BM6043

Determination of Level of Confidence

- May select any confidence level between 0 100 percent;
- Social-science researches general use ______ % level of
confidence;
- Studies on quality assurance normal use ______ %
- Political statistic typically use ______ %
__
Confidence interval (population known): X z(n)
In your opinion, level of confidence and sample size: any
relationship?
What does 95% level of confidence mean?

99% level of confidence means:

Example for z distribution confidence intervals 1:

The labour union wishes to have information on the mean income
of middle management in the retail industry. A random sample of
256 managers reveal a sample mean of RM45,420. The standard
deviation of the population is RM2,050. The union would like to
answers the following:
What is the population mean?
What is the reasonable values for the population mean?
What do these results mean?

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Example for z distribution confidence intervals 2:

You own a petrol station and you would like to estimate the mean
number of litres of petrol sold to customers. Assume the amount of
petrol sold follows the NPD with standard deviation of 2.3 litres.
From your record, you select a random of 60 sales and finds the
mean number of litres sold is 8.60.
a. What is the point of estimate of the population?
b. Develop a 99% confidence interval for the population.
c. Interpret the meaning of part (b).

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Student t Distribution
z Distribution versus t Distribution
- Both are continuous distribution and symmetrical
- Student t distribution has mould shape, z distribution is bell
shaped. In other words, t distribution curve is more spread out and
flatter (in height) and has fatter tails
- there is not one t-distribution, but rather a family of t distribution.
All have a mean of 0, but their standard deviation differs according
to the sample size n. Example: There is a t distribution for sample
of 20, another for sample size of 30, and so on.
- as degree of freedom (df) increases, t distribution converge into
bell curve of z distribution. BTW, what is df?

df for one-group versus more-than-one group

Calculating t statistics manually is almost impossible. So refer to

table (a copy has been distributed).

When should you use t distribution?

So, you use z distribution when ???

BM6043

Very popular and important distribution when:

Sample size is small, in particular when you do not have the
variance or volatility (which is the standard deviation) of the
underlying population (which is typical the case so Student t
distribution has a lot of practical applications).
Since t distribution is continuous and share many characteristics of
z distribution, the confidence intervals are determined using
__
Confidence interval (population unknown): X t(sn)
To develop a confidence interval for the population with unknown
standard deviation:
i) Assume sampled population is either normal or
approximately normal.
ii) Estimate the population standard deviation () with the
sample standard deviation (s).
iii) Use the t distribution rather than the z distribution.
t distribution Question 1:
Sime Tyres wishes to investigate the tread life of its tires. A
sample of 10 tires driven 50,000 km 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 to conclude that after 50,000 km the
population mean amount of tread remaining is 0.30 inch?

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t distribution Question 2:
The manager of Aramai-T Mall want to estimate the mean amount
spent per shopping visit by customers. A sample of customers
reveals the following amounts spent (RM):
48.16
37.92
49.17

42.22
52.64
61.46

46.82
48.59
51.53

51.45
50.82
52.68

23.78
46.94
58.84

41.86
61.83
23.88

54.86
61.69

What is the best estimate of the mean population?

Determine a 95% confidence interval. Interpret the result.
Wold it be reasonable to conclude that the population mean is
RM50? What about RM60?

t distribution Question 3:
The owner of Kampung Egg Farm wants to estimate the mean
number of eggs laid per chicken. A sample of 20 chickens shows
they laid an average of 20 eggs per month with a standard
deviation of 2 eggs per month.
i.

What is the population mean? What is the best estimate of

this value?
ii. For a 95% confidence interval, what is the t value?
iii. Develop the 95% confidence interval for the population
mean. Would it be reasonable to conclude that the
population mean is 22 eggs?

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Brief Discussion on Chi-squared Distribution

(Test of Independence):
Non-symmetrical distribution: positively skewed.
Non-parametric analysis: All variables are categorical
Formula:

df = (row 1) (column 1)

Example: A financial literacy question was given and performance

based on gender is shown in the following table. (N=513)
Gender
Male
Female
Total

Correct
82
90
180

Wrong
115
218
333

Total
197
316
513

Using the formula, calculate the chi-squared

Your conclusion is (based on 95% CI)

BM6043

Chi-squared (Test of independence) Question 1:

Suppose a business research want to determine whether type petrol
preferred is independent of a persons income. The survey result is
given in the following table:
Regular
Premium
Extra
Premium
Lower than
85
16
6
107
RM30,000
RM30,000
102
27
13
142
to
RM49,999
RM50,000
36
22
15
73
to
RM99,999
More than
15
23
25
63
RM100,000
238
88
59
385
Using 99% level of confidence, what is the conclusion?