You are on page 1of 14

3/23/2016

OPRE 6301/SYSM 6303


Quantitative Introduction to Risk and
Uncertainty in Business
12-1

Chapter Twelve
Inference about a Population

12-2

3/23/2016

Student t Distribution

11-3

Student t Distribution
In addition to mean, m, and standard deviation, s,
the Student t distribution also requires degrees of
freedom, n, be specified.

11-4

3/23/2016

Student t Distribution
P(t t A ,n ) P

11-5

Student t Distribution

11-6

3/23/2016

Student t Distribution

11-7

Estimating m when
s is unknown
When s is unknown, we must estimate the
standard deviation with its point estimator s.

11-8

3/23/2016

Estimating m when
s is unknown
When s is unknown, we must estimate the
standard deviation with its point estimator s.
When we use the point estimator s, we must
use the Student t distribution so we do not
overestimate our confidence in the results.

11-9

Estimating m when
s is unknown
Substitute into the probability equation
s
s

P x t 2,n
m x t 2,n
1
n
n

11-10

3/23/2016

Estimating m when
s is unknown
Substitute into the probability equation
s
s

P x t 2,n
m x t 2,n
1
n
n

This equation provides us a confidence


interval estimate of m when the population
standard deviation is unknown.
11-11

Estimating m when
s is unknown
Substitute into the probability equation
s
s

P x t 2,n
m x t 2,n
1
n
n

Lower Confidence Limit:

x t 2,n

s
n

11-12

3/23/2016

Estimating m when
s is unknown
Substitute into the probability equation
s
s

P x t 2,n
m x t 2,n
1
n
n

Lower Confidence Limit:

x t 2,n

Upper Confidence Limit: x t 2,n

s
n
s
n
11-13

Estimating m when
s is unknown
Substitute into the probability equation
s
s

P x t 2,n
m x t 2,n
1
n
n

The probability (1-) is the confidence level,


which is a measure of how frequently the
interval will include m.
11-14

3/23/2016

Estimating m when
s is unknown
Lets investigate the interval estimate using the
data from Example 10.1. Doll Computers

11-15

Testing m when s is unknown


Test statistic

x m
s n

which is Student t-distributed


with n=n-1 degrees of freedom

12-16

3/23/2016

Testing m when s is unknown


Lets investigate Example 12.1

12-17

Testing a population proportion


Sample proportion

x
n

Recall the sampling distribution

P p
p(1 p) / n
12-18

3/23/2016

Testing a population proportion


Test statistic

P p
p(1 p) / n

which is approximately normal when


np and n(1-p) are greater than 5.

12-19

Testing a population proportion


Confidence Interval

p z 2 p(1 p) / n

12-20

10

3/23/2016

Testing a population proportion


Lets investigate Example 12.5

12-21

Testing a population proportion


Sample size to estimate the proportion

B z 2 p(1 p) / n

12-22

11

3/23/2016

Testing a population proportion


Sample size to estimate the proportion

B z 2 p(1 p) / n
By rearranging the formula algebraically

z 2 p(1 p)

12-23

Testing a population proportion


So, if we want our error to be no larger than 0.03

1.96 p(1 p)

0.03

12-24

12

3/23/2016

Testing a population proportion


Problem: we need an estimate of the proportion

Method 1

p 0.5
It is the most conservative value we can choose

12-25

Testing a population proportion


Problem: we need an estimate of the proportion
Method 1

p 0.5
It is the most conservative value we can choose
2

1.96 0.5(1 0.5)


32.672 1,068
n

0.03

12-26

13

3/23/2016

Testing a population proportion


Problem: we need an estimate of the proportion

Method 2
Set the proportion to the best estimate you have

12-27

Testing a population proportion


Problem: we need an estimate of the proportion
Method 2
Set the proportion to the best estimate you have
2

1.96 0.2(1 0.2)


26.132 683
n

0.03

12-28

14