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Slide 1
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Slide 3
 Estimation & Confidence Interval

Interval Estimation for Population Mean: s Known

Interval Estimation for Population Mean: s Unknown
Determining the Sample Size

Slide 4
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Slide 5
 A point estimate
A confidence
is a single value
interval is a range of
(statistic) used to
values within which
estimate a
the population
population value
parameter is expected
(parameter).
to occur.

An Interval The two confidence

Estimate states the intervals that are used
range within which a extensively are the
population parameter 95% and the 99%.
probably lies.

Slide 6
 Interpretation of Interval Estimation

For a 95% confidence 95% of the sample means

interval about 95% of the for a specified sample size
similarly constructed will lie within 1.96 standard
intervals will contain the deviations of the
parameter being estimated. hypothesized population
mean.
For the 99% confidence interval,
99% of the sample means for a
specified sample size will lie within
2.58 standard deviations of the
hypothesized population mean.

Slide 7
 Margin of Error and the Interval Estimate

A point estimator cannot be expected to provide the

exact value of the population parameter.

An interval estimate can be computed by adding and

subtracting a margin of error to the point estimate.

Point Estimate +/- Margin of Error

The purpose of an interval estimate is to provide

information about how close the point estimate is to
the value of the parameter.

Slide 8
 Margin of Error and the Interval Estimate
(Continued)

The general form of an interval estimate of a

population mean is
x Margin of Error

Point Estimate

Slide 9
Interval Estimation of a Population Mean:
s Known (Continued)
In order to develop an interval estimate of a
population mean, the margin of error must be
computed using either:
the population standard deviation s , or
the sample standard deviation s
s is rarely known exactly, but often a good estimate
can be obtained based on historical data or other
information.
We refer to such cases as the s known case.

Slide 10
 Interval Estimation of a Population Mean:
s Known (Continued)
There is a 1 - probability that the value of a
sample mean will provide a margin of error of z /2 s x
or less.

Sampling
distribution
of x

/2 1 - of all /2
x values

x

z /2 s x z /2 s x

Slide 11
 Interval Estimate of a Population Mean:
s Known (Continued)

Sampling
distribution
of x
1 - of all
/2 /2
x values
interval
does not x

include interval
z /2 s x z /2 s x
includes
[------------------------- x -------------------------]
[------------------------- x -------------------------]
[------------------------- x -------------------------]

Slide 12
 Interval Estimate of a Population Mean:
s Known (Continued)
Interval Estimate of

s
Point Estimation of x z /2 Margin of Error
Population Mean n

where: x is the sample mean

1 - is the confidence coefficient
z/2 is the z value providing an area of
/2 in the upper tail of the standard
normal probability distribution
s is the population standard deviation
n is the sample size

Slide 13
 Interval Estimate of Population Mean:
s Known
Example: Discount Sounds
Discount Sounds has 260 retail outlets
throughout the United States. The firm
is evaluating a potential location for a
new outlet, based in part, on the mean
annual income of the individuals in
D
the marketing area of the new location.
A sample of size n = 36 was taken;
the sample mean income is $31,100. The
population standard deviation is estimated to be $4,500,
and the confidence coefficient to be used in the interval
estimate is 0.95.

Slide 14
 Interval Estimate of Population Mean:
s Known D

The margin of error is:

s 4,500
z /2 1.96 1, 470
n 36

Thus, at 95% confidence, the margin of error

is $1,470.

Note: To find the Z from the table do the following:

/2 = .05/2=.025 and 1-.025 = .975 and from table Z is 1.96

Slide 15
 Interval Estimate of Population Mean:
s Known D

Interval estimate of is:

$31,100 + $1,470
s or
x z /2
n $29,630 to $32,570

We are 95% confident that the interval contains the

population mean. Note that the sample mean was
= $31,100.

Slide 16
 Interval Estimation of a Population Mean:
s Unknown
If an estimate of the population standard deviation s
cannot be developed prior to sampling, we use the
sample standard deviation s to estimate s .
This is the s unknown case.
In this case, the interval estimate for is based on the
t distribution.

Slide 17
 t Distribution

The t distribution is a family of similar probability

distributions.

A specific t distribution depends on a parameter

known as the degrees of freedom.

Degrees of freedom refer to the number of

independent pieces of information that go into the
computation of s.

Slide 18
 t Distribution (Continued)

A t distribution with more degrees of freedom has

less dispersion.

As the number of degrees of freedom increases, the

difference between the t distribution and the
standard normal probability distribution becomes
smaller and smaller.

Slide 19
 t Distribution (Continued)

t distribution
Standard (20 degrees
normal of freedom)
distribution

t distribution
(10 degrees
of freedom)

z, t
0

Slide 20
Students t Table

Slide 21
 Students t Table

Upper Tail Area

df .25 .10 .05

1 1.000 3.078 6.314

2 0.817 1.886 2.920

3 0.765 1.638 2.353

Slide 22
 Students t Table

Upper Tail Area

df .25 .10 .05

1 1.000 3.078 6.314

2 0.817 1.886 2.920

3 0.765 1.638 2.353

t values
Slide 23
 Students t Table

/2
Upper Tail Area

df .25 .10 .05

1 1.000 3.078 6.314

2 0.817 1.886 2.920 /2

3 0.765 1.638 2.353
0 t
t values
Slide 24
 Students t Table

Assume:
/2 n=3
Upper Tail Area df = n - 1 = 2
df .25 .10 .05 = .10
/ 2 =.05
1 1.000 3.078 6.314

2 0.817 1.886 2.920 /2

3 0.765 1.638 2.353
0 t
t values
Slide 25
 Students t Table

Assume:
/2 n=3
Upper Tail Area df = n - 1 = 2
df .25 .10 .05 = .10
/ 2 =.05
1 1.000 3.078 6.314

2 0.817 1.886 2.920 /2

3 0.765 1.638 2.353
0 t
t values
Slide 26
 Students t Table

Assume:
/2 n=3
Upper Tail Area df = n - 1 = 2
df .25 .10 .05 = .10
/ 2 =.05
1 1.000 3.078 6.314

2 0.817 1.886 2.920

.05
3 0.765 1.638 2.353
0 t
t values
Slide 27
 Students t Table

Assume:
/2 n=3
Upper Tail Area df = n - 1 = 2
df .25 .10 .05 = .10
/ 2 =.05
1 1.000 3.078 6.314

2 0.817 1.886 2.920

.05
3 0.765 1.638 2.353
0 t
t values 2.920
Slide 28
 Interval Estimation of a Population Mean:
s Unknown
Interval Estimate
s
Point Estimation of x t /2 Margin of Error
n
Population Mean

where: 1 - = the confidence coefficient

t/2 = the t value providing an area of /2
in the upper tail of a t distribution
with n - 1 degrees of freedom
s = the sample standard deviation

Slide 29
 Interval Estimation of a Population Mean:
s Unknown
Example: Apartment Rents
A reporter for a student newspaper is writing an
article on the cost of off-campus
housing. A sample of 16
efficiency apartments within a
half-mile of campus resulted in
a sample mean of $650 per month and a sample
standard deviation of $55.

Slide 30
 Interval Estimation of a Population Mean:
s Unknown (Example Continued)
Example: Apartment Rents
Let us provide a 95% confidence interval
estimate of the mean rent per
month for the population of
efficiency apartments within a
half-mile of campus.

Slide 31
 Interval Estimation of a Population Mean:
s Unknown (Example Continued)
At 95% confidence, = .05, and /2 = .025.
t.025 is based on n - 1 = 16 - 1 = 15 degrees of freedom.
In the t distribution table we see that t.025 = 2.131.
Degrees Area in Upper Tail
of Freedom .20 .100 .050 .025 .010 .005
15 .866 1.341 1.753 2.131 2.602 2.947
16 .865 1.337 1.746 2.120 2.583 2.921
17 .863 1.333 1.740 2.110 2.567 2.898
18 .862 1.330 1.734 2.101 2.520 2.878
19 .861 1.328 1.729 2.093 2.539 2.861
. . . . . . .

Slide 32
 Interval Estimation of a Population Mean:
s Unknown (Example Continued)
Interval Estimate

s
x t.025
n

55
650 2.131 650 29.30
16
We are 95% confident that the mean rent per month
for the population of efficiency apartments within a
half-mile of campus is between $620.70 and $679.30.

Slide 33
Summary of Interval Estimation Procedures
for a Population Mean

Can the
Yes No
population standard
deviation s be assumed
known ?
Use the sample
standard deviation
s to estimate s
s Known
Case
Use Use
s s Unknown s
x z /2 Case & x t /2
n Small Sample n

Slide 34
If s is unknown and
n>30, the standard Interval Estimation
deviation of the sample, Summary
designated by s, is used to
approximate the
population standard
deviation.
If the population
standard deviation (s ) is
s
X z known or the sample (n)
n is n30 we use the z
distribution.

Slide 35
 Interval Estimation
If the population Summary
standard deviation (s ) is
unknown, and the
s
underlying population is
approximately normal,
X t
and the sample size is n
less than 30 (n<30) we
use the t distribution.

The value of t for a given confidence level

depends upon its degrees of freedom.

Slide 36
 More Examples

Confidence Interval
Estimate for Mean
(s Known)
 Thinking Challenge Example

Youre a Q/C inspector for

Gallo. The s for 2-liter bottles is
0.05 liters. A random sample of
100 bottles showed that sample
mean = 1.99 liters. What is the
90% confidence interval estimate
of the true mean amount in 2-liter
bottles?
To find the Z:
=1-90% =0.1 and /2 =0.1/2 =0.05
1 0.05 = 0.95 and from table, the Z is: 2 liter
(1.64 + 1.65)/ 2 = 1.645
Slide 38
 Confidence Interval
Solution

s s
X - Z / 2 X Z / 2
n n

.05 .05
. - 1645
199 . 199
. 1645
.
100 100

1982
. 1998
.
We are 90% confident that interval estimate of
the true mean amount in 2-liter bottles is between
1.98 and 1.99.
Slide 39
 Confidence Interval of
(s Unknown and n 30)
Example

The School of Business Dean at CSU wants to estimate the

mean number of hours worked per week by business students.
A sample of 49 students showed a mean of 24 hours with a
standard deviation of 4 hours.
What is the point estimate of the mean number of hours
worked per week by students?
The point estimate is 24 hours (sample mean).
What is the 95% confidence interval for the average number of
hours worked per week by the students?

Slide 40
 Example & Solution (Continued)

Using the formula, we have 24 1.96(4/7) or we have 22.88 to

25.12.
What are the 95% confidence limits?
The endpoints of the confidence interval are the confidence
limits. The lower confidence limit is 22.88 and the upper
confidence limit is 25.12.
What degree of confidence is being used?
The degree of confidence (level of confidence) is 0.95.

Slide 41
 Example & Solution (Continued)

Interpret the findings.

If we had time to select 100 samples of size 49 from the
population of the number of hours worked per week by
business students at CSU and compute the sample means and
95% confidence intervals, the population mean of the number of
hours worked by the students per week would be found in about 95
out of the 100 confidence intervals. Either a confidence interval
contains the population mean or it does not. In this example,
about 5 out of the 100 confidence intervals would not contain
the population mean.

Slide 42
 More Examples

Confidence Interval Estimate

for Mean
(s Unknown, and n<30)
 Thinking Challenge Example

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?

Slide 44
 Solution

`X = 3.7
S = 0.38987
n = 6, df = n - 1 = 6 - 1 = 5
S / n = 3.8987 / 6 = 0 .1592
t.05,5 = 2.0150
3.7 - (2.015)(0.1592) 3.7 + (2.015)(0.1592)
3.385 4.015

We are 90% confident that the interval

estimate of the population mean task
time is between 3.4 and 4.0 minutes.

Slide 45
 Confidence Interval Excel Application

Given the price of ten (10) houses in one of the

subdivisions located in Henry County, use Excel to
construct a 95% confidence interval for the
population mean.
Data: $230,000, $240,000, $310,000, $198,000,
$257,000, $345,000, $315,000, $260,000, $198,000,
$270,000.

Slide 46
 Excel Solution--SWStat

Data Area

Slide 47
 Excel SolutionSWStat (Continued)
(SWStat Statistics Intervals & Tests)

Slide 48
Excel SolutionSWStat (Continued)

$227,099 $297,502

Slide 49
 Confidence Interval Excel Application
(Another Problem)

A random sample of 36 magazine subscribers is

taken to estimate the mean age of all subscribers.
Use Excel to construct a 90% confidence interval
estimate of the mean age of all of this magazines
subscribers.
See next slide for the data.

Slide 50
 The Data
Subscriber Age Subscriber Age Subscriber Age
1 39 13 40 25 38
2 27 14 35 26 51
3 38 15 35 27 26
4 33 16 41 28 39
5 40 17 34 29 35
6 35 18 46 30 37
7 51 19 44 31 33
8 36 20 44 32 41
9 47 21 43 33 36
10 28 22 32 34 33
11 33 23 29 35 46
12 35 24 33 36 37
Slide 51
Excel Solution--SWStat

Slide 52
Excel Solution (Continued)
SWStat

Slide 53
 Sample Size for an Interval Estimate
of a Population Mean

Let E = the desired margin of error.

We said E is the amount added to and subtracted

from the point estimate to obtain an interval estimate.

s
x t /2 E = Margin of Error
n

Interval Estimate
of the mean
Slide 54
 Sample Size for an Interval Estimate
of a Population Mean (Continued)
Margin of Error

s
E z /2 Margin of Error
n

Necessary Sample Size

( z / 2 ) 2 s 2
n
E2

Slide 55
 Sample Size for an Interval Estimate
of a Population Mean--Example
Recall that Discount Sounds is evaluating a potential
location for a new retail outlet, based in part, on the mean
annual income of the individuals in
the marketing area of the new location.
Suppose that Discount Sounds management team
wants an estimate of the population mean such that
there is a 0.95 probability that the sampling error is $500
or less.
How large a sample size is needed to meet the required
precision?

Slide 56
 Sample Size for an Interval Estimate
of a Population Mean--Solution D
s
E = z /2 n 500 Given

At 95% confidence, z.025 = 1.96. Recall that s= 4,500.

( z / 2 ) 2 s 2
n
E2
(1.96)2 (4, 500)2
n 2
311.17 312
(500)

A sample of size 312 is needed to reach a desired

precision of + $500 at 95% confidence.

Slide 57
 Sample Size for an Interval Estimate
of a Population Mean (Continued)

There are 3 factors that determine the size of a sample, none

of which has any direct relationship to the size of the population.
They are:
1- The degree of confidence selected.
2- The maximum allowable error--margin of error.
3- The variation of the population.

( z / 2 ) 2 s 2
n
E2

Slide 58
 Thinking Challenge Sample Size Example 1

A consumer group would like to estimate the mean monthly

electric bill for a single family house in July. Based on similar
studies the standard deviation is estimated to be $20.00. A
99% level of confidence is desired, with an accuracy of $5.00.
How large a sample is required?
n = [(2.58)(20)/5]2 = 106.5024 107

( z / 2 ) 2 s 2
n
E2

Slide 59
 Thinking Challenge Sample Size Example 1
(Continued)
What sample size is needed to be 90% confident of
being correct within 5? A pilot study suggested that
the standard deviation is 45.

Slide 60
 Thinking Challenge Sample Size Example 1
(Continued)
What sample size is needed to be 90% confident of
being correct within 5? A pilot study suggested that
the standard deviation is 45.

Note that in this example both the degree of

confidence and population standard deviation are
changed hence, the sample size is changed too.

Slide 61
 Thinking Challenge Sample Size Example 2

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 sample standard deviation was
about $400. What sample size do you
use?

Slide 62
Thinking Challenge Sample Size Example 2
(Solution)

Slide 63
 Interval Estimation
of a Population Proportion

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Slide 64
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