BBAZ16011

INTRODUCTION TO
BUSINESS STATISTICS

2023-2024
SEMESTER B
Test 2
Will be held at least one week after the finish of Chapter 10.
Will be on a Sunday afternoon.
 Estimation and
Confidence
Intervals
CHAPTER 9

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Learning Objectives
LO9-1 Compute and interpret a point estimate of a population mean
LO9-2 Compute and interpret a confidence interval for a population
mean
LO9-3 Compute and interpret a confidence interval for a population
proportion
LO9-4 Calculate the required sample size to estimate a population
proportion or population mean

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 Point Estimate
 A point estimate is a single value (statistic) used to estimate a population value
(parameter)
Sample
Population
POINT ESTIMATE
The statistic, computed from sample information, that estimates a
population parameter.
Example
 Suppose the Bureau of Tourism for Barbados wants an estimate of the mean amount spent
by tourists visiting that country. They randomly select 500 tourists as they depart and ask
these tourists about their spending while there. The mean amount spent by the sample of
500 tourists serves as an estimate of the unknown population parameter.

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 Sampling Error (Chapter 8 slide)
• It is unlikely the mean of a sample will be exactly equal to the mean of the
population
SAMPLING ERROR
The difference between a sample statistic and its corresponding population
parameter.
Example
◦ The Foxtrot Inn’s number of rooms rented in June. The mean number of rooms rented, is 3.13
◦ Taking three random samples of size 5, we find sample means, , of 3.80, 3.40 and 1.80. The
sampling error is the difference between each

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 Confidence Intervals
 A confidence interval is a range of values within which the population
parameter is expected to occur
CONFIDENCE INTERVAL
A range of values constructed from sample data so that the population parameter is
likely to occur within that range at a specified probability. The specified probability is
called the level of confidence.
 The factors that determine the width of a confidence interval for a mean
are
◦ The number of observations in the sample, n
◦ The variability in the population, usually estimated by the sample standard deviation, s
◦ The desired level of confidence

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 Level of Confidence, Known
 To determine the confidence limits when the population standard
deviation is known, we use the z distribution
The formula is

x  sample mean
z  z - value for a particular confidence level
σ  the population standard deviation
n  the number of observations in the sample

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Finding a Value of z
 The method for finding z for a 95% confidence interval is
◦ Divide the confidence interval in half, .9500/2 = .4750
◦ Find the value .4750 in the body of the table
◦ Identify the row and column and add the values
◦ The probability of finding a value between 0 and 1.96 is .4750
◦ So the probability of finding a value between +/- 1.96 is .9500

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 The factors that determine the width of a confidence interval for a mean are
Level of Confidence, z
The number of observations in the sample, n

Example
The variability in the population, usually estimated by the sample standard deviation, s
The desired level of confidence

The American Management Association is studying the income of store managers in the
retail industry. A random sample of 49 managers reveals a sample mean of $45,420. The
standard deviation of the population is $2,050.

1. What is the population mean?

2. What is a reasonable range of values for the population mean? Z?
3. How do we interpret these results?

1. We do not know the population mean, so we can use the sample mean, $45,420 as
our best estimate.
2. The AMA decides to use a 95% level of confidence, so use equation (9-1),
z = $45,420 1.96 = $45,420 $574
3. The confidence interval is from $44,846 and $45,994, the value $574 is called the
margin of error.
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 Sampling Distribution of the Sample
Mean (Chapter 8 slide)
• If the population follows a normal distribution, the sampling distribution of
the sample mean will also follow the normal distribution for samples of any
size
• If the population is not normally distributed, the sampling distribution of the
sample mean will approach a normal distribution when the sample size is at
least 30
• Assume the population standard deviation is known
• To determine the probability that a sample mean falls in a particular range,
use the following formula

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Level of Confidence,
Unknown
 To determine the confidence limits when the population standard
deviation is unknown, we use the t distribution
The formula is

Example
◦ The Dean of the Business College wants to estimate the mean number of hours full-
time students work at paying jobs each week. He randomly selects a sample of 30
students and asks them how many hours they worked last week. He can calculate
the sample mean, but it is unlikely he would know the population standard deviation
required for formula 9-1.

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Determining when to use the Z or t distribution

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Characteristics of the t Distribution
 The t distribution is a continuous distribution
 It is bell-shaped and symmetrical
 It is flatter, or more spread out, than the standard normal distribution
 There is a family of t distributions, depending on the number of
degrees of freedom; the degrees of freedom are based on the sample
size, n.

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 Finding a Value of t
 First assume the population is normal
 Using Appendix B.5, move across the columns identified for confidence
intervals
 In the next example, we want to use the 95% level of confidence, so
move to that column
 Then find df, the degrees of freedom, n-1

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 Level of Confidence, t Example
A tire manufacturer wishes to investigate the tread life of its tires. A sample of 10 tires
driven 50,000 miles revealed a sample mean of 0.32 inch of tread remaining with a
standard deviation 0.09 inch. Construct a 95% confidence interval for the population mean.
Would it be reasonable for the manufacturer to conclude that after 50,000 miles the
population mean amount of tread remaining is 0.30 inch? Assumption: population: normal distribution

= 0.32 2.262 = 0.32 0.064

The endpoints of the confidence interval are 0.256 and 0.384. The margin of error is 0.064.
The manufacturer can be reasonably sure (95% confident) that the mean remaining tread
depth is between 0.256 and 0.384 inch. Because the value 0.30 is in this interval, it is 胎面花紋
possible that the mean of the population is 0.30.

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 Confidence Intervals for Proportions
PROPORTION
The fraction, ratio, or percent indicating the part of the sample or the
population having a particular trait of interest.
 A sample proportion, p, is found by x, the number of successes, divided by n, the
number of observations

 Examples
◦ Southern Tech career services reports that 80% of its graduates enter the job market in a position
related to their field of study
◦ A recent study of married men between the ages 35 and 50 found that 63% felt that both partners
should earn a living
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Confidence Intervals for Proportions
 A population proportion is identified by
 Two requirements
 The binomial conditions have been met
 The values n and n(1- ) should both be greater than or equal to 5

 We construct a confidence interval for a population proportion with the

following formula

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 Confidence Interval,
The union representing the Bottle Blowers of America (BBA) is considering a proposal to
merge with the Teamsters Union. At least three-fourths of the BBA membership must
approve any merger. A random sample of 2,000 current members reveals 1,600 plan to vote
for the merger proposal. What is the estimate of the population proportion? Can you
conclude that the necessary proportion of BBA members favor the merger? Why?
First, calculate the sample proportion, p = = = .80

Next, use formula (9-4) to determine the 95% confidence interval,

p = .80 = .80
The endpoints of the confidence interval are .782 and .818, so we conclude the merger will
likely pass because the interval estimate includes values greater than 75% of the union
membership.

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 Determining Sample Size for Means
 There are three factors that determine the sample size when we wish to
estimate the mean
 The margin of error, E
 The desired level of confidence, for example 95%
 The variation in the population
 The formula to determine the sample size for the mean is

 The result is not always a whole number; the usual practice is to round up any
fractional result to the next whole number.
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Sample Size to Estimate a Population
Mean Example
A student in public administration wants to estimate the mean monthly
earnings of city council members in large cities. She can tolerate a margin of
error of $100 in estimating the mean. She would also prefer to report the
interval estimate with a 95% level of confidence. The student found a report
by the Department of Labor that reported a standard deviation of $1,000.
What is the required sample size?
n=

The computed value of 384.16 is rounded up to 385. A sample size of 385 is

required to meet the specifications.

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Determining Sample Size for Proportions
 There are three factors that determine the sample size when we wish
to estimate a proportion
◦ The margin of error, E
◦ The desired level of confidence
◦ The variation in the population

 The formula to determine the sample size for a proportion is

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Sample Size for the Population
Proportion Example
The student in the previous example also wants to estimate the proportion of
cities that have private refuse collectors. The student wants to estimate the
population proportion with a margin of error of .10, prefers a level of
confidence of 90%, and has no estimate for the population proportion.
What is the required sample size?

2
n = (.50)(1-.50) = 67.65

The student needs a random sample of 68 cities.

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