Estimation and Confidence Intervals

Chapter 9

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Learning Objectives
LO9-1Compute and interpret a point estimate
of a population mean
LO9-2Compute and interpret a confidence
interval for a population mean
LO9-3Compute and interpret a confidence
interval for a population proportion
LO9-4Calculate the required sample size to
estimate a population proportion or
population mean
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Point Estimate
 A point estimate is a single value (statistic) used to estimate a
population value (parameter)
POINT ESTIMATE The statistic, computed from sample information,
that estimates a population parameter.

Example
 Suppose the Bureau of Tourism for Barbados wants an
estimate of the mean amount spent by tourists visiting that
country. They randomly select 500 tourists as they depart and
ask these tourists about their spending while there. The mean
amount spent by the sample of 500 tourists serves as an
estimate of the unknown population parameter.

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Confidence Intervals
 A confidence interval is a range of values within which
the population parameter is expected to occur
CONFIDENCE INTERVAL A range of values constructed from sample
data so that the population parameter is likely to occur within that
range at a specified probability. The specified probability is called the
level of confidence.

 The factors that determine the width of a confidence

interval for a mean are
 The number of observations in the sample, n
 The variability in the population, usually estimated by the
sample standard deviation, s
 The desired level of confidence

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Level of Confidence, Known
 To determine the confidence limits when the population
standard deviation is known, we use the z distribution
 The formula is

x  sample mean
z  z - value for a particular confidence level
σ  the population standard deviation
n  the number of observations in the sample

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 x μ
z=
σ/ n
We convert the process for a given z valuex value.

Here, μ is unknown, and we use a point estimate of x for μ.

𝑥 x ± z* σ/ n

-z ---0--- +z z-value

x - z* σ/ n ---x--- x z* σ/ n x-value

9-6
Finding a Value of z
 The method for finding z for a 95% confidence interval is
 Divide the confidence interval in half, .9500 ÷ 2 = .4750
 Find the value .4750 in the body of the table
 Identify the row and column and add the values
 The probability of finding a value between 0 and 1.96 is
.4750
 So the probability of finding a value between +/− 1.96 is
.9500

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Level of Confidence, z Example
The American Management Association is studying the income of store
managers in the retail industry. A random sample of 49 managers reveals a
sample mean of $45,420. The standard deviation of the population is $2,050.

1. What is the population mean? What is an estimate of the population

mean?
2. What is a reasonable range of values for the population mean?
3. How do we interpret these results?

1. We do not know the population mean, so we can use the sample mean,
$45,420 as our best estimate. The sample mean is the best point
estimate of the unknown population mean.
2. The AMA decides to use a 95% level of confidence, so use equation (9-1),
σ $2.050
x z = $45,420 1.96 = $45,420 $574
n 49
3. The confidence interval is from $44,846 and $45,994, the value $574 is
called the margin of error.
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Level of Confidence, Unknown
 To determine the confidence limits when the population
standard deviation is unknown, we use the t distribution
 The formula is

Example
 The Dean of the Business College wants to estimate the mean
number of hours full-time students work at paying jobs each
week. He randomly selects a sample of 30 students and asks
them how many hours they worked last week. He can
calculate the sample mean, but it is unlikely he would know the
population standard deviation required for formula 9-1.

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 Reminder:

9-10
Determining when to use the Z or t
distribution

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Characteristics of the t Distribution
 The t distribution is a continuous distribution
 It is bell-shaped and symmetrical
 It is flatter, or more spread out, than the standard normal
distribution
 There is a family of t distributions, depending on the number
of degrees of freedom; the degrees of freedom are based on
the sample size, n.

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Degrees of freedom of an estimate is the number of independent pieces of
information that went into calculating the estimate. It’s not quite the same as the
number of items in the sample. In order to get the df for the estimate, you have to
subtract 1 from the number of items. Let’s say you were finding the mean weight
loss for a low-carb diet. You could use 4 people, giving 3 degrees of freedom (4 –
1 = 3), or you could use one hundred people with df = 99.
In math terms (where “n” is the number of items in your set): df=n-1
Why do we subtract 1 from the number of items?
Another way to look at degrees of freedom is that they are the number of values
that are free to vary in a data set. What does “free to vary” mean? Here’s an
example using the mean (average):
Q. Pick a set of numbers that have a mean (average) of 10.
A. Some sets of numbers you might pick: 9, 10, 11 or 8, 10, 12 or 5, 10, 15.
Once you have chosen the first two numbers in the set, the third is fixed. In other
words, you can’t choose the third item in the set. The only numbers that are free
to vary are the first two. You can pick 9 + 10 or 5 + 15, but once you’ve made that
decision you must choose a particular number that will give you the mean you are
looking for. So degrees of freedom for a set of three numbers is TWO.
For example: if you wanted to find a confidence interval for a sample, degrees of
freedom is n – 1.

9-13
Finding a Value of t
 First assume the population is normal
 Using Appendix B.5, move across the columns identified
for confidence intervals
 In the next example, we want to use the 95% level of
confidence, so move to that column
 Then find df, the
degrees of freedom, n-1

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Level of Confidence, t 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% 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 inch?

s 0.09
x t = 0.32 2.262 = 0.32 0.064
n 10

The endpoints of the confidence interval are 0.256 and 0.384. The margin of
error is 0.064. The manufacturer can be reasonably sure (95% confident) that
the mean remaining tread depth is between 0.256 and 0.384 inch. Because
the value of 0.30 is in this interval, it is very likely that the mean of the
population is 0.30

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Confidence Intervals for Proportions
PROPORTION The fraction, ratio, or percent indicating the part of the
sample or the population having a particular trait of interest.

 A sample proportion, p, is found by x, the number of successes,

divided by n, the number of observations

Examples
 Southern Tech career services reports that 80% of its
graduates enter the job market in a position related to their
field of study
 A recent study of married men between the ages 35 and 50
found that 63% felt that both partners should earn a living

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Confidence Intervals for Proportions (2 of 2)
 A population proportion is identified by
 Two requirements
 The binomial conditions have been met
 The values n and n(1- ) should both be greater than
or equal to 5
 We construct a confidence interval for a population
proportion with the following formula

Reminder:For a binomial distribution, μ n ∗ π and σ2 nπ 1 π

9-17
The population proportion, π, refers to the percent of successes in the
population.
To develop a confidence interval for a proportion, we need to meet
two requirements:
1. The binomial conditions, discussed in Chapter 6, have been met.
These conditions are:
a. The sample data are the number of successes in n trials.
b. There are only two possible outcomes. (We usually label one of
the outcomes a “success” and the other a “failure.”)
c. The probability of a success remains the same from one trial to
the next.
d. The trials are independent. This means the outcome on one trial
does not affect the outcome on another.
2. The values nπ and n(1 − π) should both be greater than or equal
to 5. This allows us to invoke the central limit theorem and employ
the standard normal distribution, that is, z, to complete a
confidence interval.

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Confidence Interval,
The union representing the Bottle Blowers of America (BBA) is considering a
proposal to merge with the Teamsters Union. According to BBA union bylaws, at
least three-fourths of the union membership must approve any merger. A random
sample of 2,000 current BBA members reveals 1,600 plan to vote for the merger
proposal. What is the estimate of the population proportion? Develop a 95%
confidence interval for the population proportion. Basing your decision on this
sample information, can you conclude that the necessary proportion of BBA
members favor the merger? Why?
x ,
First, calculate the sample proportion, p = = = .80
n ,

Next, use formula (9-4) to determine the 95% confidence interval,

p 1 p .80 1 .80
p z = .80 1.96 = .80 .018
n 2,000
The endpoints of the confidence interval are .782 and .818, so we conclude the
merger will likely pass because the interval estimate includes values greater than
75% of the union membership.
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Determining Sample Size for Means
 There are three factors that determine the sample size when
we wish to estimate the mean
 The margin of error, E the researcher will tolerate
 The desired level of confidence, for example 95%
 The variation or dispersion of the population being studied
 The formula to determine the sample size for the mean is

 E=z* σ/ n  solving for n, we have our formula.

 The result is not always a whole number; the usual practice is
to round up any fractional result to the next whole number.

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Sample Size to Estimate a Population Mean
Example

A student in public administration wants to estimate the mean monthly earnings of

city council members in large cities. She can tolerate a margin of error of $100 in
estimating the mean. She would also prefer to report the interval estimate with a
95% level of confidence. The student found a report by the Department of Labor
that reported a standard deviation of $1,000. What is the required sample size?

. $ ,
n= 2 2 19.6 2 384.16
$

The computed value of 384.16 is rounded up to 385. A sample size of 385 is

required to meet the specifications.

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Determining Sample Size for Proportions
 There are three factors that determine the sample size
when we wish to estimate a proportion
 The margin of error, E
 The desired level of confidence
 The variation or dispersion of the population being studied.
The formula to determine the sample size for a proportion is:

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Sample Size for the Population Proportion
Example

The student in the previous example also wants to estimate the proportion
of cities that have private refuse collectors. The student wants to estimate
the population proportion with a margin of error of .10, prefers a level of
confidence of 90%, and has no estimate for the population proportion.
What is the required sample size?

1.645
n = (.50)(1-.50) 2 = 67.65
.10

The student needs a random sample of 68 cities.

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 Chapter 9 Practice Problems

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Question 5 LO9-1

A research firm surveyed 49 randomly selected Americans

to determine the mean amount spent on coffee during 1
week. The sample mean was $20 per week. The population
distribution is normal with a standard deviation of $5.

a. What is the point estimate of the population mean?

Explain what it indicates.
b. Using the 95% level of confidence, determine the
confidence interval for μ. Explain what it indicates.

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Question 11 LO9-2

The owner of Britten’s Egg Farm wants to estimate the mean number
of eggs produced per chicken. A sample of 20 chickens shows they
produced an average of 20 eggs per month with a standard deviation
of 2 eggs per month.

a. What is the value of the population mean? What is the best

estimate of this value?
b. Explain why we need to use the t distribution. What assumption
do you need to make?
c. For a 95% confidence interval, what is the value of t?
d. What is the margin of error?
e. Develop the 95% confidence interval for the population mean.
f. Would it be reasonable to conclude that the population mean is
21 eggs? What about 25 eggs?

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Question 19 LO9-4

A population’s standard deviation is 10. We want to

estimate the population mean with a margin of error of 2,
with a 95% level of confidence. How large a sample is
required?

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Question 25 LO9-4

Suppose the U.S. president wants to estimate the

proportion of the population that supports his current
policy toward revisions in the health care system. The
president wants the margin of error to be 0.04. Assume a
95% level of confidence. The president’s political advisors
found a similar survey from 2 years ago that reported that
60% of people supported health care revisions.

a. How large of a sample is required?

b. How large of a sample would be necessary if no
estimate were available for the proportion supporting
current policy?

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