2003 Pearson Prentice Hall

Chapter 7
Inferences Based on a Single Sample:
Estimation with Confidence Intervals

7-1

Learning Objectives
2003 Pearson Prentice Hall

1. State What Is Estimated

2. Distinguish Point & Interval Estimates
3. Explain Interval Estimates
4. Compute Confidence Interval Estimates
for Population Mean & Proportion
5. Compute Sample Size
7-2

Thinking Challenge
2003 Pearson Prentice Hall

Suppose youre
interested in the
average amount of
money that students
in this class (the
population) have on
them. How would
you find out?
7-3

 2003 Pearson Prentice Hall

Introduction
to Estimation

7-4

Statistical Methods
2003 Pearson Prentice Hall

SS t taa t ti iss t ti icc aa l l

MM ee t thh oo dd ss
DD ee ss cc r ri ipp t ti ivvee
SS t taa t ti iss t ti icc ss

I Inn f fee r ree nn t ti iaa l l

SS t taa t ti iss t ti icc ss

EE ss t ti imm aa t ti ioo nn

7-5

HH yypp oo t thh ee ss i iss

TT ee ss t ti inn gg

Estimation Process
2003 Pearson Prentice Hall

7-6

Estimation Process
2003 Pearson Prentice Hall

Population
Mean, , is
unknown

7-7

Estimation Process
2003 Pearson Prentice Hall

Population

Mean, , is
unknown

Sample

7-8

Random Sample
Mean
X = 50

Estimation Process
2003 Pearson Prentice Hall

Population

Mean, , is
unknown

Sample

7-9

Random Sample
Mean
X = 50

I am 95%
confident that
is between
40 & 60.

Unknown Population
Parameters Are
Estimated

2003 Pearson Prentice Hall

Estimate Population
Parameter...
Mean

Proportion
Variance
Differences
7 - 10

1 - 2

with Sample
Statistic
x
p^
s

x1 - x2

Estimation Methods
2003 Pearson Prentice Hall

7 - 11

Estimation Methods
2003 Pearson Prentice Hall

Estimation

7 - 12

Estimation Methods
2003 Pearson Prentice Hall

Estimation

Point
Estimation

7 - 13

Estimation Methods
2003 Pearson Prentice Hall

Estimation

Point
Estimation

7 - 14

Interval
Estimation

 2003 Pearson Prentice Hall

Point Estimation

7 - 15

Estimation Methods
2003 Pearson Prentice Hall

Estimation

Point
Estimation

7 - 16

Interval
Estimation

Point Estimation
2003 Pearson Prentice Hall

1. Provides Single Value

Based on Observations from 1 Sample

2. Gives No Information about How Close

Value Is to the Unknown Population
Parameter
3. Example: Sample Mean X = 3 Is Point
Estimate of Unknown Population Mean
7 - 17

 2003 Pearson Prentice Hall

Interval Estimation

7 - 18

Estimation Methods
2003 Pearson Prentice Hall

Estimation

Point
Estimation

7 - 19

Interval
Estimation

Interval Estimation
2003 Pearson Prentice Hall

1. Provides Range of Values

Based on Observations from 1 Sample

2. Gives Information about Closeness to

Unknown Population Parameter

Stated in terms of Probability

3. Example: Unknown Population Mean Lies

Between 50 & 70 with 95% Confidence
7 - 20

 2003 Pearson Prentice Hall

7 - 21

Key Elements of
Interval Estimation

 2003 Pearson Prentice Hall

Key Elements of
Interval Estimation

Sample statistic
(point estimate)

7 - 22

 2003 Pearson Prentice Hall

Key Elements of
Interval Estimation

Confidence
interval

Confidence
limit (lower)
7 - 23

Sample statistic
(point estimate)

Confidence
limit (upper)

 2003 Pearson Prentice Hall

Key Elements of
Interval Estimation

A probability that the population parameter

falls somewhere within the interval.
Confidence
interval

Confidence
limit (lower)
7 - 24

Sample statistic
(point estimate)

Confidence
limit (upper)

Confidence Limits
for Population Mean
We know the distribution of X-bar (for
large n:

CLT says its normally distributed with

mean Mu)

For any z, look up Pr X z X

z X

z X

 2003 Pearson Prentice Hall

Confidence Depends
on Interval (z)

7 - 26

 2003 Pearson Prentice Hall

Confidence Depends
on Interval (z)
x_

7 - 27

 2003 Pearson Prentice Hall

Confidence Depends
on Interval (z)

X = Z x

x_

7 - 28

 2003 Pearson Prentice Hall

Confidence Depends
on Interval (z)

X = Z x

x_

-1.65 x

+1.65 x

90% Samples

7 - 29

 2003 Pearson Prentice Hall

Confidence Depends
on Interval (z)

X = Z x

x_

-1.65 x
-1.96 x

+1.65 x
+1.96 x

90% Samples
95% Samples
7 - 30

 2003 Pearson Prentice Hall

Confidence Depends
on Interval (z)

X = Z x

x_

-2.58 x -1.65 x
-1.96 x

+1.65 x +2.58 x
+1.96 x

90% Samples
95% Samples
99% Samples
7 - 31

Confidence Level
2003 Pearson Prentice Hall

1. Probability that the sample statistic

falls within interval
2. Denoted (1 -

Is Probability That Parameter Is Not

Within Interval

3. Typical Values Are 99%, 95%, 90%

7 - 32

Is .01, .05., .10

Intervals
2003 Pearson Prentice Hall

Equivalent formulations:
X z X
X z X , z X

X z X , X z X

Therefore, can draw intervals around

either one, mu or x-bar:
Pr X z X , z X Pr X z X , X z X
7 - 33

But, Be Careful
2003 Pearson Prentice Hall

When you write

Pr X z X , X z X
mu and sigma are fixed.

The experiment is to draw a sample and compute x-bar

Not to make a random draw of what mu is

(Would you be selecting from all the alternate universes where

mu might be different?)

Thus, the probability is really 1 - that if you run the

experiment again, the interval youll draw around
the new X-bar will contain mu

7 - 34

Not the probability that mu is close to the particular x-bar that you
got from the current sample

 2003 Pearson Prentice Hall

Intervals &
Confidence Level

Sampling
Distribution / 2
of Mean

1 -

x__

/2

x =
Intervals
extend from
X - Z X to
X + Z X
7 - 35

(1 - ) % of
intervals
contain .
% do not.
Intervals derived from
many samples

 2003 Pearson Prentice Hall

Factors Affecting
Interval Width

1. Data Dispersion

Measured by

Intervals Extend from

X - Z X to X + Z X

2. Sample Size

X = / n

3. Level of Confidence
(1 - )

(Affects Z)

7 - 36

1984-1994 T/Maker Co.

 2003 Pearson Prentice Hall

7 - 37

Confidence Interval
Estimates

 2003 Pearson Prentice Hall

Confidence Interval
Estimates
Confidence
Intervals

7 - 38

 2003 Pearson Prentice Hall

Confidence Interval
Estimates
Confidence
Intervals
Mean

7 - 39

 2003 Pearson Prentice Hall

Confidence Interval
Estimates
Confidence
Intervals
Mean

7 - 40

Proportion

 2003 Pearson Prentice Hall

Confidence Interval
Estimates
Confidence
Intervals
Mean

7 - 41

Proportion

Variance

 2003 Pearson Prentice Hall

Confidence Interval
Estimates
Confidence
Intervals
Mean

Known

7 - 42

Proportion

Variance

 2003 Pearson Prentice Hall

Confidence Interval
Estimates
Confidence
Intervals
Mean

Known

7 - 43

Proportion

Unknown

Variance

 2003 Pearson Prentice Hall

Confidence Interval
Estimate Mean (
Known)

7 - 44

 2003 Pearson Prentice Hall

Confidence Interval
Estimates
Confidence
Intervals
Mean

Known

7 - 45

Proportion

Unknown

Variance

 2003 Pearson Prentice Hall

Confidence Interval
Mean ( Known)

1. Assumptions

Population Standard Deviation Is Known

Population Is Normally Distributed
If Not Normal, Can Be Approximated by
Normal Distribution (n 30)

7 - 46

 2003 Pearson Prentice Hall

Confidence Interval
Mean ( Known)

1.Assumptions

Population Standard Deviation Is Known

Population Is Normally Distributed
If Not Normal, Can Be Approximated by
Normal Distribution (n 30)

2. Confidence Interval Estimate

X Z / 2
X Z / 2
n
n

7 - 47

 2003 Pearson Prentice Hall

Estimation Example
Mean ( Known)

The mean of a random sample of n = 25

is X = 50. Set up a 95% confidence
interval estimate for if = 10.

7 - 48

 2003 Pearson Prentice Hall

Estimation Example
Mean ( Known)

The mean of a random sample of n = 25

is X = 50. Set up a 95% confidence
interval estimate for if = 10.

X Z / 2
X Z / 2
n
10
50 1.96
50 1.96
25
46.08 53.92
7 - 49

n
10
25

Thinking Challenge
2003 Pearson Prentice Hall

Youre a Q/C inspector for

Gallo. The for 2-liter
bottles is .05 liters. A
random sample of 100
bottles showed X = 1.99
liters. What is the 90%
confidence interval
estimate of the true mean
amount in 2-liter bottles?

22
liter
liter
1984-1994 T/Maker Co.

7 - 50

 2003 Pearson Prentice Hall

Confidence Interval
Solution*

X Z / 2
X Z / 2
n
n
.05
1.99 1.645
1.99 1.645
100
1.982 1.998
7 - 51

.05
100

Check Your
Understanding
You take a sample

1.

Compute x-bar and confidence interval of 1.96*sigma around xbar

Is Pr(mu lies in the confidence interval)=.95?

Suppose you take another sample

2.

3.

Is Pr(x-bar for new sample lies in the first confidence interval) =

.95?
Is Pr(confidence interval computed from the second sample
contains mu) = .95?

Suppose you combine the two samples

4.

5.

Will the confidence interval be larger or smaller than the

individual intervals computed?
Will the confidence level be lower or higher?

 2003 Pearson Prentice Hall

Confidence Interval
Estimate Mean (
Unknown)

7 - 53

 2003 Pearson Prentice Hall

Confidence Interval
Estimates
Confidence
Intervals
Mean

Known

7 - 54

Proportion

Unknown

Variance

Large Samples
2003 Pearson Prentice Hall

The sample variance s is a good estimator

of sigma
Carry on as before

7 - 55

Another Way To
Think About It

2003 Pearson Prentice Hall

Define variable

X X X
Z

X
/ n s/ n

X-bar is the sampling distribution of the mean of a

sample of Xs
Z is the normalized variable of X-bar

mu= 0 and sigma = 1

By the CLT, X-bar is normally distributed (large samples)

So Z is normally distributed
Therefore,

pr Z Z

2
7 - 56

pr Z Z

pr Z Z

Confidence Interval
Cookbook

2003 Pearson Prentice Hall

Interval to compute:

X Z X
2

Compute sample mean, X

Find

What is it for

.1? .05 ? .01?

Compute sample standard deviation, s

Compute X
7 - 57

/ n s/ n

 2003 Pearson Prentice Hall

Problems for Small

Samples

X may not be normally distributed

What are the implications for Z?

s is not a good estimator of X

n

7 - 58

Solution for Small

Samples

2003 Pearson Prentice Hall

1. Assumptions

Population of X Is Normally Distributed

2. Use Students t Distribution

1.

Define variable

X
T
s/ n
2. T has the Student distribution with n-1 degrees of
freedom (When X is normally distributed)

Theres a different Student distribution for different degrees of

freedom
As n gets large, Student distribution approximates a normal
distribution with mean = 0 and sigma = 1

7 - 59

 2003 Pearson Prentice Hall

Students t
Distribution
Standard
Normal

Bell-Shaped

t (df = 13)

Symmetric
t (df = 5)

Fatter Tails

0
7 - 60

Z
t

 2003 Pearson Prentice Hall

Confidence Interval
Mean ( Unknown)

Find t-value associated with desired

confidence level alpha
X
Pr T t / 2,n1
T
s/ n
1001 confidence interval is
s
s
X t
, X t / 2,n1

/ 2,n 1
n
n

7 - 61

Students t Table
2003 Pearson Prentice Hall

7 - 62

Students t Table
2003 Pearson Prentice Hall

t.10
.10

t.05
.05

t.025
.025

1 3.078 6.314 12.706

2 1.886 2.920 4.303
3 1.638 2.353 3.182

7 - 63

Students t Table
2003 Pearson Prentice Hall

t.10
.10

t.05
.05

t.025
.025

1 3.078 6.314 12.706

2 1.886 2.920 4.303
3 1.638 2.353 3.182

t values
7 - 64

Students t Table
2003 Pearson Prentice Hall

t.10
.10

t.05
.05

t.025
.025

/2

1 3.078 6.314 12.706

2 1.886 2.920 4.303
3 1.638 2.353 3.182

t values
7 - 65

/2

Students t Table
2003 Pearson Prentice Hall

t.10
.10

t.05
.05

t.025
.025

Assume:
n=3
df = n - 1 = 2
= .10
/2 =.05

/2

1 3.078 6.314 12.706

2 1.886 2.920 4.303
3 1.638 2.353 3.182

t values
7 - 66

/2

Students t Table
2003 Pearson Prentice Hall

t.10
.10

t.05
.05

t.025
.025

Assume:
n=3
df = n - 1 = 2
= .10
/2 =.05

/2

1 3.078 6.314 12.706

2 1.886 2.920 4.303
3 1.638 2.353 3.182

t values
7 - 67

/2

Students t Table
2003 Pearson Prentice Hall

t.10
.10

t.05
.05

t.025
.025

Assume:
n=3
df = n - 1 = 2
= .10
/2 =.05

/2

1 3.078 6.314 12.706

2 1.886 2.920 4.303
3 1.638 2.353 3.182

t values
7 - 68

.05

Students t Table
2003 Pearson Prentice Hall

t.10
.10

t.05
.05

t.025
.025

Assume:
n=3
df = n - 1 = 2
= .10
/2 =.05

/2

1 3.078 6.314 12.706

2 1.886 2.920 4.303
3 1.638 2.353 3.182

t values
7 - 69

.05

2.920

 2003 Pearson Prentice Hall

Degrees of Freedom
(df)

1. Number of Observations that Are Free to

Vary After Sample Statistic Has Been
Calculated
2. Example

Sum of 3 Numbers Is 6
X1 = 1 (or Any Number)
X2 = 2 (or Any Number)
X3 = 3 (Cannot Vary)
Sum = 6

7 - 70

degrees of freedom
= n -1
= 3 -1
=2

 2003 Pearson Prentice Hall

Estimation Example
Mean ( Unknown)

A random sample of n = 25 has x = 50 &

s = 8. Set up a 95% confidence interval
estimate for .

7 - 71

 2003 Pearson Prentice Hall

Estimation Example
Mean ( Unknown)

A random sample of n = 25 has x = 50 &

s = 8. Set up a 95% confidence interval
estimate for .
S
S
X t / 2, n 1
X t / 2, n 1
n
n
8
8
50 2.0639
50 2.0639
25
25
46.69 53.30
7 - 72

Thinking Challenge
2003 Pearson Prentice Hall

Youre a time study

analyst in manufacturing.
Youve recorded the
following task times (min.):
3.6, 4.2, 4.0, 3.5, 3.8, 3.1.
What is the 90%
confidence interval
estimate of the population
mean task time?
7 - 73

 2003 Pearson Prentice Hall

Confidence Interval
Solution*

X = 3.7
S = 3.8987
n = 6, df = n - 1 = 6 - 1 = 5
S / n = 3.8987 / 6 = 1.592
t.05,5 = 2.0150
3.7 - (2.015)(1.592) 3.7 + (2.015)(1.592)
0.492 6.908
7 - 74

 2003 Pearson Prentice Hall

Confidence Interval
Estimate of Proportion

7 - 75

 2003 Pearson Prentice Hall

Confidence Interval
Estimates
Confidence
Intervals
Mean

Known

7 - 76

Proportion

Unknown

Variance

 2003 Pearson Prentice Hall

7 - 77

Confidence Interval
Proportion

Confidence Interval
Proportion of
Population
Two Categorical Outcomes

2003 Pearson Prentice Hall

Mean of 0-1 variables, each with prob. p

count of 1' s X i
X

n
n

Xi

pq

pq
n

(Like binomial, which counted 1s, but didnt

divide by n)
7 - 78

Normal Approximation
Can Be Used

2003 Pearson Prentice Hall

pq
pq
z X , X z X p z
, pz

n
n

p q
p q
p z
, p z

n
n

7 - 79

 2003 Pearson Prentice Hall

Confidence Interval
Proportion

1. Assumptions

Two Categorical Outcomes

Population Follows Binomial Distribution
Normal Approximation Can Be Used
p
1 p

p
3
If

Does Not Include 0 or 1

2. Confidence Interval Estimate

(1 p )
(1 p )
p
p
p z 2
p p z 2
n
n
7 - 80

 2003 Pearson Prentice Hall

Estimation Example
Proportion

A random sample of 400 graduates

showed 32 went to grad school. Set up a
95% confidence interval estimate for p.

7 - 81

 2003 Pearson Prentice Hall

Estimation Example
Proportion

A random sample of 400 graduates

showed 32 went to grad school. Set up a
95% confidence interval estimate for p.
(1 p )
(1 p )
p
p
p Z / 2
p p Z / 2
n
n
.08 (1 .08)
.08 (1 .08)
.08 196
p .08 1.96
1.96
400
400
.053 p .107
7 - 82

Thinking Challenge
2003 Pearson Prentice Hall

Youre a production
manager for a newspaper.
You want to find the %
defective. Of 200
newspapers, 35 had
defects. What is the
90% confidence interval
estimate of the population
proportion defective?
7 - 83

 2003 Pearson Prentice Hall

Confidence Interval
Solution*

(1 p )
(1 p )
p
p
p z //22
p p z //22
n
n
.175 (.825)
.175 (.825)
.175 1.645
p .175 1.645
200
200
.1308 p .2192

7 - 84

Review
2003 Pearson Prentice Hall

Define

7 - 85

Review
2003 Pearson Prentice Hall

Pr confidence interval will not contain

Pr X Z X (if X is normally distributed)

or Pr X T X (if X is normally distributed)

,n 1

7 - 86

 2003 Pearson Prentice Hall

Finding Sample Sizes

7 - 87

 2003 Pearson Prentice Hall

(1)
(2)
(3)

Finding Sample
Sizes
for Estimating

I dont want to

X Error
Z

x
x

Error Z x Z
n
2 2
Z
n
Error 2

Error Is Also Called Bound, B, or

Margin of Error or Sampling Error, SE
7 - 88

sample too much

or too little!

Determining Sample
Size

2003 Pearson Prentice Hall

Z is determined by desired confidence

level
But how do you determine sigma?

7 - 89

Determining Sample
Size

2003 Pearson Prentice Hall

Z is determined by desired confidence

level
But how do you determine sigma?

Known from previous studies

Pilot test on a small n
Theoretical derivation

7 - 90

 2003 Pearson Prentice Hall

Sample Size
Example

What sample size is needed to be 90%

confident of being correct within 5? A
pilot study suggested that the standard
deviation is 45.

7 - 91

Sample Size
Example

2003 Pearson Prentice Hall

What sample size is needed to be 90%

confident of being correct within 5? A
pilot study suggested that the standard
deviation is 45.

Z
1.645 45
n

219.2 220
2
2
Error
5
2

7 - 92

Thinking Challenge
2003 Pearson Prentice Hall

You work in Human

Resources at Merrill Lynch.
You plan to survey employees
to find their average medical
expenses. You want to be
95% confident that the sample
mean is within $50.
A pilot study showed that
was about $400. What
sample size do you use?
7 - 93

 2003 Pearson Prentice Hall

Sample Size
Solution*
Z 22 22
n
Error 22
2
2

1.96 2 400 2

50 22

245.86 246

7 - 94

Public Opinion Poll

2003 Pearson Prentice Hall

You want to know what percentage of the

population supports gay marriage
Within bound plus/minus 4% at 95%
confidence
How large a sample do you need?
p(1-p) achieves its maximum at p=.5

Using a conservative bound, p1 p 0.5

7 - 95

 2003 Pearson Prentice Hall

Public Opinion Poll

Solution*

2 2

1.96 pq 1.96 * .5
n

2
2
2
B
.04
.04
600

Even if p is near .5, 95% confidence interval will be

plus/minus 4 percent
If p is much smaller, will the confidence interval be
larger or smaller? (Hint: try p=.1)
If you expect p is 10-30%, rather than 50%, do you need
a bigger or smaller sample to get 95% confidence of
plus/minus 4 percent?
7 - 96

Conclusion
2003 Pearson Prentice Hall

1. Stated What Is Estimated

2. Distinguished Point & Interval Estimates
3. Explained Interval Estimates
4. Computed Confidence Interval Estimates
for Population Mean & Proportion
5. Computed Sample Size
7 - 97

End of Chapter
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