula,

1.9 1. 9

12 − 2.575 × < µ < 12 + 2.757 ×

49 49

11.3 < µ < 12.7

Thus, we are 99% confident

that the interval from 11.3

min. to 12.7 min. contains

the true average time.

Ex. 7.7(Pg 225):

With reference to Ex. 7.6,

with what confidence that we

assert that the sample mean

does not differ from the true

mean by more than 15

seconds?

Sol. : n=49, s=1.9, E=0.25

s

Using E = zα 2 × ,

n

0.25 × 7

zα 2 = = 0.9211

1 .9

P ( Z < 0.9211) = 1 − α 2 = 0.8212

1 − α = 0.6424

Therefore, we can assert with

64.24% confidence that

maximum error is 15 sec.

Ex. 7.11(Pg 225):

The principal of college

wants to use the mean of a

random sample to estimate

the average amount of time

students take to get from one

class to next and he wants to

be able to assert with 98%

confidence that the error is at

most .25 minute. If it can be

presumed from experience

that σ = 1.25 minutes, how

large a sample will she have

to take?

Sol. : σ = 1.25, E − 0.25,

1 − α = 0.98 ⇒ α = 0.2

zα 2 .σ z0.01 × 1.25

2

∴n= =

E 0 .25

= 136

Ex. 7.15(Pg226):

A random sample of 100

teachers in a large

metropolitan area revealed a

mean weekly salary of Rs.

2,000 with a standard

deviation of Rs. 43. With

what degree of confidence

can we assert that the average

weekly salary of all teachers

in the metropolitan area is

between Rs. 1,985 and Rs.

2,015?

Sol. : n=100, x =2000, s=43

1985 < µ < 2015

Using,

s s

x − zα 2 . < µ < x + zα 2 .

n n

we get

43

2000 + zα 2 × = 2015

100

zα 2 = 3.49

∴ P( Z < 3.49) = 1 − α 2 = 0.9998

1 − α = 0.9996

Therefore, we can assert with

99.96% confidence that the

average weekly salary of all

teachers in the metropolitan

area is between Rs. 1,985 and

Rs. 2,015

Maximum likelihood

estimation :

Consider a random sample of

size n from discrete popul-

ation f ( x;θ ) that depends on a

parameter θ . The joint distri-

bution is

f ( x1 ;θ ) f ( x2 ;θ )...... f ( xn ;θ ) .

Once the observations beco-

me available, we could

substitute their actual values

x1 , x2 ,..., xn into the joint

density. After the substi-

tution, the resulting function

of θ

L(θ ) = f ( x1 ;θ ) f ( x2 ;θ )...... f ( xn ;θ )

is called the likelihood

function. The maximum

likelyhood estimator of θ is

the random variable which

equals the value for θ that

maximizes the probability of

the observed sample.

Because this is an after-the-

fact calculation, we say that it

maximizes the likelihood.

The same procedure for

obtaining the maximum

likelihood estimator applies

in the continuous case.

Ex. 7.23(a)(pg 227):

Find the maximum likelihood

estimator for λ when f ( x; λ )

is the Poisson distribution.

Sol.:

e λ−λ x

f ( x; λ ) = , x = 0,1,...., λ > 0

x!

Likelihood function is

e λ e λ

−λ x1 −λ x2

e λ −λ xn

L (λ ) = ⋅ ⋅ ......... ⋅

x1! x2 ! xn !

n

∑ xi

e λ − nλ i =1

=

x1!⋅ x2 !⋅..... ⋅ xn !

Take g (λ ) = ln L(λ )

n

= −nλ + (∑ xi )(ln L)

i =1

− ln( x1! x2 !....xn !)

1 n

g ′(λ ) = −n + ∑ xi = 0

λ i =1

1n

⇒ λ = ∑ xi

n i =1

1 n

g ′′(λ ) = − 2 ∑ xi < 0

λ i =1

It shows that g (λ ) is

1n

maximum at λ = ∑ xi , cons-

n i =1

equently, L(λ ) is maximum at

1n

λ = ∑ xi .

n i =1

Hence, maximum likelihood

1n

estimator = ∑ xi

n i =1

Ex. 7.24(a)(pg 227):

Find the maximum likelihood

estimator for β when f ( x; β )

is the exponential distribu-

tion.

Sol.:

1 xβ

f ( x; β ) = e , x > 0, β > 0

β

Likelihood function is

− x1 β − x2 β − xn β

e e e

L( β ) = ⋅ ⋅ ......... ⋅

β β β

n

1

1 β∑x− i

= ne i =1

β

Take g ( β ) = ln L( β )

1 n

= − (∑ xi ) − n(ln β )

β i =1

1 n n

g ′( β ) = 2 ∑ xi − = 0

β i =1 β

1n

⇒ β = ∑ xi

n i =1

1 2 n

g ′′( β ) = 2 (n − ∑ xi )

β β i =1

3

n 1n

=− n < 0 for β = ∑ xi

(∑ x i ) 2 n i =1

i =1

It shows that g (β ) is

1n

maximum at β = ∑ xi ,

n i =1

consequently, L( β ) is

1n

maximum at β = ∑ xi .

n i =1

Hence, maximum likelihood

1n

estimator = ∑ xi

n i =1

Estimation of Proportions

**Suppose X denotes the
**

number of times that an

appropriate event occurs in n

trials.

Then the point estimator of

the population proportion is

X

the sample proportion .

n

If the n trials satisfy the

assumptions underlying the

binomial distribution, one can

show that the sample

proportion is an unbiased

estimator of the binomial

parameter p , namely, of the

true proportion we are trying

to estimate on the basis of a

sample.

When n is large, we can

construct approximate confi-

dence intervals for the bino-

mial parameter p by using

the normal approximation.

Accordingly we can assert

with probability 1 − α that the

inequality

X − np

− zα 2 < < zα 2

np (1 − p )

will be satisfied.

Making the further

approximation of substituting

x

for p in np(1 − p) , we get a

n

large sample confidence

interval for p

x x x x

1 − 1 −

x n n x n n

− zα 2 < p < + zα 2

n n n n

Where the degree of

confidence is (1 − α )100% .

Maximum error of

estimate:

Again using the normal

approximation, we can assert

with probability 1 − α that the

error will be at most

p (1 − p )

E = zα 2

n

x

with the observed value

n

substituted for p .

Sample size determination :

Solving above formula for n ,

we get

2

zα 2

n = p (1 − p )

E

Remark: This formula

cannot be used unless we

know the possible value of p .

If no such value available, we

can make use of the fact that

p (1 − p ) is at most 1 4 ,

corresponding to p = 1 2.

Sample size ( p unknown ) :

2

1 zα 2

n=

4 E

Ex. 9.3(Pg. 286) :

In a random sample of 200

industrial accidents, it was

found that 116 were due at

least partially to unsafe work-

ing conditions. Construct a

99% confidence interval for

the corresponding true

proportion?

(a) Table 9;

(b) The large-sample confi-

dence interval formula.

Sol.

n = 200, x = 116, α = 1 − .99 = 0.01

x

(a) = 0.58

n

Using Table 9,

0.49 < p < 0.67

x

(b) = 0.58, z0.005 = 2.575

n

Using large-sample confide-

ence interval formula, we get

0.58(1 − 0.58) 0.58(1 − 0.58)

0.58 + 2.575 < p < 0.58 − 2.575

200 200

∴ 0.49 < p < 0.67

Ex. 9.4(Pg. 286) :

In the reference to previous

exercise , what can we say

with 95% confidence about

the maximum error if we use

the sample proportion to

estimate the corresponding

true proportion?

x

Sol. = 0.58, zα 2 = z0.005 = 2.575

n

Then the error is at most

0.58(1 − 0.58)

E = 2.575

200

= 0.0899

Ex. 9.8(Pg. 286) :

Among 200 fish caught in a

large lake, 36 were inedible

due to the pollution of the

environment. If we use

36

= 0.18 as an estimate of

200

the corresponding true propo-

rtion, with what confidence

can we assert that the error of

this estimate is at most

0.070?

x

Sol. = 0.18, E = 0.07

n

Then,

0.18(1 − 0.18)

E = zα 2 = 0.07

200

⇒ zα 2 = 2.5926

P ( Z < 2.5926) = 1 − α 2 = 0.9952

1 − α = 0.9904

Therefore, we can assert with

99.04% confidence that the

error of this estimate is at

most 0.07.

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