Business Statistics II

Chapter 1

Sampling and Sampling Distribution

Chap 1-1
 Learning Objectives
In this chapter, you learn:
 To distinguish between different sampling methods
 Understand the concept the sampling Error
 Determine the Mean and Standard Deviation for Sampling
Distribution of Sample Mean 𝑥ҧ
 Understand the Importance of Central Limit Theorem
 Determine the Mean and Standard Deviation for Sampling
Distribution of Sample Proportion 𝑝Ƹ

Chap 1-2
 Sample & Why Sampling

 A Sample is the portion of the population used for analysis.

 Sampling is the selection of a small number of elements from a large
defined group of elements and expecting that the information gathered
from the small group will allow judgement to be made about the larger
group
 Selecting a sample is less time-consuming than selecting every item in
the population (census).

 Selecting a sample is less costly than selecting every item in the

population.

Chap 1-3
 A Sampling Process Begins With A Sampling Frame

 The sampling frame is a listing of items that make up the population

 Frames are data sources such as population lists, directories, or maps
 Inaccurate or biased results can result if a frame excludes certain
portions of the population
 Using different frames to generate data can lead to dissimilar
conclusions

Chap 1-4
 Types of Samples

Sampling

Probability Non-probability
Sampling Sampling

Simple Stratified Systematic Cluster Snowball Convenience Judgement

Random Sampling Sampling Sampling Sampling Sampling Sampling

Chap 1-5
 Non-probability Sampling

Non-probability Sampling: is a sampling technique where the sample are

gathered in a process that does not give all the individuals in the population
equal chances of being selected.
1. Convenience sampling is a non-probability sampling method that
selects the item from the population based on accessibility and ease of
selection.
2. In a judgment sample, you get the opinions of pre-selected experts in
the subject matter.
3. Snowball sampling is appropriate to use when the population you are
interested in hard-to-reach. These include populations such as drug
addicts, homeless people, individuals with AIDS/HIV,, and so forth.

Chap 1-6
 Probability Sampling

Probability Sampling: is technique in which each member of

population has an equal chance of being selected. The main purpose of
sampling is to create a sample that is representative of the population it
is being drawn from hence it is very difficult to survey the whole
population.

1. Simple Random Sampling: each member of the population (N) has

the same probability (chance) of being selected for your sample (n).
Sometimes this is called a Lottery method.

Chap 1-7
 Probability Sampling

2. Stratified Sampling
Divide the entire population into distinct subgroups called strata. The
strata are based on a specific characteristic, such as age, income,
education level, and so on.
All members of a stratum share the specific characteristic. Draw random
samples from each stratum.

Example:
in the population of all undergraduate college students, some strata might
be freshmen, sophomores, juniors, or seniors. Other strata might be
Male or Female

Chap 1-8
 Probability Sampling

3. Systematic Sampling
Systematic Sampling technique involves numbering all members of the
population sequentially. Then, from a starting point selected at random,
include every kth member of the population in the sample.

Example:

If you select every 5the person to walk out of a supermarket to your sample
after randomly selected the person you start for the sampling, you are
performing Systematic Sampling.

Chap 1-9
 Probability Sampling

4. Cluster Sampling
Divide the entire population into pre-existing segments or clusters. The
clusters are often geographic. Make a random selection of clusters. Include
every member of each selected cluster in the sample.

Example:

In conducting a survey of school children in a large city, we could first

randomly select five schools and then include all the children from each
selected school.

Chap 1-10
 Population & Sampling Distribution

Population is the entire group of items the researcher wishes to study

and about which the generalization can be made. Census is a study
that includes data about every member of the target population.

Generally, census is rarely taken because it is very expensive , time

consuming and in many cases it is impossible to identify and assess
each member of the target population

Chap 1-11
 Population & Sampling Distribution

Population Distribution: The population distribution is the

probability distribution of the population data.
Suppose there are only five students in an advanced statistics class
and the monthly income of these five students are
70 78 80 80 95
So, we will write the frequency distribution table of scores x along
with relative frequency and then lists the probability distribution of
the population.

Chap 1-12
 Population & Sampling Distribution

Table 1.1 Population Frequency & Table 1.2 Population

Relative Frequency Distributions Probability Distribution
Relative x P(x)
x f Frequency
70 1/5 = 0.20
70 1 1/5 = 0.20
78 1/5 = 0.20
78 1 1/5 = 0.20
80 2/5 = 0.40
80 2 2/5 = 0.40
95 1/5 = 0.20
95 1 1/5 = 0.20
ΣP(x) = 1.00
N=5 Sum = 1.00

Table 1.2, presents the probability distribution of the population. Note that
these probabilities are the same as the relative frequencies.

Chap 1-13
 Sampling Distribution

 The value of a population parameter is always constant. For

example, for any population data set, there is only one value of the
population mean, µ.
 However, we cannot say the same about the sample mean, We
would expect different samples of the same size drawn from the
same population to yield different values of the sample mean 𝑥.ҧ
 Like other random variables, the sample mean possesses a
probability distribution, which is more commonly called the
𝒙).
sampling distribution of sample mean (ഥ

Chap 1-14
 Sampling Distribution

Sampling distribution: The probability distribution of 𝑥ҧ is called its

sampling distribution. It lists the various values that can assume and
the probability of each value of 𝑥.ҧ

In general, the probability distribution of a sample statistic is called

its sampling distribution.

Reconsider the population of monthly income of five students.

Consider all possible samples of three scores each that can be
selected, without replacement. The total number of possible samples
is 10.

Chap 1-15
 Sampling Distribution

Suppose we assign the letters A, B, C, D, and E to the monthly

income of the five students, so that
A = 70 B = 78 C = 80 D = 80 E = 95
Then, the 10 possible samples of three scores each are
ABC, ABD, ABE, ACD, ACE, ADE, BCD, BCE, BDE, CDE

These 10 samples and their respective means are listed in Table 1.3.
Note that the first two samples have the same three scores. The reason
for this is that two of the students (C and D) have the same score.

Chap 1-16
 Sampling Distribution
Table 1.3 All Possible Table 1.4 Frequency & Table 1.5 Sampling
Samples & Their Means Relative Frequency of 𝑥ҧ Distribution of 𝑥ҧ
Sample income 𝑥ҧ 𝑥ҧ f RF 𝑥ҧ P(𝑥)ҧ
ABC 70, 78, 80 76 76.00 2 2/10 = .20 76.00 0.20
ABD 70, 78, 80 76 76.67 1 1/10 = .10 76.67 0.10
ABE 70, 78, 95 81 79.33 1 1/10 = .10 79.33 0.10
ACD 70, 80, 80 76.67
81.00 1 1/10 = .10 81.00 0.10
ACE 70, 80, 95 81.67
81.67 2 2/10 = .20 81.67 0.20
ADE 70, 80, 95 81.67
84.33 2 2/10 = .20 84.33 0.20
BCD 78, 80, 80 79.33
85.00 1 1/10 = .10 85.00 0.10
BCE 78, 80, 95 84.33
Σf = 10 Sum = 1 ΣP(𝑥)ҧ = 1
BDE 78, 80, 95 84.33
CDE 80, 80, 95 85

Chap 1-17
 Sampling and Non-sampling Error

Regardless of how careful we are using simple random sampling

methods, different samples selected from different population will
give different results because they contain different elements.

Sampling Error: sampling error is the difference between the

sample (statistic) and the corresponding population value
(parameter).
Sampling error = 𝑥ҧ - μ
Where,
𝑥ҧ = sample mean
μ = population mean

Chap 1-18
 Sampling and Non-sampling Error

Sampling error occurs because of chance

The Sampling error ca be computed using the following steps:
Step 1: determine the population mean.
Σ𝑥
𝜇=
𝑁
Step 2: determine the sample mean.
Σ𝑥
𝑥=
𝑛
Stem 3: compute the sampling error.
Sampling error = 𝑥 − 𝜇

Chap 1-19
 Sampling and Non-sampling Error

Example 1:
There are only five students in an advanced statistics class and the
monthly income of these five students are
80 78 80 80 95
Suppose one sample of three is randomly selected from this
population, and this sample includes 70, 80, and 95.
Find the sampling error?

Chap 1-20
 Sampling and Non-sampling Error

Solution 1:
Step 1: The population mean

μ= 70 + 78 + 80 + 80 + 95 = 80.6
5
Step 2: The Sample mean
𝑥 = 70 + 80 + 95 = 81.67
3
Step 3: Compute the sampling error
Sampling error = 𝑥 −μ = 81.67 – 80.6 = 1.07
That is the mean monthly income from the sample is 1.07 higher than
the population mean. This difference occurred due to chance
Chap 1-21
 Sampling and Non-sampling Error

There are errors that occur for other reasons (other than sampling
error), such errors are made during collection, recording and
tabulation of data. Therefore, these errors are known as non-sampling
error.

Non-sampling Errors: The errors that occur in the collection,

recording, and tabulation of data are called non-sampling errors.

NOTE that there is only one kind of sampling error: the error occurs
due to chance. However, there are any non-sampling errors

Chap 1-22
 Sampling and Non-sampling Error

Suppose, when we select the sample of three, we mistakenly record

the score as 82 instead of 80, we calculate the sample mean
𝑥 = 70 + 82 + 95 = 82.33
3
The difference between this sample and the population mean is

𝑥 −μ = 82.33 – 80.6 = 1.73

This difference does not represent the sampling error
Sampling error = 𝑥 −μ = 81.67 – 80.6 = 1.07
Non-sampling error = 1.73 – 1.07 = 0.66

Chap 1-23
 Sampling and Non-sampling Error

 If sample is non random, and hence non representative

 The questions may not fully understood by the respondents
 The interviewer may make mistakes when coding, editing, data
processing and analysis.
 Poor questionnaire design
 When respondents refuse to cooperate with the interviewer (non-
response error)
 Inaccurate reporting by the respondent, biased guess etc.

Chap 1-24
 Mean and Standard Deviation of 𝒙

The mean and standard deviation of are, respectively, the mean and
standard deviation of the means of all samples of the same size
selected from a population. The standard deviation of 𝑥 is also called
the standard error of 𝑥.
Mean and Standard Deviation of 𝒙 ഥ : The mean and standard
deviation of the sampling distribution of 𝑥ҧ are called the mean and
standard deviation of 𝑥ҧ and are denoted by 𝜇𝑥ҧ and 𝜎𝑥ҧ , respectively.

Chap 1-25
 Mean and Standard Deviation of 𝒙

Mean of the Sampling Distribution of 𝒙 ഥ: The mean of the sampling

distribution of 𝑥ҧ is always equal to the population mean.
𝜇𝑥ҧ = μ
Hence, if we select all possible samples (of the same size) from a
population and calculate their means, the mean (𝜇𝑥ҧ ) of all these
sample means will be the same as the mean (μ) of the population.

However, the standard deviation, 𝜎𝑥ҧ of is not equal to the standard

deviation, σ, of the population distribution (unless n = 1).

Chap 1-26
 Mean and Standard Deviation of 𝒙

The standard deviation of 𝑥ҧ is equal to the standard deviation of the

population divided by the square root of the sample size; that is
𝜎
𝜎𝑥ҧ =
𝑛
𝒏
• REMEMBER This formula is used when ≤ 𝟎. 𝟎𝟓, and/or the
𝑵
population from which sample is drawn is normal distribution

Chap 1-27
 Mean and Standard Deviation of 𝒙

The central limit theorem states that

 If a simple random sample is drawn from a normal distribution with a
mean of μ and a standard deviation of σ, the sampling distribution of
the sample mean is a normal distribution with a mean of μ and a
standard deviation (or standard error) of 𝜎ൗ 𝑛, this is true for any
sample size.

 If the population does not have a normal distribution, but the sample
size is large (n ≥ 30), the sampling distribution is approximately
normally distributed with a mean of μ and a standard deviation of
𝜎
ൗ 𝑛.

Chap 1-28
 Mean and Standard Deviation of 𝒙

Example 2:
The mean wage per hour for all 5000 employees who work at a large
company is $27.50, and the standard deviation is $3.70.

Let 𝑥ҧ be the mean wage per hour for a random sample of certain
employees selected from this company.

Find the mean and standard deviation of 𝑥ҧ for a sample size of

(a) 30 (b) 75 (c) 200

Chap 1-29
 Mean and Standard Deviation of 𝒙
Solution 2:
Given information: N = 5000 n = 30 µ = $27.50 σ = $3.70
(a) The mean, 𝜇𝑥ҧ , of the sampling distribution of 𝑥ҧ is
𝜇𝑥ҧ = µ = $27.50
𝑛 30
≤ 5% = = 𝟎. 𝟎𝟎𝟔 ≤ 𝟓%
𝑁 5000
Hence,
𝜎 3.70
𝜎𝑥ҧ = = = $𝟎. 𝟔𝟕𝟔
𝑛 30
 The mean and standard deviation of this sampling distribution of 𝑥ҧ
will be $27.50 and $.676, respectively
Chap 1-30
 Mean and Standard Deviation of 𝒙
Given information: N = 5000 n = 75 µ = $27.50 σ = $3.70
(b) In this case
𝑛 75
≤ 5% = = 𝟎. 𝟎𝟏𝟓 ≤ 𝟓%
𝑁 5000
The mean and the standard deviation of 𝑥ҧ are
𝜎 3.70
𝜇𝑥ҧ = µ = $27.50 and 𝜎𝑥ҧ = = = $𝟎. 𝟒𝟐𝟕
𝑛 75

 The mean and standard deviation of this sampling distribution of 𝑥ҧ

will be $27.50 and $.427, respectively

Chap 1-31
 Mean and Standard Deviation of 𝒙

Given information: N = 5000 n = 200 µ = $27.50 σ = $3.70

(c) In this case
𝑛 200
≤ 5% = = 𝟎. 𝟎𝟒 ≤ 𝟓%
𝑁 5000
The mean and the standard deviation of 𝑥ҧ are
𝜎 3.70
𝜇𝑥ҧ = µ = $27.50 and 𝜎𝑥ҧ = = = $𝟎. 𝟐62
𝑛 200

 The mean and standard deviation of this sampling distribution of 𝑥ҧ

will be $27.50 and $.262, respectively

Chap 1-32
 Mean and Standard Deviation of 𝒙

Example 3:
The mean paid rent by all residents in a particular city is $300 with
standard deviation of $75. calculate the mean and standard deviation
of 𝑥ҧ when the sample size is
a) 30
b) 100
Solution:
In this case the sample size is large (n ≥ 30), so
(a) The mean, 𝜇𝑥ҧ , of the sampling distribution of 𝑥ҧ is
𝜇𝑥ҧ = µ = $300

Chap 1-33
 Mean and Standard Deviation of 𝒙

Solution 3:
The standard deviation of sampling distribution of 𝒙 is
𝜎 75
𝜎𝑥ҧ = = = $𝟏𝟑. 𝟔𝟗
𝑛 30

b) The mean, 𝜇𝑥ҧ , of the sampling distribution of 𝑥ҧ is 𝜇𝑥ҧ = µ = $300

𝜎 75
𝜎𝑥ҧ = = = $𝟕. 𝟓
𝑛 100

Chap 1-34
 Sampling Distribution of Proportion

The Population Proportion, denoted by P, is obtained by taking the

ration of the number of elements in a population with specific
characteristic to the total number of elements in a population, the sample
proportion is denoted by 𝑝Ƹ (pronounced p hat)

The sample proportion is obtained by taking the ratio of the number of

elements in a sample with specific attributes to the total number of
elements in the sample.
A similar ratio gives for a population

Chap 1-35
 Sampling Distribution of Proportion

Population and Sampling Proportions

𝑥 𝑥
𝑝= and 𝑝Ƹ =
𝑁 𝑛

p = Population proportion
𝑝Ƹ = Sample proportion
N = Population size
n = Total number of elements in the sample
x = Number of items in the population having the attributes of interest

Chap 1-36
 Sampling Distribution of a Proportion

Example 4:
1.5 million people live in a city of which 600,000 of them own homes. If
300,000 families are taken from this city and 175,000 are found to be
homeowners, calculate population proportion, the sample proportion,
and sampling error.
Solution 4:
𝑥 600,000
𝑝= = = 0.40
𝑁 1.5 𝑚𝑖𝑙𝑙𝑖𝑜𝑛

𝑥 175,000
𝑝Ƹ = = = 𝟎. 𝟓𝟖
𝑛 300,000
Sampling error = 𝑝Ƹ − 𝑝 = 0.58 - 0.40 = 0.18

Chap 1-37
 Mean and Standard Deviation of Sampling Distribution of 𝑝Ƹ

 In many applications you will be interested in determining the

proportion (p) of all items in a population that possess a particular
attribute. The best estimate of this population proportion will be 𝑝,Ƹ the
sample proportion.

 If the sample size is sufficiently large such that np ≥ 5 and n(1 - p) ≥ 5

the distribution of all possible sample proportions will approximately
normally distributed.

 In addition to being normally distributed, the sampling distribution

will have a mean and standard deviation (or standard error) as
indicated the following formulas

Chap 1-38
 Mean and Standard Deviation of the
Sampling Distribution of 𝑝Ƹ

ෝ
Mean and Standard Deviation of the Sampling Distribution of 𝒑

Mean = 𝜇𝑝ො = 𝑝
and
𝑝(1−𝑝)
Standard deviation = 𝜎𝑝ො =
𝑛

Where:
p = Population Proportion
n = Sample size
𝑝Ƹ = Sample proportion

Chap 1-39
 Mean and Standard Deviation of the
Sampling Distribution of 𝑝Ƹ

Example 5:
18% of the working people said their careers are both personally and
financially rewarding. Assume that this result is true for the population of
all working people.

Let 𝑝Ƹ be the proportion in a random sample of 100 working people who

hold this view. Find the mean and standard deviation of sampling of 𝑝.Ƹ

Chap 1-40
 Mean and Standard Deviation of the
Sampling Distribution of 𝑝Ƹ

Solution 5:
Step 1: Determine if the sample is sufficiently large
np ≥ 5 = (100)(0.18) = 18 > 5 & n(1 - p) = (100)(0.82) = 82 > 5
So we conclude that the sampling distribution of the sample proportion
will be approximately normal (or sufficient)
Step 2: Calculate the mean & standard deviation
Mean = 𝜇𝑝ො = 𝑝 = 0.18
and
𝑝(1−𝑝) 0.18(0.82) 0.1476
𝜎𝑝ො = = = = 0.001476 ≈ 0.033
𝑛 100 100

Chap 1-41
 Mean and Standard Deviation of the
Sampling Distribution of 𝑝Ƹ

Example 6:
The advertisement manager of a newspaper believe that the proportion of
“apartment for rent” ads placed in the paper that result in a rental within
two weeks is 0.80 or higher.

She has selected a simple random sample of 100 “apartment for rent” ads.
Of these, 73 resulted in a rental within the two week period.

Calculate the mean and standard deviation?

Chap 1-42
 Mean and Standard Deviation of the
Sampling Distribution of 𝑝Ƹ

Solution 6:
Step 1: determine the population proportion p
p = 0.80
Step 2: Determine if the sample is sufficiently large
np ≥ 5 = (100)(0.80) = 80 > 5 & n(1 - p) = (100)(0.20) = 20 > 5
The sampling distribution of the sample proportion is sufficient)
Step 3: calculate the mean & standard deviation
Mean = 𝜇𝑝ො = 𝑝 = 0.80
and
𝑝(1−𝑝) 0.80(0.20) 0.16
𝜎𝑝ො = = = = 0.0016 ≈ 0.04
𝑛 100 100
Chap 1-43