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© 1998 Prentice-Hall, Inc. Chapter 7 Inferences Based on a Single Sample: Estimation with Confidence Intervals 7-1 Learning Objectives © 1998 Prentice-Hall, Inc. 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 © 1998 Prentice-Hall, Inc. Suppose you’re interested in estimating the average amount of money that second-year business students (population) have on them. How would you find out? 7-3 Alone Group Class © 1998 Prentice-Hall, Inc. Introduction to Estimation 7-4 © 1998 Prentice-Hall, Inc. Types of Statistical Applications Statistical Methods Descriptive Statistics Inferential Statistics Estimation 7-5 Hypothesis Testing Estimation Process © 1998 Prentice-Hall, Inc. 7-6 Estimation Process © 1998 Prentice-Hall, Inc. Population Mean, , is unknown 7-7 Estimation Process © 1998 Prentice-Hall, Inc. Population Mean, , is unknown Sample 7-8 Random Sample Mean X = 50 Estimation Process © 1998 Prentice-Hall, Inc. Population Mean, , is unknown Sample 7-9 Random Sample Mean X = 50 I am 95% confident that is between 42 & 58. © 1998 Prentice-Hall, Inc. Unknown Population Parameters Are Estimated 7 - 10 © 1998 Prentice-Hall, Inc. Unknown Population Parameters Are Estimated Estimate population parameter... 7 - 11 with sample statistic © 1998 Prentice-Hall, Inc. Unknown Population Parameters Are Estimated Estimate population parameter... Mean 7 - 12 with sample statistic x © 1998 Prentice-Hall, Inc. Unknown Population Parameters Are Estimated Estimate population parameter... Mean Proportion 7 - 13 p with sample statistic x p^ © 1998 Prentice-Hall, Inc. Unknown Population Parameters Are Estimated Estimate population parameter... Mean Proportion p Variance 7 - 14 2 with sample statistic x p^ s 2 © 1998 Prentice-Hall, Inc. Unknown Population Parameters Are Estimated Estimate population parameter... Mean Proportion p Variance Differences 7 - 15 2 1 - 2 with sample statistic x p^ s 2 x1 -x2 Estimation Methods © 1998 Prentice-Hall, Inc. 7 - 16 Estimation Methods © 1998 Prentice-Hall, Inc. Estimation 7 - 17 Estimation Methods © 1998 Prentice-Hall, Inc. Estimation Point Estimation 7 - 18 Estimation Methods © 1998 Prentice-Hall, Inc. Estimation Point Estimation 7 - 19 Interval Estimation © 1998 Prentice-Hall, Inc. Point Estimation 7 - 20 Estimation Methods © 1998 Prentice-Hall, Inc. Estimation Point Estimation 7 - 21 Interval Estimation Point Estimation © 1998 Prentice-Hall, Inc. 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 meanx = 3 is point estimate of unknown population mean 7 - 22 © 1998 Prentice-Hall, Inc. Interval Estimation 7 - 23 Estimation Methods © 1998 Prentice-Hall, Inc. Estimation Point Estimation 7 - 24 Interval Estimation Interval Estimation © 1998 Prentice-Hall, Inc. 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 Knowing exact closeness requires knowing unknown population parameter 3. Example: unknown population mean lies between 50 & 70 with 95% confidence 7 - 25 © 1998 Prentice-Hall, Inc. 7 - 26 Key Elements of Interval Estimation © 1998 Prentice-Hall, Inc. Key Elements of Interval Estimation Sample statistic (point estimate) 7 - 27 © 1998 Prentice-Hall, Inc. Key Elements of Interval Estimation Confidence interval 7 - 28 Sample statistic (point estimate) © 1998 Prentice-Hall, Inc. Key Elements of Interval Estimation Confidence interval Confidence limit (lower) 7 - 29 Sample statistic (point estimate) Confidence limit (upper) © 1998 Prentice-Hall, Inc. Key Elements of Interval Estimation A probability that the population parameter falls somewhere within the interval. Confidence interval Confidence limit (lower) 7 - 30 Sample statistic (point estimate) Confidence limit (upper) Confidence Limits for Population Mean © 1998 Prentice-Hall, Inc. Parameter = Statistic ± Error © 1984-1994 T/Maker Co. 7 - 31 (1) X Error (2) Error X or X X (3) Z (4) Error Z x (5) X Z x x Error x © 1998 Prentice-Hall, Inc. 7 - 32 Many Samples Have Same Interval © 1998 Prentice-Hall, Inc. Many Samples Have Same Interval x_ 7 - 33 X © 1998 Prentice-Hall, Inc. Many Samples Have Same Interval X = ± Zx x_ 7 - 34 X © 1998 Prentice-Hall, Inc. Many Samples Have Same Interval X = ± Zx x_ -1.65x +1.65x 90% Samples 7 - 35 X © 1998 Prentice-Hall, Inc. Many Samples Have Same Interval X = ± Zx x_ -1.65x -1.96x +1.65x +1.96x 90% Samples 95% Samples 7 - 36 X © 1998 Prentice-Hall, Inc. Many Samples Have Same Interval X = ± Zx x_ -2.58x -1.645x -1.96x +1.645x +2.58x +1.96x 90% Samples 95% Samples 99% Samples 7 - 37 X Confidence Level © 1998 Prentice-Hall, Inc. 1. Probability that the unknown population parameter falls within interval 2. Denoted (1 - 100 is probability that parameter is not within interval 3. Typical values are 99%, 95%, 90% 7 - 38 © 1998 Prentice-Hall, Inc. 7 - 39 Intervals & Confidence Level © 1998 Prentice-Hall, Inc. Intervals & Confidence Level Sampling Distribution /2 of Mean x_ 1 - x = 7 - 40 /2 _ X © 1998 Prentice-Hall, Inc. Intervals & Confidence Level Sampling Distribution /2 of Mean x_ 1 - x = /2 _ X Confidence Interval 7 - 41 © 1998 Prentice-Hall, Inc. Intervals & Confidence Level Sampling Distribution /2 of Mean x_ 1 - x = /2 _ X Confidence Interval 7 - 42 © 1998 Prentice-Hall, Inc. Intervals & Confidence Level Sampling Distribution /2 of Mean x_ 1 - x = Intervals extend from X - ZX to X + ZX 7 - 43 /2 _ X Confidence Interval © 1998 Prentice-Hall, Inc. Intervals & Confidence Level Sampling Distribution /2 of Mean x_ 1 - x = Intervals extend from X - ZX to X + ZX 7 - 44 /2 _ X Confidence Interval © 1998 Prentice-Hall, Inc. Intervals & Confidence Level Sampling Distribution /2 of Mean x_ 1 - x = Intervals extend from X - ZX to X + ZX 7 - 45 /2 _ X Confidence Interval © 1998 Prentice-Hall, Inc. Intervals & Confidence Level Sampling Distribution /2 of Mean x_ 1 - /2 x = Intervals extend from X - ZX to X + ZX X Confidence Interval Large number of intervals 7 - 46 _ © 1998 Prentice-Hall, Inc. Intervals & Confidence Level Sampling Distribution /2 of Mean x_ 1 - x = Intervals extend from X - ZX to X + ZX 7 - 47 /2 _ X (1 - )100 % of intervals contain . 100 % do Large number of intervals not. Factors Affecting Interval Width © 1998 Prentice-Hall, Inc. 1. Data dispersion Measured by Intervals extend from X - ZX toX + ZX 2. Sample size X = / n 3. Level of confidence (1 - ) Affects Z © 1984-1994 T/Maker Co. 7 - 48 © 1998 Prentice-Hall, Inc. 7 - 49 Confidence Interval Estimates © 1998 Prentice-Hall, Inc. Confidence Interval Estimates One Population 7 - 50 © 1998 Prentice-Hall, Inc. Confidence Interval Estimates One Population Mean 7 - 51 © 1998 Prentice-Hall, Inc. Confidence Interval Estimates One Population Mean 7 - 52 Proportion © 1998 Prentice-Hall, Inc. Confidence Interval Estimates One Population Large Sample Mean Z Distribution 7 - 53 Proportion © 1998 Prentice-Hall, Inc. Confidence Interval Estimates One Population Large Sample Mean Z Distribution 7 - 54 Small Sample t Distribution Proportion © 1998 Prentice-Hall, Inc. Confidence Interval Estimates One Population Large Sample Mean Z Distribution 7 - 55 Small Sample t Distribution Proportion Z Distribution © 1998 Prentice-Hall, Inc. Confidence Interval Estimate Mean (Large Sample) 7 - 56 © 1998 Prentice-Hall, Inc. Confidence Interval Estimates One Population Large Sample Mean Z Distribution 7 - 57 Small Sample t Distribution Proportion Z Distribution Confidence Interval Mean (Large Sample) © 1998 Prentice-Hall, Inc. 1. Assumptions Sample size at least 30 (n 30) Random sample drawn If population standard deviation unknown, use sample standard deviation 7 - 58 Confidence Interval Mean (Large Sample) © 1998 Prentice-Hall, Inc. 1. Assumptions Sample size at least 30 (n 30) Random sample drawn If population standard deviation unknown, use sample standard deviation 2. Confidence interval estimate X Z / 2 7 - 59 n X Z / 2 n © 1998 Prentice-Hall, Inc. Estimation Example Mean (Large Sample) The mean of a random sample of n = 36 isX = 50. Set up a 95% confidence interval estimate for if = 12. 7 - 60 © 1998 Prentice-Hall, Inc. Estimation Example Mean (Large Sample) The mean of a random sample of n = 36 isX = 50. Set up a 95% confidence interval estimate for if = 12. X Z / 2 X Z / 2 n n 12 12 50 1.96 50 1.96 36 36 46.08 53.92 7 - 61 Thinking Challenge © 1998 Prentice-Hall, Inc. You’re a Q/C inspector for Gallo. The for 2-liter bottles is .05 liters. A random sample of 100 bottles showedX = 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 - 62 Alone Group Class © 1998 Prentice-Hall, Inc. Confidence Interval Solution* X Z / 2 n X Z / 2 n .05 .05 1.99 1.645 1.99 1.645 100 100 1.982 1.998 7 - 63 © 1998 Prentice-Hall, Inc. Confidence Interval Estimate Mean (Small Sample) 7 - 64 © 1998 Prentice-Hall, Inc. Confidence Interval Estimates One Population Large Sample Mean Z Distribution 7 - 65 Small Sample t Distribution Proportion Z Distribution Confidence Interval Mean (Small Sample) © 1998 Prentice-Hall, Inc. 1. Assumptions Sample size less than 30 (n < 30) Population normally distributed Population standard deviation unknown 2. Use Student’s t distribution 7 - 66 Confidence Interval Mean (Small Sample) © 1998 Prentice-Hall, Inc. 1. Assumptions Sample size less than 30 (n < 30) Population normally distributed Population standard deviation unknown 2. Use Student’s t distribution 3. Confidence interval estimate S S X t / 2, n 1 X t / 2, n 1 n n 7 - 67 Student’s t Distribution © 1998 Prentice-Hall, Inc. 7 - 68 Student’s t Distribution © 1998 Prentice-Hall, Inc. Standard Normal Z 0 7 - 69 Student’s t Distribution © 1998 Prentice-Hall, Inc. Standard Normal Bell-Shaped t (df = 13) Symmetric ‘Fatter’ Tails 0 7 - 70 Z t Student’s t Distribution © 1998 Prentice-Hall, Inc. Standard Normal Bell-Shaped t (df = 13) Symmetric t (df = 5) ‘Fatter’ Tails 0 7 - 71 Z t Student’s t Table © 1998 Prentice-Hall, Inc. 7 - 72 Student’s t Table © 1998 Prentice-Hall, Inc. v t.10 t.05 t.025 1 3.078 6.314 12.706 2 1.886 2.920 4.303 3 1.638 2.353 3.182 7 - 73 Student’s t Table © 1998 Prentice-Hall, Inc. v t.10 t.05 t.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 - 74 Student’s t Table © 1998 Prentice-Hall, Inc. /2 v t.10 t.05 t.025 1 3.078 6.314 12.706 2 1.886 2.920 4.303 3 1.638 2.353 3.182 /2 0 t values 7 - 75 t Student’s t Table © 1998 Prentice-Hall, Inc. Assume: n=3 df = n - 1 = 2 = .10 /2 =.05 /2 v t.10 t.05 t.025 1 3.078 6.314 12.706 2 1.886 2.920 4.303 3 1.638 2.353 3.182 /2 0 t values 7 - 76 t Student’s t Table © 1998 Prentice-Hall, Inc. Assume: n=3 df = n - 1 = 2 = .10 /2 =.05 /2 v t.10 t.05 t.025 1 3.078 6.314 12.706 2 1.886 2.920 4.303 3 1.638 2.353 3.182 /2 0 t values 7 - 77 t Student’s t Table © 1998 Prentice-Hall, Inc. Assume: n=3 df = n - 1 = 2 = .10 /2 =.05 /2 v t.10 t.05 t.025 1 3.078 6.314 12.706 2 1.886 2.920 4.303 3 1.638 2.353 3.182 .05 0 t values 7 - 78 t Student’s t Table © 1998 Prentice-Hall, Inc. Assume: n=3 df = n - 1 = 2 = .10 /2 =.05 /2 v t.10 t.05 t.025 1 3.078 6.314 12.706 2 1.886 2.920 4.303 3 1.638 2.353 3.182 .05 0 t values 7 - 79 2.920 t Degrees of Freedom (df) © 1998 Prentice-Hall, Inc. 1. Number of observations that are free to vary after sample statistic has been calculated 7 - 80 Degrees of Freedom (df) © 1998 Prentice-Hall, Inc. 1. Number of observations that are free to vary after sample statistic has been calculated 2. Example: Sum of 3 numbers is 6 X1 = X2 = X3 = Sum = 6 7 - 81 Degrees of Freedom (df) © 1998 Prentice-Hall, Inc. 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 = X3 = Sum = 6 7 - 82 Degrees of Freedom (df) © 1998 Prentice-Hall, Inc. 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 = Sum = 6 7 - 83 Degrees of Freedom (df) © 1998 Prentice-Hall, Inc. 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 - 84 Degrees of Freedom (df) © 1998 Prentice-Hall, Inc. 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 - 85 degrees of freedom = n -1 = 3 -1 =2 © 1998 Prentice-Hall, Inc. Estimation Example Mean (Small Sample) A random sample of n = 25 hasx = 50 & s = 8. Set up a 95% confidence interval estimate for . 7 - 86 © 1998 Prentice-Hall, Inc. Estimation Example Mean (Small Sample) A random sample of n = 25 hasx = 50 & s = 8. Set up a 95% confidence interval estimate for . S X t / 2, n 1 X t / 2, n 1 n 8 50 2.0639 50 2.0639 25 46.69 53.30 7 - 87 S n 8 25 Thinking Challenge © 1998 Prentice-Hall, Inc. You’re a time study analyst in manufacturing. You’ve 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 - 88 Alone Group Class © 1998 Prentice-Hall, Inc. 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 - 89 © 1998 Prentice-Hall, Inc. Confidence Interval Estimate of Proportion 7 - 90 Data Types © 1998 Prentice-Hall, Inc. Data Quantitative Discrete 7 - 91 Continuous Qualitative Qualitative Data © 1998 Prentice-Hall, Inc. 1. Qualitative random variables yield responses that classify e.g., gender (male, female) 2. Measurement reflects # in category 3. Nominal or ordinal scale 4. Examples Do you own savings bonds? Do you live on-campus or off-campus? 7 - 92 Proportions © 1998 Prentice-Hall, Inc. 1. Involve qualitative variables 2. Fraction or % of population in a category 3. If two qualitative outcomes, binomial distribution Possess or don’t possess characteristic 7 - 93 Proportions © 1998 Prentice-Hall, Inc. 1. Involve qualitative variables 2. Fraction or % of population in a category 3. If two qualitative outcomes, binomial distribution Possess or don’t possess characteristic ^ 4. Sample proportion (p) x number of successes p n sample size 7 - 94 © 1998 Prentice-Hall, Inc. 7 - 95 Sampling Distribution of Proportion © 1998 Prentice-Hall, Inc. Sampling Distribution of Proportion Sampling Distribution ^ P(P ) .3 .2 .1 .0 ^ P .0 7 - 96 .2 .4 .6 .8 1.0 Sampling Distribution of Proportion © 1998 Prentice-Hall, Inc. 1. Approximated by normal distribution b g np 3 np 1 p excludes 0 or n Sampling Distribution ^ P(P ) .3 .2 .1 .0 ^ P .0 7 - 97 .2 .4 .6 .8 1.0 Sampling Distribution of Proportion © 1998 Prentice-Hall, Inc. 1. Approximated by normal distribution b g np 3 np 1 p excludes 0 or n 2. Mean P p 7 - 98 Sampling Distribution ^ P(P ) .3 .2 .1 .0 ^ P .0 .2 .4 .6 P p .8 1.0 Sampling Distribution of Proportion © 1998 Prentice-Hall, Inc. 1. Approximated by normal distribution b g np 3 np 1 p excludes 0 or n 2. 3. Mean P p ^ P(P ) .3 .2 .1 .0 ^ P .0 Standard error p 1 p p^ n a 7 - 99 Sampling Distribution f .2 .4 .6 P p .8 1.0 © 1998 Prentice-Hall, Inc. Confidence Interval Estimates One Population Large Sample Mean Z Distribution 7 - 100 Small Sample t Distribution Proportion Z Distribution © 1998 Prentice-Hall, Inc. 7 - 101 Confidence Interval Proportion Confidence Interval Proportion © 1998 Prentice-Hall, Inc. 1. Assumptions Two categorical outcomes Population follows binomial distribution Normal approximation can be used 7 - 102 b g np 3 np 1 p does not include 0 or 1 Confidence Interval Proportion © 1998 Prentice-Hall, Inc. 1. Assumptions Two categorical outcomes Population follows binomial distribution Normal approximation can be used b g np 3 np 1 p 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 - 103 © 1998 Prentice-Hall, Inc. 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 - 104 © 1998 Prentice-Hall, Inc. 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 1.96 p .08 1.96 400 400 .053 p .107 7 - 105 Thinking Challenge © 1998 Prentice-Hall, Inc. You’re 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 - 106 Alone Group Class © 1998 Prentice-Hall, Inc. Confidence Interval Solution* (1 p ) (1 p ) p p p z / 2 p p z / 2 n n .175 (.825) .175 (.825) .175 1.645 p .175 1.645 200 200 .1308 p .2192 7 - 107 © 1998 Prentice-Hall, Inc. Finding Sample Sizes 7 - 108 © 1998 Prentice-Hall, Inc. 7 - 109 Finding Sample Sizes for Estimating Finding Sample Sizes for Estimating © 1998 Prentice-Hall, Inc. (1) Z X x Error x (2) Error Z x Z (3) Z n Error 2 2 7 - 110 2 n Finding Sample Sizes for Estimating © 1998 Prentice-Hall, Inc. (1) Z X x Error x (2) Error Z x Z (3) Z n Error 2 2 7 - 111 2 n Finding Sample Sizes for Estimating © 1998 Prentice-Hall, Inc. (1) Z X x Error x (2) Error Z x Z (3) Z n Error 2 2 2 Error is also called bound, B 7 - 112 n Finding Sample Sizes for Estimating © 1998 Prentice-Hall, Inc. (1) Z X x Error x (2) Error Z x Z (3) Z n Error 2 2 2 Error is also called bound, B 7 - 113 I don’t want to sample too much or too little! n Sample Size Example © 1998 Prentice-Hall, Inc. 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 - 114 Sample Size Example © 1998 Prentice-Hall, Inc. What sample size is needed to be 90% confident of being correct within 5? A pilot study suggested that the standard deviation is 45. a f a f 219.2 220 af 2 1645 . 45 Z n 2 2 Error 5 2 7 - 115 2 2 Thinking Challenge © 1998 Prentice-Hall, Inc. 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 - 116 Alone Group Class Sample Size Solution* © 1998 Prentice-Hall, Inc. Z 2 2 n 2 Error 400f 1.96f a a a50f 2 2 2 245.86 246 7 - 117 Conclusion © 1998 Prentice-Hall, Inc. 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 - 118 This Class... © 1998 Prentice-Hall, Inc. Please take a moment to answer the following questions in writing: 1. What was the most important thing you learned in class today? 2. What do you still have questions about? 3. How can today’s class be improved? 7 - 119 End of Chapter Any blank slides that follow are blank intentionally.