Topic 5 Topic: Estimation and Confidence Interval

• Estimation & Confidence Interval for • To construct a confidence

Population Mean with Known Σ interval for a population
• Confidence Interval for Population Mean mean with known σ
with Unknown σ • To construct a confidence
• Confidence Interval for Population interval for a population
Proportion mean with unknown σ
• Determining the Sample Size • To construct a confidence
interval for a population
proportion

Why This Topic

Estimation is a procedure by which a numerical value or values are assigned to a population parameter based
on the information collected from a sample. The statistical procedures for estimating the population mean,
proportion, variance, and standard deviation will be explained. This lesson explains how to construct a
confidence interval for the population mean μ when the population standard deviation σ is known, unknown
and for a population proportion.

Estimation & Confidence Interval for Population Mean with Known Σ

Point Estimation
A point estimate is a single value that best describes the population of interest:

• The sample mean is a point estimate of the unknown population mean.

• The sample proportion is a point estimate of the unknown population proportion.

Point estimates are easy to calculate but do not provide any information about their accuracy.
An interval estimate provides additional information about variability.

Confidence Intervals

Calculating Confidence Intervals for the Mean when the Standard Deviation (σ) of a Population is Known
A confidence interval for the mean is an interval estimate around a sample mean that provides us with a range
within which the true population mean is expected to lie.

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A confidence level is defined as the probability that the interval estimate will include the population parameter
of interest.

Assumptions :
• The sample size is at least 30 (n ≥ 30).
• The population standard deviation (σ) is known.

The formula for the Standard Error of the Mean

The purpose of generating a confidence interval is to provide an estimate of the value of the population mean.
The confidence interval for the mean has an upper confidence limit and a lower confidence limit. The limits
describe the range in which we have some degree of confidence that the actual population mean lies.

Formulas for the Confidence Interval for the Mean (σ Known)

zα/2 is called the critical z-score.

The variable α is known as the significance level; it represents the probability that any given confidence interval
will not contain the true population mean.

Example: if α = 0.10, then zα/2 = z0.05 = 1.645 is the value that encloses 90% of the area under the normal distribution
and leaves 5% in each tail.

• The total area to the left of the right-hand boundary is 0.90 + 0.05 = 0.95.
• The total area to the left of the left-hand boundary is 0.05.

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Example: An airline wants to estimate the number of tickets sold for a daily flight between Dallas and Denver.
Suppose a sample of 35 flights gives a sample mean of 145.5 (Assume that σ = 30.2).

Calculate a 90% confidence interval for the population mean:

1. Find the standard error of the mean:

2. Find zα/2 for 90%:

3. Calculate the interval endpoints:

Based on our sample mean of 145.5, we are 90% confident that the population mean number of tickets sold is
between 137.10 and 153.90.

Calculating the Margin of Error

The Margin of Error ME is the width of the confidence interval between a sample mean and its upper limit or
between a sample mean and its lower limit.

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Increasing the sample size while keeping the confidence level constant will reduce the margin of error, resulting
in a narrower (more precise) confidence interval.

Interpreting a Confidence Interval

We are 90% confident that the true mean is between 137.10 and 153.90.
• Although the population mean may or may not be in this interval, close to 90% of a large number of
sample means drawn from this population will produce confidence intervals that include that
population’s mean.

An incorrect interpretation is that there is 90% probability that this interval contains the true population mean.
• This interval either does or does not contain the true mean, there is no probability for a single interval.

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Changing Confidence Levels

The significance level, α, represents the probability that any given confidence interval will not contain the true
population mean.

The confidence level of an interval is the complement to the significance level, 1 ─ α.

• i.e., a 100(1 – α)% confidence interval has a significance level equal to α.

The confidence interval gets wider if the confidence level increases.

z-scores for the most commonly used confidence levels are shown in this table:

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Confidence Intervals for the Mean with Small Samples when σ is Known. When the sample size is less than 30 and
sigma is known, the population must be normally distributed to calculate a confidence interval. With n < 30 the
Central Limit Theorem cannot be applied, so we can’t say the sampling distribution will be approximately
normal…
• …but the sampling distribution is always normal (regardless of sample size) if the population is normally
distributed.

Example: A manager wants to know the average time it takes to complete the required forms to hire a new
worker. Suppose a sample of size n = 18 gives a sample mean of 1.28 hours (assume that σ = 0.2 hours and that
the population follows the normal distribution).

Calculate a 95% confidence interval for the population mean.

1. Find the standard error of the mean:

2. Find zα/2 for 95%:

3. Calculate the interval endpoints:

Confidence Interval for Population Mean with Unknown σ

When the population standard deviation is unknown, we substitute s, the sample standard deviation, in its place
to calculate the standard error.

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The formula for the Approximate Standard Error of the Mean

The Student’s t-distribution is used in place of the normal probability distribution when the sample standard
deviation, s, is used in place of the population standard deviation, σ.

Using the Student’s t-distribution

The t-distribution is a continuous probability distribution with the following properties:

• It is bell-shaped and symmetrical around the mean.

• The shape of the curve depends on the degrees of freedom (df), df = n – 1.
• The area under the curve is equal to 1.0.
• The t-distribution is flatter and wider than the normal distribution.
• The critical score for the t-distribution is greater than the critical z-score for the same confidence level.
• The t-distribution is actually a family of distributions. As the number of degrees of freedom increases, the
shape of the t-distribution becomes similar to the normal distribution.

Note: When there are more than 100 degrees of freedom (a sample size of more than 100), the t-distribution and
normal distribution are practically identical.

Formulas for the Confidence Interval for the Mean (σ Unknown)

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Example: A hospital manager wants to estimate the average number of days patients spend in the hospital for
a surgical procedure. Suppose a sample of size n = 15 has a sample mean of 5.11 and a sample standard
deviation s = 0.85.

Calculate a 95% confidence interval for the population mean.

1. Find the standard error of the mean:

2. Find tα/2 for (15 – 1) = 14 df and 95% confidence (from Student’s t table):

3. Calculate the interval endpoints:

Based on our sample mean of 5.11, we are 95% confident that the population mean is between 4.64 and 5.58
days.

Confidence Interval for Population Proportion

Calculating Confidence Intervals for Proportions

Proportion data follow the binomial distribution, which can be approximated by the normal distribution under the
following conditions:

np ≥ 5 and n(1 – p) ≥ 5
where:
p = The probability of a success in the population
n = The sample size

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The confidence interval for the proportion is an interval estimate around a sample proportion that provides us
with a range of where the true population proportion lies.

Since the population proportion p is unknown, it is estimated using the sample proportion. The formula for the
Approximate Standard Error of the Proportion:

Formulas for the Confidence Interval for a Proportion:

The formula for the Margin of Error for a Confidence Interval for the Proportion

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The proportion margin of error, MEp, represents the width of the confidence interval between the sample
proportion and its upper limit or between the sample proportion and its lower limit

Example: From a random sample of Malaysian citizens, 22 of 100 people are found to have diabetes. Calculate
a 98% confidence interval for the population proportion of diabetic Malaysian citizens.

1. Calculate the sample proportion and the approximate standard error of the proportion:

2. Find zα/2 for 98%:

3. Calculate the interval endpoints: (next slide)

Based on our sample proportion of 0.22, we are 98% confident that the population proportion is between 0.124
and 0.316

Determining the Sample Size

Determining the Sample Size

Increasing the sample size, and holding all else constant, reduces the margin of error and provides a narrower
confidence interval.

The sample size needed to achieve a specific margin of error can be calculated, given the following information:
• The confidence level
• The population standard deviation

Calculating the Sample Size to Estimate a Population Mean

Solving for n:

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Example: If σ = 45, what sample size is needed to be 90% confident in estimating the population mean with a
margin of error of ± 5?

1. Find zα/2 for 90%:

2.

3. Calculate the required sample size:

So use a sample of size n = 220 (always round up).

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