Copyright 2010 John Wiley & Sons, Inc.

1
Copyright 2010 John Wiley & Sons, Inc.
Business Statistics, 6
th
ed.
by Ken Black
Chapter 8

Statistical
Inference:
Estimation for
Single Populations
Copyright 2010 John Wiley & Sons, Inc.
2
Learning Objectives
Know the difference between point and interval
estimation.
Estimate a population mean from a sample mean
when o is known.
Estimate a population mean from a sample mean
when o is unknown.
Copyright 2010 John Wiley & Sons, Inc.
3
Learning Objectives
Estimate a population proportion from a sample
proportion.
Estimate the population variance from a sample
variance.
Estimate the minimum sample size necessary to
achieve given statistical goals.
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4
A point estimate is a static taken from a sample that
is used to estimate a population parameter
Interval estimate - a range of values within which
the analyst can declare, with some confidence, the
population lies
Estimating the Population Mean
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Confidence Interval to Estimate
when o is Known
n
x
x
E
=
n
z x
n
z x
or
n
z x
o

o
o
+ s s

Point estimate





Interval Estimate
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Distribution of Sample Means
for 95% Confidence

.4750 .4750
X
95%
.025 .025
Z
1.96 -1.96 0
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is used to locate the Z value in constructing the
confidence interval
The confidence interval yields a range within which
the researcher feel with some confidence the
population mean is located
Z score the number of standard deviations a value
(x) is above or below the mean of a set of numbers
when the data are normally distributed
Estimating the Population Mean
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8
For a 95% confidence interval
= .05
/2 = .025

Value of /2 or z
.025
look at the standard normal
distribution table under
.5000 - .0250 = .4750
From Table A5 look up .4750, and read 1.96 as the
z value from the row and column
Estimating the Population Mean
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Confidence Intervals
Z values:
90% - 1.645
95% - 1.96
98% - 2.33
99% - 2.575
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96 . 1 , 85 , 46 , 510
2 /
= = = =
o
o z n x
78 . 519 22 . 500
78 . 9 510 78 . 9 510
85
46
96 . 1 510
85
46
96 . 1 510
2 / 2 /
s s
+ s s
+ s s
+ s s

o
o o
n
z x
n
z x
95% Confidence Interval for
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11
Example No. 1
A survey was taken of U.S. companies that do
business with firms in India. One of the questions
on the survey was: Approximately how many years
has your company been trading with firms in India?
A random sample of 44 responses to this question
yielded a mean of 10.455 years. Suppose the
population standard deviation for this question
is 7.7 years. Using this information, construct a 90%
confidence interval for the mean number of years that
a company has been trading in India for the population
of U.S. companies trading with firms in India.
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12
Example No. 2
A study is conducted in a company that employs 800
engineers. A random sample of 50 engineers reveals
that the average sample age is 34.3 years.
Historically, the population standard deviation of the
age of the companys engineers is approximately 8
years. Construct a 98% confidence interval to
estimate the average age of all the engineers in this
company.
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13
Estimating the Mean of a Normal
Population: Unknown o
The population has a normal distribution.
The value of the population Standard Deviation is
unknown, then sample Std Dev must be used in the
estimation process.
z distribution is not appropriate for these conditions
when the Population Std Dev is unknown, t
distribution is appropriate, and you use the Sample
Std Dev in the t formula
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14
t Distribution
A family of distributions -- a unique distribution for
each value of its parameter, degrees of freedom (d.f.)
Symmetric, Unimodal, Mean = 0, Flatter than a z
t distribution is used instead of the z distribution for
doing inferential statistics on the population mean
when the population Std Dev is unknown and the
population is normally distributed
With the t distribution, you use the Sample Std Dev
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n
s
x
t

=
A family of distributions - a unique distribution for
each value of its parameter using degrees of freedom
(d.f.)
Symmetric, Unimodal, Mean = 0, Flatter than a z
t formula
t Distribution
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t distribution flatter in middle and have more
area in their tails than the normal distribution
t distribution approach the normal curve as n becomes
larger
t distribution is to be used when the population variance
or population Std Dev is unknown, regardless of the size
of the sample
t Distribution Characteristics
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t table uses the area in the tail of the distribution
Emphasis in the t table is on , and each tail of the
distribution contains /2 of the area under the curve
when confidence intervals are constructed
t values are located at the intersection of the df
value and the selected /2 value
Reading the t Distribution
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1
1 , 2 / 1 , 2 /
1 , 2 /
=
+ s s

n df
n
s
t x
n
s
t x
or
n
s
t x
n n
n
o o
o

Confidence Intervals for of a

Normal Population: Unknown o
Copyright 2010 John Wiley & Sons, Inc.
19
Table of Critical Values of t
to
o
0
With df = 24 and o = 0.05,
t
o
= 1.711.
df
t0.100 t0.050 t0.025 t0.010 t0.005
1 3.078 6.314 12.706 31.821 63.656
2 1.886 2.920 4.303 6.965 9.925
3 1.638 2.353 3.182 4.541 5.841
4 1.533 2.132 2.776 3.747 4.604
5 1.476 2.015 2.571 3.365 4.032
23 1.319 1.714 2.069 2.500 2.807
24 1.318 1.711 2.064 2.492 2.797
25 1.316 1.708 2.060 2.485 2.787
29 1.311 1.699 2.045 2.462 2.756
30 1.310 1.697 2.042 2.457 2.750
40 1.303 1.684 2.021 2.423 2.704
60 1.296 1.671 2.000 2.390 2.660
120 1.289 1.658 1.980 2.358 2.617
1.282 1.645 1.960 2.327 2.576

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1 =
+ s s

n df
n
s
t x
n
s
t x
or
n
s
t x

Confidence Intervals for of a

Normal Population: Unknown o
Copyright 2010 John Wiley & Sons, Inc.
21
Example # 3
The owner of a large equipment rental company wants to
make a rather quick estimate of the average number of days a
piece of ditch digging equipment is rented out per person per
time. The company has records of all rentals, but the amount
of time required to conduct an audit of all accounts would be
prohibitive. The owner decides to take a random sample of
rental invoices. Fourteen different rentals of ditch diggers are
selected randomly from the files, yielding the following data.
She uses these data to construct a 99% confidence interval to
estimate the average number of days that a ditch digger is
rented and assumes that the number of days per rental is
normally distributed in the population.

3 1 3 2 5 1 2 1 4 2 1 3 1 1
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18 . 3 10 . 1
04 . 1 14 . 2 04 . 1 14 . 2
14
29 . 1
012 . 3 14 . 2
14
29 . 1
012 . 3 14 . 2
s s
+ s s
+ s s
+ s s

n
s
t x
n
s
t x
012 . 3
005 . 0
2
99 . 1
2
13 1 , 14 , 29 . 1 , 14 . 2
13 , 005 .
=
=

=
= = = = =
t
n df n s x
o
Solution for Example 3
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size sample =
proportion population =

- 1 =

proportion sample =

2 2
n
p
p q
p
where
n
q p
z p p
n
q p
z p
o o
+ s s
Confidence Interval to Estimate
the Population Proportion
Estimating the population proportion often
must be made
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Example #4
A clothing company produces mens jeans. The jeans
are made and sold with either a regular cut or a boot
cut. In an effort to estimate the proportion of their
mens jeans market in Oklahoma City that prefers
boot-cut jeans, the analyst takes a random sample
of 212 jeans sales from the companys two Oklahoma
City retail outlets. Only 34 of the sales were for
boot-cut jeans. Construct a 90% confidence interval
to estimate the proportion of the population in
Oklahoma City who prefer boot-cut jeans.
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20 . 0 12 . 0
04 . 0 16 . 0 04 . 0 16 . 0
212
) 84 . 0 )( 16 . 0 (
645 . 1 16 . 0
212
) 84 . 0 )( 16 . 0 (
645 . 1 16 . 0

s s
+ s s
+ s s
+ s s
p
p
p
n
q p
z p p
n
q p
z p
645 . 1 % 90
84 . 0 16 . 0 1

- 1 =

16 . 0
212
34

, 34 , 212
=
= =
= = = = =
z Confidence
p q
n
x
p x n
Example # 4
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1
) (
2
2

=
n
x x
s
1 - freedom of degrees
) 1 (
2
2
2
n
s n
=

=
o
_
Estimating the Population Variance
Population Parameter o
2

Estimator of o
2





_
2
formula for Single Variance
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27
( ) ( )
confidence of level 1
1
1 1
2
2
1
2
2
2
2
2
=
=

s s

o
_
o
_ o o
n df
s n s n
Confidence Interval for o
2

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Two Table Values of _
2

0 2 4 6 8 10 12 14 16 18 20
df = 7
.05
.05
.95
2.16735 14.0671
df 0.950 0.050
1 3.93219E-03 3.84146
2 0.102586 5.99148
3 0.351846 7.81472
4 0.710724 9.48773
5 1.145477 11.07048
6 1.63538 12.5916
7 2.16735 14.0671
8 2.73263 15.5073
9 3.32512 16.9190
10 3.94030 18.3070
20 10.8508 31.4104
21 11.5913 32.6706
22 12.3380 33.9245
23 13.0905 35.1725
24 13.8484 36.4150
25 14.6114 37.6525
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90% Confidence Interval for o
2

007146 . 001101 .
16735 . 2
0022125 ). 1 8 (
0671 . 14
0022125 ). 1 8 (
) 1 ( ) 1 (
________ __________ __________ __________
16735 . 2
0671 . 14
10 . , 7 1 , 8 , 0022125 .
2
2
2
2
1
2
2
2
2
2
2
95 .
2
2
1 .
1
2
2
1
2
05 .
2
2
1 .
2
2
2
s s

s s

s s

= = =
= = =
= = = = =

o
o
_
o
_
_ _ _
_ _ _
o
o o
o
o
s n s n
n df n s
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Example # 5
The U.S. Bureau of Labor Statistics publishes data on the hourly
compensation costs for production workers in manufacturing
for various countries. The latest figures published for Greece
show that the average hourly wage for a production worker in
manufacturing is $16.10. Suppose the business council of
Greece wants to know how consistent this figure is. They
randomly select 25 production workers in manufacturing from
across the country and determine that the standard deviation
of hourly wages for such workers is $1.12. Use this information
to develop a 95% confidence interval to estimate the
population variance for the hourly wages of production
workers in manufacturing in Greece. Assume that the hourly
wages for production workers across the country in
manufacturing are normally distributed.
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31
( ) ( )
( ) ( )
4277 . 2 7648 . 0
4011 . 12
) 2544 . 1 ( 1 25
3641 . 39
) 2544 . 1 ( 1 25
1 1
2
2
2
2
1
2
2
2
2
2
s s

s s

s s

o
o
_
o
_ o o
s n s n
4011 . 12
3641 . 39
05 . , 24 1 , 25 , 2544 . 1
2
975 .
2
2
05 .
1
2
2
1
2
025 .
2
2
05 .
2
2
2
= = =
= = =
= = = = =

_ _ _
_ _ _
o
o
o n df n s
Example # 5