Chapter 9

Copyright© Dorling Kindersley India Pvt Ltd
Chapter 9
Statistical Inference:
Estimation for Single
Populations
Business Statistics - Naval

Bajpai
Learning Objectives

Upon completion of this chapter, you will be able to:
 Understand the concept of estimation and types of estimators

 Use z-statistic for estimating population mean
 Understand the concept of confidence interval for estimating
population mean μ when σ is unknown
 Estimate population mean using the t statistic test (small sample
case)
 Understand the concept of confidence interval estimation for
population proportion
 Understand the concept of sample size for estimating population
mean μ
 Understand the concept of sample size for estimating the population
proportion p
Business Statistics - Naval Bajpai

Statistical Inference

Statistical inference is the branch of statistics which deals
with uncertainty in decision making and provides a basis
for making scientific decisions.

Types of Estimates

 We can make two types of estimates about the population.
They are referred to as point estimates and interval
estimates.
 A point estimate is the sample statistic that is used to
estimate the population parameter.
 An interval estimate is the range of values within which a
researcher or an employee can say with some confidence
that the population parameter falls. This range is called
confidence interval.

Using the Z Statistic for Estimating Population

Mean
 The z statistic can be used for estimating the population
parameter on the basis of the sample statistic.
 Confidence interval for estimating population mean μ
 The confidence interval with the associated probability can be

calculated as below:

Figure 9.1: z scores for confidence interval in relation to
alpha
In estimation, any confidence level can be applied; however,

the most widely used levels are 90 %, 95%, and 99%.

Figure 9.2: Distribution of sample means for 99% confidence
interval


Example 9.1: A researcher has taken a random sample of size 70 from
a population with a sample mean of 35 and a population standard
deviation of 4.62. Construct a 90% confidence interval to estimate the
population mean.
This result implies that the researcher is 90% confident that the
population mean will lie between 34.091 and 35.909. The point
estimate is 35.

Using MS Excel and Minitab for Confidence

Interval Construction
 Solved Examples\Excel\Ex 9.1.xls

 Solved Examples\Minitab\Ex 9.1.MPJ
When the sample size is less than 5% of the population, the

finite correction factor does not significantly increase the
accuracy of the solution.

Confidence interval for estimating population mean μ,
when σ is unknown and sample size is large (n ≥30)

Example 9.3: In order to estimate the customer loyalty for
a particular product, a researcher poses the following
question to a sample of 100 customers: How many years
have you been continuously using this product? This
sample yielded a mean period of 8 years with a sample
standard deviation of 2 years. Construct a 95% confidence
interval for estimating the population mean.

Example 9.3 (Solution)

This result implies that the researcher is 95% confident that the
population mean (average years after purchase in the
population) will lie between 7.608 years and 8.392 years.
Solved Examples\Excel\Ex 9.3.xls

Solved Examples\Minitab\Ex 9.3.MPJ

Estimating Population Mean Using the t

Statistic (Small–Sample Case)
In the case of small sample size (n < 30), the z formula

discussed earlier is not applicable. The problem can be solved by
using the t statistic.
Figure 9.10 : Comparison of standard normal curve with two t

distributions having degrees of freedom 10 and 20, respectively

The t Distribution

 The t distribution, developed by William Gosset is a family
of similar probability distributions with a specific t
distribution depending on a parameter known as the
degrees of freedom.
 As sample size n increases, t distribution values tend to

approach standard normal curve.
 The difference between tabular values of t and z becomes

negligible as sample size increases.This is a reason why
many researchers use the z distribution for large samples.

The t Distribution (Contd.)

Figure 9.11 : Comparison of standard normal curve
with two t curves with sample size n = 10 and n = 22
Degrees of Freedom

 The number of degrees of freedom indicates the number of values that are
free to vary in a random sample. The degrees of freedom can be understood
as the number of independent observations for a source of variation minus
the number of independent parameters estimated in computing the
variation.
 Confidence interval to estimate population parameter μ, when population

standard deviation σ is unknown and the population is normally distributed.

Example 9.4: The personnel department of an organization wants to
apply cost-cutting measures for improving efficiency. As the first step,
the personnel department wants to curtail telephone expenses incurred
by employees. For this, personnel department has taken a random
sample of 10 employees and gathered the following data about
telephone expenses (in thousand rupees) in the previous year:10, 12,
24, 23, 11, 14, 15, 34, 16, 23. Construct a 95% confidence interval to
estimate the average telephone expenses of the employees in the
population.
Solution:

Confidence Interval Estimation for Population

Proportion
Confidence interval to estimate the population proportion p
Example 9.5: A research company conducted a survey on 300

randomly selected tax payers. It found that out of 300 tax
payers, 180 tax payers have filled the “SARAL” form correctly.
Construct a 95% confidence interval to estimate the percentage
of tax payers who have filled the form correctly in the
population.

Using Minitab to Construct Confidence Interval

Estimation for Population Proportion

Sample Size Estimation

Sample Size for Estimating Population Mean μ
The z formula for sample mean is

Example 9.6: A population has a standard deviation of 4.2
and sampling error of 2.4.Determine the sample size to
estimate the mean of the population with 95% confidence
level?

Sample Size for Estimating Population

Proportion p
The z formula for sample proportion is

Example 9.7: A consumer electronics company wants to
determine the job satisfaction levels of its employees. For this,
they ask a simple question, are you satisfied with your job? It
was estimated before the study that no more than 30% of the
employees would answer yes. What should be the sample size
for this company to estimate population proportion to ensure
95% confidence in result, and to be within 0.04 of the true
population proportion?
Solution : Here, p = 0.3; q = 0.7; E = 0.04

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Copyright© Dorling Kindersley India Pvt Ltd

Business Statistics - Naval

Copyright© Dorling Kindersley India Pvt Ltd

 Understand the concept of estimation and types of estimators

Business Statistics - Naval Bajpai

Copyright© Dorling Kindersley India Pvt Ltd

Business Statistics - Naval Bajpai

Copyright© Dorling Kindersley India Pvt Ltd

Business Statistics - Naval Bajpai

Copyright© Dorling Kindersley India Pvt Ltd

 The confidence interval with the associated probability can be

Business Statistics - Naval Bajpai

In estimation, any confidence level can be applied; however,

Business Statistics - Naval Bajpai

Business Statistics - Naval Bajpai

Copyright© Dorling Kindersley India Pvt Ltd

Business Statistics - Naval Bajpai

Copyright© Dorling Kindersley India Pvt Ltd

 Solved Examples\Excel\Ex 9.1.xls

When the sample size is less than 5% of the population, the

Business Statistics - Naval Bajpai

Copyright© Dorling Kindersley India Pvt Ltd

Business Statistics - Naval Bajpai

Copyright© Dorling Kindersley India Pvt Ltd

Solved Examples\Excel\Ex 9.3.xls

Business Statistics - Naval Bajpai

Copyright© Dorling Kindersley India Pvt Ltd

In the case of small sample size (n < 30), the z formula

Figure 9.10 : Comparison of standard normal curve with two t

Business Statistics - Naval Bajpai

Copyright© Dorling Kindersley India Pvt Ltd

 As sample size n increases, t distribution values tend to

 The difference between tabular values of t and z becomes

Business Statistics - Naval Bajpai

Copyright© Dorling Kindersley India Pvt Ltd

Copyright© Dorling Kindersley India Pvt Ltd

 Confidence interval to estimate population parameter μ, when population

Business Statistics - Naval Bajpai

Solved Examples\Minitab\Ex 9.4.MPJ

Copyright© Dorling Kindersley India Pvt Ltd

Example 9.5: A research company conducted a survey on 300

Business Statistics - Naval Bajpai

Copyright© Dorling Kindersley India Pvt Ltd

Solved Examples\Minitab\Ex 9.5.MPJ

Business Statistics - Naval Bajpai

Copyright© Dorling Kindersley India Pvt Ltd

Business Statistics - Naval Bajpai

Business Statistics - Naval Bajpai

Copyright© Dorling Kindersley India Pvt Ltd

The z formula for sample proportion is

Business Statistics - Naval Bajpai

Solution : Here, p = 0.3; q = 0.7; E = 0.04

Business Statistics - Naval Bajpai

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