Interval estimation

Interval Estimation

• An inferential statistical procedure used to estimate population

parameters from sample data through the building of confidence intervals
• An interval estimate can be computed by adding and subtracting a margin
of error to the point estimate.
Point Estimate +/- Margin of Error

• The purpose of an interval estimate is to provide information about how

close the point estimate is to the value of the parameter.
• The general form of an interval estimate of a population mean is
Two cases for interval estimation
Sample size for construction of interval
estimate
• Interval Estimate of a Population Mean: Known
• In most applications, a sample size of n = 30 is adequate.
• If the population distribution is highly skewed or contains
outliers, a sample size of 50 or more is recommended.
• If the population is not normally distributed but is roughly
symmetric, a sample size as small as 15 will suffice.
• If the population is believed to be at least approximately
normal, a sample size of less than 15 can be used.
𝜎 𝑘𝑛𝑜𝑤𝑛
Interval Estimate of a Population Mean:
s Known
• Interval Estimate of m

where: is the sample mean

1 - is the confidence coefficient
z/2 is the z value providing an area of
/2 in the upper tail of the standard
normal probability distribution
s is the population standard deviation
n is the sample size
 Interval Estimate of a Population Mean:
s Known
 Values of za/2 for the Most Commonly Used Confidence Levels

Confidence Table
Level a a/2 Look-up Area za/2
90% .10 .05 .9500 1.645
95% .05 .025 .9750 1.960
99% .01 .005 .9950 2.576
. Confidence Intervals: a range of values computed
from sample data that has a known probability of
capturing some population parameter of interest
Because 90% of all the intervals constructed using
will contain the population mean,
we say we are 90% confident that the interval
includes the population mean m.

We say that this interval has been established at the

90% confidence level.

The value .90 is referred to as the confidence

coefficient.
• Example
• Construct a 95% confidence for a data with sample mean = 82;
100
• Solution
• For a 95% confidence interval, the confidence coefficient is (1-
• Using standard normal probability table , an area of /2 -.05/2 =
0.025 provide a table value of =1.96
• Hence confidence interval at 95%

Confidence interval
Margin of error is 3.92 for 95%
Example – Continued
• Using the same values and expression a 90% confidence interval is

Margin of error is 3.29 for 90%

Confidence interval is 78.71 to 85.29

• 99% confidence interval

Margin of error is 5.15 for 99%

Confidence interval is 76.85 to 87.15
𝜎 𝑈𝑛𝑘𝑛𝑜𝑤𝑛
Interval Estimate of a Population Mean:
Unknown

• If an estimate of the population standard deviation cannot be developed prior

to sampling, we use the sample standard deviation s to estimate .
• In this case, the interval estimate for is based on the t distribution.
• t distribution is developed by William Gosset.
• The t distribution is a family of similar probability distributions.
• A specific t distribution depends on a parameter known as the degrees of
freedom.
• Degrees of freedom (df) refer to the number of independent pieces of
information that go into the computation of s
• df = n-1
t Distribution

t distribution
Standard (20 degrees
normal of freedom)
distribution

t distribution
(10 degrees
of freedom)

z, t

0
Interval Estimate of a Population Mean: Unknown

• Interval Estimate

where: 1 - = the confidence coefficient

t/2 = the t value providing an area of /2
in the upper tail of a t distribution
with n - 1 degrees of freedom
s = the sample standard deviation
Apartment Rents -
A reporter for a student newspaper is writing an article on the cost of
off-campus housing. A sample of 16 one-bedroom apartments within
a half-mile of campus resulted in a sample mean of $750 per month
and a sample standard deviation of $55. Let us provide a 95%
confidence interval estimate of the mean rent per month for the
population of one-bedroom efficiency apartments within a half-mile of
campus. We will assume this population to be normally distributed.
Apartment Rents – solution
• At 95% confidence, = .05, and /2 = .025.
• is based on n - 1 = 16 - 1 = 15 degrees of freedom
• In the t distribution table we see that = 2.131

• We are 95% confident that the mean rent per month for the population
of one-bedroom apartments within a half-mile of campus is between
$720.70 and $779.30.
Refer to excel data- new balance
• Compute
• Mean =?
• SD.S=?
• n=?
• Interval estimate for New balance data at 95% confidence

Margin of error is 955 for 95%

Confidence interval is 76.85 to 87.15
Sample size estimation
Determining Sample Size for an Interval Estimate of a Population
Mean
 Margin of Error

 Necessary Sample Size

Sample Size for an Interval Estimate
of a Population Mean

The Necessary Sample Size equation requires a

value for the population standard deviation s

If unknown
Use If known in the formula and a preliminary or planning value
construct confidence interval for can be used in the equation.

Use the estimate of the population Use a pilot study to select a Use judgment or a
standard deviation computed in a preliminary study and use the sample “best guess” for the
previous study. standard deviation from the study. value of s .
A previous study that investigated the cost of renting automobiles in the
United States found a mean cost of approximately $55 per day for
renting a midsize automobile. Suppose that the organization that
conducted this study would like to conduct a new study in order to
estimate the population mean daily rental cost for a midsize automobile
in the United States. In designing the new study, the project director
specifies that the population mean daily rental cost be estimated with a
margin of error of $2 and a 95% level of confidence.
The project director specified a desired margin of error of E = 2, and the
95% level of confidence indicates = 1.96. At this point, an analyst
reviewed the sample data from the previous study and found that the
sample standard deviation for the daily rental cost was $9.65.Find the
required sample
Solution

=89.43
the sample size for the new study needs to be at least 89.43 midsize
automobile rentals in order to satisfy the project director’s $2 margin-
of-error requirement. In cases where the computed n is not an integer,
we round up to the next integer value; hence, the recommended sample
size is 90 midsize automobile rentals.
Solution
σ = 30
e=7
Z Value of 90% confidence = 90/2 = Table value of 45% as 0.45 = 1.64
=50
The required sample size is n= 50
Population proportion
𝑝± 𝑀𝑎𝑟𝑔𝑖𝑛𝑜𝑓 𝑒𝑟𝑟𝑜𝑟
Population proportion
• General form of interval estimate of a population proportion p is

Thumb rule : sampling distribution p can be

approximated by anormal distribution whenever
Interval Estimate of a Population Proportion
• Interval Estimate

where: 1 - is the confidence coefficient

z/2 is the z value providing an area of
/2 in the upper tail of the standard
normal probability distribution
is the sample proportion
A national survey of 900 women golfers was conducted to learn how
women golfers view their treatment at golf courses in the United States.
The survey found that 396 of the women golfers were satisfied with the
availability of tee times. Thus, the point estimate of the proportion of
the population of women golfers who are satisfied with the availability
of tee times is 396/900 = .44. Construct a 95% confidence interval.

Thus, the margin of error is .0324 and the 95% confidence interval
estimate of the population proportion is .4076 to .4724. Using
percentages, the survey results enable us to state with 95% confidence
that between 40.76% and 47.24% of all women golfers are satisfied
with the availability of tee times
Determining sample size for population
proportion

The planning value p* can be chosen by:

• Using the sample proportion from a previous sample of the same or similar units, or
• Selecting a preliminary sample and using the sample proportion from this sample.
• Use judgment or a “best guess” for a p* value.
• Otherwise, use .50 as the p* value.
• How large should the sample be if the survey director
wants to estimate the population proportion with a
margin of error of .025 at 95% confidence? (p = .44)