Estimation of Parameters

• An estimate is a value or a range of values that approximate a parameter. It is based on sample

statistics computed from sample data.

• Estimation is the process of determining parameter values.

• A point estimate is a specific numerical value of a population parameter. The sample mean is the best
point estimate of the population mean.

• An interval estimate is a range of values that may contain the parameter of a population.

A good estimator has the following properties:

1. Unbiased
2. Consistent
3. Relatively efficient

• An interval estimate, called a confidence interval, is a range of values that is used to estimate a
parameter. This estimate may or may not contain the true parameter value.

The confidence level of an interval estimate of a parameter is the probability that the interval estimate contains
the parameter. It describes what percentage of intervals from many different samples contain the unknown
population parameter

The significance level also known as alpha level which is denoted by 𝜶 refers to the likelihood that the
confidence interval does NOT contain the parameter it estimates.

Statistical Hypothesis Testing

Statistical Hypothesis- is a claim or assertion about a parameter or some parameters of one or more
population.

A test of hypotheses/ test procedure is a method to test the claims about a characteristic of a population
through the use of sample data.

There are two types of statistical hypotheses

1. Null hypothesis. The null hypothesis, denoted by H0, is a claim about a characteristic of a population
that is initially assumed as a true statement.

2. Alternative hypothesis. The alternative hypothesis, denoted by Ha, is a competing claim or statement
to the null hypothesis.

The null hypothesis is of this form:

H0 : population parameter = hypothesized value

The alternative hypothesis will be one of the following:

Ha: population parameter > hypothesized value

Ha: population parameter < hypothesized value
Ha: population parameter ≠ hypothesized value

Example
Write the null and alternative hypotheses for each situation.

1. A manufacturer of car tires wants to test whether their machine still produces car tires with a mean
diameter of 16 inches.
 Answer:
Let u be the mean diameter of car tires produced by the manufacturer.
H0 : u = 16 Ha : u ≠ 1

We choose u ≠ 16 as the alternative hypothesis. This is our competing claim that the machine does not
produce car tires with the mean diameter equal to 16 inches.

2. An airline company claims that the percentage of their flights prone to delays weekly due to air traffic
and other technical issues does not exceed 28% of their total flights.

answer: Let p = 0.28

𝐻𝑜 : 𝑝 = 0.28

𝐻𝐴 : 𝑝 < 0.28

We choose 𝑝 < 0.28 as 𝐻𝐴 since we want to reject the null hypothesis that the percentage of flights
prone to delay is greater than or equal to 28 percent

ERRORS IN TEST OF HYPOTHESIS

Type I error is the error of rejecting the null hypothesis when it is true.

Type II error is the error of failing to reject the null hypothesis when it is false.