Estimation and Confidence Intervals
Estimation and Confidence Intervals
Estimation and Confidence Intervals
Confidence Intervals
Types of Estimators
• Point Estimate
A single-valued estimate.
A single element chosen from a sampling distribution.
Conveys little information about the actual value of the
population parameter, about the accuracy of the estimate.
• Confidence Interval or Interval Estimate
An interval or range of values believed to include the
unknown population parameter.
Associated with the interval is a measure of the confidence
we have that the interval does indeed contain the parameter of
interest.
Confidence Interval or
Interval Estimate
0.4
P 196
. x 196
. 0.95
n
0.3
n
f(z)
0.2
or 0.1
0.0
x 196
-4 -3 -2 -1 0 1 2 3 4
P x 196
. . 0.95
n n
z
Confidence Interval for when
is Known (Continued)
Before sampling, there is a 0.95probability that the interval
1.96
n
will include the sample mean (and 5% that it will not).
That is, x 1.96 is a 95% confidence interval for .
n
A 95% Interval around the Population
Mean
Sampling Distribution of the Mean
0.4
Approximately 95% of sample means
0.3
95%
can be expected to fall within the
interval 1.96 , 1.96 .
f(x)
0.2
n n
0.1
2.5% 2.5%
Conversely, about 2.5% can be
0.0
196
.
n
196
.
n
x
expected to be above 196
.
n
and
2.5% can be expected to be below
x
1.96 .
x n
2.5% fall below
the interval x
x So 5% can be expected to fall outside
x
x 2.5% fall above the interval 196
. , 196
. .
x
the interval n n
x
x
0.2
0.1
2.5% 2.5% mean falls within the 95% interval around
0.0 the population mean.)
x
196
. 196
.
n n
x x x
We define za as the z value that cuts off a right-tail area of a under the standard
2
normal curve. (1-a) or (1-a)100% is called the confidence level. a is called the
2
level of significance.
S tand ard Norm al Distrib ution
P z > za a/2
0.4
(1 a ) 2
P z za a/2
0.3
2
f(z)
P za z za (1 a)
0.2
0.1 a a 2 2
2 2
0.0 (1- a)100% Confidence Interval:
-5 -4 -3 -2 -1 0 1 2 3 4 5
z a Z za x za
2 2
2 n
Critical Values of z and Levels of
Confidence
(1 a )
a za
Stand ard N o rm al Distrib utio n
0.4
2 2 (1 a )
0.3
0.99 0.005 2.576
f(z)
0.2
0.4 0.4
0.3 0.3
f(z)
f(z)
0.2 0.2
0.1 0.1
0.0 0.0
-5 -4 -3 -2 -1 0 1 2 3 4 5 -5 -4 -3 -2 -1 0 1 2 3 4 5
Z Z
0 .4 0 .9
0 .8
0 .3 0 .7
0 .6
0 .5
f(x)
f(x)
0 .2
0 .4
0 .3
0 .1
0 .2
0 .1
0 .0 0 .0
x x
}
f(t)
9 1.383 1.833 2.262 2.821 3.250 0 .2
}
}
17 1.333 1.740 2.110 2.567 2.898 t
18 1.330 1.734 2.101 2.552 2.878
19 1.328 1.729 2.093 2.539 2.861 Area = 0.025 Area = 0.025
20 1.325 1.725 2.086 2.528 2.845
21 1.323 1.721 2.080 2.518 2.831
22 1.321 1.717 2.074 2.508 2.819
23
24
1.319
1.318
1.714
1.711
2.069
2.064
2.500
2.492
2.807
2.797
Whenever is not known (and the population is
25 1.316 1.708 2.060 2.485 2.787
26 1.315 1.706 2.056 2.479 2.779
assumed normal), the correct distribution to use is
27 1.314 1.703 2.052 2.473 2.771
28 1.313 1.701 2.048 2.467 2.763
the t distribution with n-1 degrees of freedom.
29 1.311 1.699 2.045 2.462 2.756
30 1.310 1.697 2.042 2.457 2.750
Note, however, that for large degrees of freedom,
40 1.303 1.684 2.021 2.423 2.704
60 1.296 1.671 2.000 2.390 2.660
the t distribution is approximated well by the Z
120 1.289 1.658 1.980 2.358 2.617
1.282 1.645 1.960 2.326 2.576
distribution.
Example
13
. .
1.350
.
1.771
.
2.160
.
2.650
.
3.012
t0.025 2.145
14 1.345 1.761 2.145 2.624 2.977 The corresponding confidence interval or
15 1.341 1.753 2.131 2.602 2.947
s
.
.
.
.
.
.
.
.
.
.
.
. interval estimate is: x t 0 . 025
. . . . . . n
35
.
10.37 2.145
15
10.37 1.94
8.43,12.31
Confidence Interval for the Mean – Example
using the t-distribution
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 of 0.09
inch.
Construct a 95 percent 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 inches?
Large Sample Confidence Intervals for
the Population Mean
For estimating p, a sample is considered large enough when both n p an n q are greater
than 5.
Large-Sample Confidence Intervals
for the Population Proportion, p
A marketing research firm wants to estimate the share that foreign companies
have in the American market for certain products. A random sample of 100
consumers is obtained, and it is found that 34 people in the sample are users
of foreign-made products; the rest are users of domestic products. Give a
95% confidence interval for the share of foreign products in this market.
pq ( 0.34 )( 0.66)
p za 0.34 1.96
2
n 100
0.34 (1.96)( 0.04737 )
0.34 0.0928
0.2472 ,0.4328
Thus, the firm may be 95% confident that foreign manufacturers control
anywhere from 24.72% to 43.28% of the market.
Sample-Size Determination
For example: A (1- a ) Confidence Interval for : x z a
n
}
2
Bound, B
Sample Size and Standard Error
The sample size determines the bound of a statistic, since the standard
error of a statistic shrinks as the sample size increases:
Sample size = 2n
Standard error
of statistic
Sample size = n
Standard error
of statistic
Minimum Sample Size: Mean and
Proportion
Minimum required sample size in estimating the population
mean, :
za2 2
n 2 2
B
Bound of estimate:
B = za
2 n
za
2 2
n 2
2
B
2 2
(1.96) ( 400)
2
120
42.684 43
Sample-Size for Proportion:
Example
The manufacturers of a sports car want to estimate the proportion of people in a
given income bracket who are interested in the model. The company wants to
know the population proportion, p, to within 0.01 with 99% confidence. Current
company records indicate that the proportion p may be around 0.25. What is the
minimum required sample size for this survey?
za2 pq
n 2
B2
2.5762 (0.25)(0.75)
. 2
010
124.42 125