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BUSINESS STATISTICS
6-1
Confidence Intervals
Using Statistics
Confidence Interval for the Population Mean When
the Population Standard Deviation is Known
Confidence Intervals for When is Unknown - The
t Distribution
Large-Sample Confidence Intervals for the Population
Proportion p
Confidence Intervals for the Population Variance
Sample Size Determination
Summary and Review of Terms
McGraw-Hill/Irwin
Aczel/Sounderpandian
COMPLETE
BUSINESS STATISTICS
6-2
6-1 Introduction
McGraw-Hill/Irwin
Aczel/Sounderpandian
COMPLETE
6-3
BUSINESS STATISTICS
Types of Estimators
Point Estimate
A single-valued estimate.
A single element chosen from a sampling distribution.
Conveys little information about the actual value of the
population parameter, about the accuracy of the estimate.
McGraw-Hill/Irwin
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COMPLETE
BUSINESS STATISTICS
6-4
McGraw-Hill/Irwin
Aczel/Sounderpandian
COMPLETE
6-5
BUSINESS STATISTICS
P 196
.
x 196
.
0.95
n
n
f(z)
0.3
or
0.1
P x 196
.
x 196
.
0.95
n
n
McGraw-Hill/Irwin
0.2
Aczel/Sounderpandian
0.0
-4
-3
-2
-1
COMPLETE
6-6
BUSINESS STATISTICS
1.96
n
will include the sample mean (and 5% that it will not).
Conversely, after sampling, approximately 95% of such intervals
x 1.96
n
will include the population mean (and 5% of them will not).
That is, x 1.96
McGraw-Hill/Irwin
Aczel/Sounderpandian
COMPLETE
6-7
BUSINESS STATISTICS
.
interval 196
.
, 196
.
0.4
95%
f(x)
0.3
0.2
0.1
2.5%
2.5%
0.0
1.96
196
.
x
x
.
expected to be above 196
and
n
2.5% can be expected to be below
1.96
.
n
x
x
x
x
x
x
x
McGraw-Hill/Irwin
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COMPLETE
6-8
BUSINESS STATISTICS
95%
f(x)
0.3
0.2
0.1
2.5%
2.5%
0.0
1.96
196
.
x
x
x
x
x
x
x
x
McGraw-Hill/Irwin
Aczel/Sounderpandian
COMPLETE
6-9
BUSINESS STATISTICS
x 1.96
McGraw-Hill/Irwin
20
x 1.96
122 1.96
n
25
122 (1.96)(4 )
122 7.84
114.16,129.84
Aczel/Sounderpandian
COMPLETE
6-10
BUSINESS STATISTICS
P z z
P z
z
P z z z (1 )
2
S t a n d a r d N o r m al D i s t ri b u ti o n
0. 4
(1 )
f(z)
0. 3
0. 2
0. 1
0. 0
-5
-4
-3
-2
-1
McGraw-Hill/Irwin
Aczel/Sounderpandian
x z
2
COMPLETE
6-11
BUSINESS STATISTICS
0.99
0.98
0.95
0.90
0.80
McGraw-Hill/Irwin
0.005
0.010
0.025
0.050
0.100
S t a n d a r d N o r m al D i s t ri b u t i o n
0. 4
(1 )
2.576
2.326
1.960
1.645
1.282
0. 3
f(z)
(1 )
0. 2
0. 1
2
0. 0
Aczel/Sounderpandian
-5
-4
-3
-2
-1
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6-12
BUSINESS STATISTICS
0 .4
0 .4
0 .3
0 .3
f(z)
f(z)
S t a n d a r d N o r m al D i s t ri b u t i o n
0 .2
0 .1
0 .2
0 .1
0 .0
0 .0
-5
-4
-3
-2
-1
-5
-4
-3
-2
-1
McGraw-Hill/Irwin
n
Aczel/Sounderpandian
COMPLETE
6-13
BUSINESS STATISTICS
S a m p lin g D i s t r ib u t io n o f th e M e a n
0 .4
0 .9
0 .8
0 .7
0 .3
f( x)
f(x)
0 .6
0 .2
0 .5
0 .4
0 .3
0 .1
0 .2
0 .1
0 .0
0 .0
McGraw-Hill/Irwin
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COMPLETE
BUSINESS STATISTICS
6-14
Example 6-1
McGraw-Hill/Irwin
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BUSINESS STATISTICS
6-15
McGraw-Hill/Irwin
Aczel/Sounderpandian
COMPLETE
BUSINESS STATISTICS
6-16
(Sigma)
McGraw-Hill/Irwin
Aczel/Sounderpandian
COMPLETE
BUSINESS STATISTICS
6-17
McGraw-Hill/Irwin
Aczel/Sounderpandian
COMPLETE
BUSINESS STATISTICS
6-18
McGraw-Hill/Irwin
Aczel/Sounderpandian
Standard normal
t, df = 20
t, df = 10
COMPLETE
BUSINESS STATISTICS
6-19
McGraw-Hill/Irwin
Aczel/Sounderpandian
COMPLETE
6-20
BUSINESS STATISTICS
x t
s
n
McGraw-Hill/Irwin
Aczel/Sounderpandian
COMPLETE
6-21
BUSINESS STATISTICS
The t Distribution
McGraw-Hill/Irwin
t0.005
-----63.657
9.925
5.841
4.604
4.032
3.707
3.499
3.355
3.250
3.169
3.106
3.055
3.012
2.977
2.947
2.921
2.898
2.878
2.861
2.845
2.831
2.819
2.807
2.797
2.787
2.779
2.771
2.763
2.756
2.750
2.704
2.660
2.617
2.576
t D i s t r ib u t io n : d f = 1 0
0 .4
0 .3
Area = 0.10
0 .2
Area = 0.10
t0.010
-----31.821
6.965
4.541
3.747
3.365
3.143
2.998
2.896
2.821
2.764
2.718
2.681
2.650
2.624
2.602
2.583
2.567
2.552
2.539
2.528
2.518
2.508
2.500
2.492
2.485
2.479
2.473
2.467
2.462
2.457
2.423
2.390
2.358
2.326
t0.025
-----12.706
4.303
3.182
2.776
2.571
2.447
2.365
2.306
2.262
2.228
2.201
2.179
2.160
2.145
2.131
2.120
2.110
2.101
2.093
2.086
2.080
2.074
2.069
2.064
2.060
2.056
2.052
2.048
2.045
2.042
2.021
2.000
1.980
1.960
f(t)
t0.050
----6.314
2.920
2.353
2.132
2.015
1.943
1.895
1.860
1.833
1.812
1.796
1.782
1.771
1.761
1.753
1.746
1.740
1.734
1.729
1.725
1.721
1.717
1.714
1.711
1.708
1.706
1.703
1.701
1.699
1.697
1.684
1.671
1.658
1.645
0 .1
0 .0
-2.228
Area = 0.025
-1.372
1.372
2.228
t0.100
----3.078
1.886
1.638
1.533
1.476
1.440
1.415
1.397
1.383
1.372
1.363
1.356
1.350
1.345
1.341
1.337
1.333
1.330
1.328
1.325
1.323
1.321
1.319
1.318
1.316
1.315
1.314
1.313
1.311
1.310
1.303
1.296
1.289
1.282
df
--1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
40
60
120
Area = 0.025
Aczel/Sounderpandian
COMPLETE
6-22
BUSINESS STATISTICS
Example 6-2
A stock market analyst wants to estimate the average return on a certain
stock. A random sample of 15 days yields an average (annualized) return of
10.37% deviation of s = 3.5%. Assuming a normal population of
andxastandard
returns, give a 95% confidence interval for the average return on this stock.
df
--1
.
.
.
13
14
15
.
.
.
t0.100
----3.078
.
.
.
1.350
1.345
1.341
.
.
.
t0.050
----6.314
.
.
.
1.771
1.761
1.753
.
.
.
McGraw-Hill/Irwin
t0.025
-----12.706
.
.
.
2.160
2.145
2.131
.
.
.
t0.010
-----31.821
.
.
.
2.650
2.624
2.602
.
.
.
t0.005
-----63.657
.
.
.
3.012
2.977
2.947
.
.
.
Aczel/Sounderpandian
n
35
.
10.37 2.145
15
10.37 1.94
8.43,12.31
COMPLETE
6-23
BUSINESS STATISTICS
t0.100
----3.078
.
.
.
1.289
1.282
t0.050
----6.314
.
.
.
1.658
1.645
McGraw-Hill/Irwin
t0.025
-----12.706
.
.
.
1.980
1.960
t0.010
-----31.821
.
.
.
2.358
2.326
t0.005
-----63.657
.
.
.
2.617
2.576
Aczel/Sounderpandian
COMPLETE
BUSINESS STATISTICS
6-24
Example 6-3: An economist wants to estimate the average amount in checking accounts at banks in a given region. A
random sample of 100 accounts gives x-bar = $357.60 and s = $140.00. Give a 95% confidence interval for , the
average amount in any checking account at a bank in the given region.
x z 0.025
s
140.00
357.60 1.96
357.60 27.44 33016,385
.
.04
n
100
McGraw-Hill/Irwin
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6-25
McGraw-Hill/Irwin
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BUSINESS STATISTICS
6-26
p z
p q
n
where the sample proportion, p , is equal to the number of successes in the sample, x,
divided by the number of trials (the sample size), n, and q = 1 - p .
McGraw-Hill/Irwin
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COMPLETE
BUSINESS STATISTICS
6-27
p z
2
pq
( 0.34 )( 0.66)
0.34 1.96
n
100
0.34 (1.96)( 0.04737 )
0.34 0.0928
0.2472 ,0.4328
Thus, the firm may be 95% confident that foreign manufacturers control
anywhere from 24.72% to 43.28% of the market.
McGraw-Hill/Irwin
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COMPLETE
BUSINESS STATISTICS
6-28
McGraw-Hill/Irwin
Aczel/Sounderpandian
COMPLETE
6-29
BUSINESS STATISTICS
pq
(0.34)(0.66)
0.34 1645
.
n
100
0.34 (1645
. )(0.04737)
0.34 0.07792
0.2621,0.4197
McGraw-Hill/Irwin
p z
Aczel/Sounderpandian
pq
(0.34)(0.66)
0.34 196
.
n
200
0.34 (196
. )(0.03350)
0.34 0.0657
0.2743,0.4057
COMPLETE
BUSINESS STATISTICS
6-30
McGraw-Hill/Irwin
Aczel/Sounderpandian
COMPLETE
6-31
BUSINESS STATISTICS
C h i- S q u a r e D is t r ib u t io n : d f = 1 0 , d f = 3 0 , d f = 5 0
0 .1 0
df = 10
0 .0 9
0 .0 8
0 .0 7
f( )
0 .0 6
df = 30
0 .0 5
0 .0 4
df = 50
0 .0 3
0 .0 2
0 .0 1
0 .0 0
0
50
100
( n 1) s 2
Aczel/Sounderpandian
COMPLETE
6-32
BUSINESS STATISTICS
.995
.990
.975
.950
.900
.100
.050
.025
.010
.005
.900
.950
.975
.990
.995
.005
0.0000393
0.0100
0.0717
0.207
0.412
0.676
0.989
1.34
1.73
2.16
2.60
3.07
3.57
4.07
4.60
5.14
5.70
6.26
6.84
7.43
8.03
8.64
9.26
9.89
10.52
11.16
11.81
12.46
13.12
13.79
McGraw-Hill/Irwin
.010
.025
.050
.100
0.000157
0.0201
0.115
0.297
0.554
0.872
1.24
1.65
2.09
2.56
3.05
3.57
4.11
4.66
5.23
5.81
6.41
7.01
7.63
8.26
8.90
9.54
10.20
10.86
11.52
12.20
12.88
13.56
14.26
14.95
0.000982
0.0506
0.216
0.484
0.831
1.24
1.69
2.18
2.70
3.25
3.82
4.40
5.01
5.63
6.26
6.91
7.56
8.23
8.91
9.59
10.28
10.98
11.69
12.40
13.12
13.84
14.57
15.31
16.05
16.79
0.000393
0.103
0.352
0.711
1.15
1.64
2.17
2.73
3.33
3.94
4.57
5.23
5.89
6.57
7.26
7.96
8.67
9.39
10.12
10.85
11.59
12.34
13.09
13.85
14.61
15.38
16.15
16.93
17.71
18.49
0.0158
0.211
0.584
1.06
1.61
2.20
2.83
3.49
4.17
4.87
5.58
6.30
7.04
7.79
8.55
9.31
10.09
10.86
11.65
12.44
13.24
14.04
14.85
15.66
16.47
17.29
18.11
18.94
19.77
20.60
2.71
4.61
6.25
7.78
9.24
10.64
12.02
13.36
14.68
15.99
17.28
18.55
19.81
21.06
22.31
23.54
24.77
25.99
27.20
28.41
29.62
30.81
32.01
33.20
34.38
35.56
36.74
37.92
39.09
40.26
Aczel/Sounderpandian
3.84
5.99
7.81
9.49
11.07
12.59
14.07
15.51
16.92
18.31
19.68
21.03
22.36
23.68
25.00
26.30
27.59
28.87
30.14
31.41
32.67
33.92
35.17
36.42
37.65
38.89
40.11
41.34
42.56
43.77
5.02
7.38
9.35
11.14
12.83
14.45
16.01
17.53
19.02
20.48
21.92
23.34
24.74
26.12
27.49
28.85
30.19
31.53
32.85
34.17
35.48
36.78
38.08
39.36
40.65
41.92
43.19
44.46
45.72
46.98
6.63
9.21
11.34
13.28
15.09
16.81
18.48
20.09
21.67
23.21
24.72
26.22
27.69
29.14
30.58
32.00
33.41
34.81
36.19
37.57
38.93
40.29
41.64
42.98
44.31
45.64
46.96
48.28
49.59
50.89
7.88
10.60
12.84
14.86
16.75
18.55
20.28
21.95
23.59
25.19
26.76
28.30
29.82
31.32
32.80
34.27
35.72
37.16
38.58
40.00
41.40
42.80
44.18
45.56
46.93
48.29
49.65
50.99
52.34
53.67
COMPLETE
BUSINESS STATISTICS
6-33
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COMPLETE
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6-34
2
2
( n 1) s , ( n 1) s
2
2
1
2
2
2
2
to its right).
* Note: Because the chi-square distribution is skewed, the confidence interval for the
population variance is not symmetric
McGraw-Hill/Irwin
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COMPLETE
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6-35
2
2
(
n
1
)
s
(
n
1
)
s
( 30 1)18540 , ( 30 1)18540 11765,33604
457
.
16.0
2
2
1
2
2
McGraw-Hill/Irwin
Aczel/Sounderpandian
COMPLETE
6-36
BUSINESS STATISTICS
.995
.
.
.
12.46
13.12
13.79
.990
.
.
.
13.56
14.26
14.95
.975
.950
.
.
.
15.31
16.05
16.79
.900
.
.
.
16.93
17.71
18.49
.
.
.
18.94
19.77
20.60
.100
.050
.
.
.
37.92
39.09
40.26
.
.
.
41.34
42.56
43.77
.025
.
.
.
44.46
45.72
46.98
.010
.
.
.
48.28
49.59
50.89
.005
.
.
.
50.99
52.34
53.67
Chi-Square Distribution: df = 29
0.06
0.05
0.95
f( )
0.04
0.03
0.02
0.025
0.01
0.025
0.00
0
10
20
20.975 16.05
McGraw-Hill/Irwin
30
40
50
60
70
20.025 4572
.
Aczel/Sounderpandian
COMPLETE
BUSINESS STATISTICS
6-37
McGraw-Hill/Irwin
Aczel/Sounderpandian
COMPLETE
BUSINESS STATISTICS
6-38
Bound, B
McGraw-Hill/Irwin
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COMPLETE
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6-39
McGraw-Hill/Irwin
Aczel/Sounderpandian
COMPLETE
BUSINESS STATISTICS
6-40
Aczel/Sounderpandian
COMPLETE
6-41
BUSINESS STATISTICS
Sample-Size Determination:
Example 6-6
A marketing research firm wants to conduct a survey to estimate the average
amount spent on entertainment by each person visiting a popular resort. The
people who plan the survey would like to determine the average amount spent by
all people visiting the resort to within $120, with 95% confidence. From past
operation of the resort, an estimate of the population standard deviation is
s = $400. What is the minimum required sample size?
z
2
(196
. ) (400)
120
42.684 43
McGraw-Hill/Irwin
Aczel/Sounderpandian
COMPLETE
6-42
BUSINESS STATISTICS
z2 pq
2
B2
2.5762 (0.25)(0.75)
010
. 2
124.42 125
McGraw-Hill/Irwin
Aczel/Sounderpandian
COMPLETE
BUSINESS STATISTICS
6-43
McGraw-Hill/Irwin
Aczel/Sounderpandian
COMPLETE
BUSINESS STATISTICS
6-44
McGraw-Hill/Irwin
Aczel/Sounderpandian