1. 1 1 Slide © 2006 Thomson/South-Western Chapter 8 Interval Estimation Population Mean:  Known Population Mean:  Known Population Mean:  Unknown Population Mean:  Unknown n Determining the Sample Size n Population Proportion

2. 2 2 Slide © 2006 Thomson/South-Western The general form of an interval estimate of a The general form of an interval estimate of a population mean is population mean is The general form of an interval estimate of a The general form of an interval estimate of a population mean is population mean is Margin of Error and the Interval Estimate

3. 3 3 Slide © 2006 Thomson/South-Western    /2 1 -  of all values 1 -  of all values Sampling distribution of Sampling distribution of [------------------------- -------------------------] interval does not include  interval includes  interval Interval Estimate of a Population Mean:  Known

4. 4 4 Slide © 2006 Thomson/South-Western Interval Estimate of  Interval Estimate of  Interval Estimate of a Population Mean:  Known where: is the sample mean 1 -  is the confidence coefficient 1 -  is the confidence coefficient z  /2 is the z value providing an area of z  /2 is the z value providing an area of  /2 in the upper tail of the standard  /2 in the upper tail of the standard normal probability distribution normal probability distribution  is the population standard deviation  is the population standard deviation n is the sample size n is the sample size

5. 5 5 Slide © 2006 Thomson/South-Western Interval Estimate of a Population Mean:  Known n Adequate Sample Size In most applications, a sample size of n = 30 is In most applications, a sample size of n = 30 is adequate. adequate. In most applications, a sample size of n = 30 is In most applications, a sample size of n = 30 is adequate. adequate. If the population distribution is highly skewed or If the population distribution is highly skewed or contains outliers, a sample size of 50 or more is contains outliers, a sample size of 50 or more is recommended. recommended. If the population distribution is highly skewed or If the population distribution is highly skewed or contains outliers, a sample size of 50 or more is contains outliers, a sample size of 50 or more is recommended. recommended.

6. 6 6 Slide © 2006 Thomson/South-Western S D Interval Estimate of Population Mean:  Known n 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 the marketing area of the new location. A sample of size n = 36 was taken; the sample mean income is $31,100. The population is not believed to be highly skewed. The population standard deviation is estimated to be $4,500, and the confidence coefficient to be used in the interval estimate is.95.

7. 7 7 Slide © 2006 Thomson/South-Western 95% of the sample means that can be observed are within + 1.96 of the population mean . The margin of error is: Thus, at 95% confidence, the margin of error Thus, at 95% confidence, the margin of error is $1,470. is $1,470. S D Interval Estimate of Population Mean:  Known

8. 8 8 Slide © 2006 Thomson/South-Western Interval estimate of  is: Interval Estimate of Population Mean:  Known S D We are 95% confident that the interval contains the population mean. $31,100 + $1,470 or $29,630 to $32,570

9. 9 9 Slide © 2006 Thomson/South-Western Interval Estimation of a Population Mean:  Unknown If an estimate of the population standard deviation  cannot be developed prior to sampling, we use the sample standard deviation s to estimate . If an estimate of the population standard deviation  cannot be developed prior to sampling, we use the sample standard deviation s to estimate . This is the  unknown case. This is the  unknown case. In this case, the interval estimate for  is based on the t distribution. In this case, the interval estimate for  is based on the t distribution. n (We’ll assume for now that the population is normally distributed.)

10. 10 Slide © 2006 Thomson/South-Western t Distribution Standardnormaldistribution t distribution (20 degrees of freedom) t distribution (10 degrees of freedom) of freedom) 0 z, t

11. 11 Slide © 2006 Thomson/South-Western t Distribution Standard normal z values

12. 12 Slide © 2006 Thomson/South-Western n Interval Estimate where: 1 -  = the confidence coefficient t  /2 = the t value providing an area of  /2 t  /2 = the t value providing an area of  /2 in the upper tail of a t distribution in the upper tail of a t distribution with n - 1 degrees of freedom with n - 1 degrees of freedom s = the sample standard deviation s = the sample standard deviation Interval Estimation of a Population Mean:  Unknown

13. 13 Slide © 2006 Thomson/South-Western 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. Interval Estimation of a Population Mean:  Unknown n Example: Apartment Rents

14. 14 Slide © 2006 Thomson/South-Western 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. We will assume this population to be normally distributed. Interval Estimation of a Population Mean:  Unknown n Example: Apartment Rents

15. 15 Slide © 2006 Thomson/South-Western At 95% confidence,  =.05, and  /2 =.025. In the t distribution table we see that t.025 = 2.131. t.025 is based on n  1 = 16  1 = 15 degrees of freedom. Interval Estimation of a Population Mean:  Unknown

16. 16 Slide © 2006 Thomson/South-Western We are 95% confident that the mean rent per month 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. n Interval Estimate Interval Estimation of a Population Mean:  Unknown

17. 17 Slide © 2006 Thomson/South-Western Summary of Interval Estimation Procedures for a Population Mean Can the population standard deviation  be assumed deviation  be assumed known ? known ? Use the sample standard deviation s to estimate  Use YesNo Use  Known Case  Unknown Case

18. 18 Slide © 2006 Thomson/South-Western Let E = the desired margin of error. Let E = the desired margin of error. E is the amount added to and subtracted from the E is the amount added to and subtracted from the point estimate to obtain an interval estimate. point estimate to obtain an interval estimate. E is the amount added to and subtracted from the E is the amount added to and subtracted from the point estimate to obtain an interval estimate. point estimate to obtain an interval estimate. Sample Size for an Interval Estimate of a Population Mean

19. 19 Slide © 2006 Thomson/South-Western Sample Size for an Interval Estimate of a Population Mean n Margin of Error n Necessary Sample Size

20. 20 Slide © 2006 Thomson/South-Western 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 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.95 probability that the sampling error is $500 or less. How large a sample size is needed to meet the required precision? S D Sample Size for an Interval Estimate of a Population Mean

21. 21 Slide © 2006 Thomson/South-Western At 95% confidence, z.025 = 1.96. Recall that  = 4,500. Sample Size for an Interval Estimate of a Population Mean S D A sample of size 312 is needed to reach a desired A sample of size 312 is needed to reach a desired precision of + $500 at 95% confidence. precision of + $500 at 95% confidence.

22. 22 Slide © 2006 Thomson/South-Western The general form of an interval estimate of a The general form of an interval estimate of a population proportion is population proportion is The general form of an interval estimate of a The general form of an interval estimate of a population proportion is population proportion is Interval Estimation of a Population Proportion

23. 23 Slide © 2006 Thomson/South-Western Interval Estimation of a Population Proportion The sampling distribution of plays a key role in The sampling distribution of plays a key role in computing the margin of error for this interval computing the margin of error for this interval estimate. estimate. The sampling distribution of plays a key role in The sampling distribution of plays a key role in computing the margin of error for this interval computing the margin of error for this interval estimate. estimate. The sampling distribution of can be approximated The sampling distribution of can be approximated by a normal distribution whenever np > 5 and by a normal distribution whenever np > 5 and n (1 – p ) > 5. n (1 – p ) > 5. The sampling distribution of can be approximated The sampling distribution of can be approximated by a normal distribution whenever np > 5 and by a normal distribution whenever np > 5 and n (1 – p ) > 5. n (1 – p ) > 5.

24. 24 Slide © 2006 Thomson/South-Western  /2 Interval Estimation of a Population Proportion n Normal Approximation of Sampling Distribution of Sampling distribution of Sampling distribution of p p 1 -  of all values 1 -  of all values

25. 25 Slide © 2006 Thomson/South-Western n Interval Estimate Interval Estimation of a Population Proportion where: 1 -  is the confidence coefficient z  /2 is the z value providing an area of z  /2 is the z value providing an area of  /2 in the upper tail of the standard  /2 in the upper tail of the standard normal probability distribution normal probability distribution is the sample proportion is the sample proportion

26. 26 Slide © 2006 Thomson/South-Western Political Science, Inc. (PSI) specializes in voter polls and surveys designed to keep political office seekers informed of their position in a race. Using telephone surveys, PSI interviewers ask registered voters who they would vote for if the election were held that day. Interval Estimation of a Population Proportion n Example: Political Science, Inc.

27. 27 Slide © 2006 Thomson/South-Western In a current election campaign, PSI has just found that 220 registered voters, out of 500 contacted, favor a particular candidate. candidate. PSI wants to develop a 95% confidence interval estimate for the proportion of the population of registered voters that favor the candidate. Interval Estimation of a Population Proportion n Example: Political Science, Inc.

28. 28 Slide © 2006 Thomson/South-Western where: n = 500, = 220/500 =.44, z  /2 = 1.96 Interval Estimation of a Population Proportion PSI is 95% confident that the proportion of all voters that favor the candidate is between.3965 and.4835. =.44 +.0435

29. 29 Slide © 2006 Thomson/South-Western Solving for the necessary sample size, we get n Margin of Error Sample Size for an Interval Estimate of a Population Proportion However, will not be known until after we have selected the sample. We will use the planning value p * for.

30. 30 Slide © 2006 Thomson/South-Western Sample Size for an Interval Estimate of a Population Proportion The planning value p * can be chosen by: 1. Using the sample proportion from a previous sample of the same or similar units, or 2. Selecting a preliminary sample and using the sample proportion from this sample. n Necessary Sample Size

31. 31 Slide © 2006 Thomson/South-Western Suppose that PSI would like a.99 probability that the sample proportion is within +.03 of the population proportion. How large a sample size is needed to meet the required precision? (A previous sample of similar units yielded.44 for the sample proportion.) Sample Size for an Interval Estimate of a Population Proportion

32. 32 Slide © 2006 Thomson/South-Western At 99% confidence, z.005 = 2.576. Recall that  =.44. A sample of size 1817 is needed to reach a desired A sample of size 1817 is needed to reach a desired precision of +.03 at 99% confidence. precision of +.03 at 99% confidence. Sample Size for an Interval Estimate of a Population Proportion

33. 33 Slide © 2006 Thomson/South-Western Note: We used.44 as the best estimate of p in the preceding expression. If no information is available about p, then.5 is often assumed because it provides the highest possible sample size. If we had used p =.5, the recommended n would have been 1843. Sample Size for an Interval Estimate of a Population Proportion