Seminar 4 Outline

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CHAPTER 7

So far we have learned about what a sample is, how to collect samples and about
sampling distributions. In this chapter we are going to learn how to use a sample to infer
something about a population parameter.

The two parameters that we are going to estimate will be a population proportion and a
population mean. We will also learn methods to determine the sample size necessary to
estimate those parameters.

The concept of the Confidence Interval is introduced in this chapter. This week you will
learn how to:
 Construct a confidence interval for both population proportions and means.
 Interpret what the confidence interval is telling us.

You should have a good understanding of what confidence intervals are and why they are
needed.
We are going to learn how to construct confidence intervals for two parameters in
particular; proportions and means.

Estimating a Population Proportion

When working with nominal or ordinal data we divide the population up into categories.
When data is put into categories there is a proportion (or a percent) of the total that is in
each category.

Sample proportions are used as point estimates to estimate population proportions. We

cannot tell how good the estimates are though until we construct a confidence interval
around it. A confidence interval is a range of values instead of just one point estimate.

Be sure to read carefully the two sections "Why Do We Need Confidence Intervals?"
(page 322) and "Interpreting a Confidence Interval" (page 322). Understand that the
interval tells us the confidence we have in the process we are using to estimate the
parameter.

Before constructing Confidence Intervals it is important to understand Critical Values.

We learned in Chapter 6 about the Normal Distribution. The concepts we learned in
Chapter 6 follow here in how we find critical values. Now the values that we are looking
up in Table A-2 (page 772) have specific meaning. They are cutoff points and they help
define our interval. These cutoff points are determined by what we would consider
'unusual'.
If we want to build a 90% Confidence Interval, we would set our cutoffs where there is
10% past the critical values, but since we have 2 tails we divide it into the two tails so
each has 5%.

By knowing our sample proportion, the sample size and the critical value, we are able to
calculate the margin of error using Formula 7-1 presented on page 325. By adding and
subtracting the margin of error (E) to the sample proportion we are able to create an
interval. Of course the sample proportion is right in the middle of the interval.

By switching around the formula E we can see that we can determine a proper sample
size if we know what we want our margin of error to be. We can see from these formulas
(7-2 and 7-3 on page 328) that for a smaller margin of error we need a bigger sample size.

Estimating Means

When we have interval or ratio data we can find a mean. There are two sections that
address finding a confidence interval for means. The first is in Section 7-3 and it requires
that we know σ, the standard deviation of the population. The second is in section 7-4
which is the method we use when σ is unknown.

σ vs. s

There is sometimes some confusion over how to tell when Sigma (σ) is known or
unknown.

First it is important to understand the difference between σ and s.

σ - Sigma is the population standard deviation. This is rarely ever known in practical
situations. To know the standard deviation of the whole population we would also have
to know the population mean. It would not make sense to collect a sample to estimate the
mean if we already knew it. The exception to this is when we have a long history of
data. After some time we can assume a certain value for σ.
s is the sample standard deviation. We calculate this from our sample. It is not the
standard deviation for the whole population but serves as an estimate. We can always
calculate s from a sample but that does not mean that we know what σ is.

Unless it is stated that we know the population standard deviation σ, we assume that we
do not know it.

This is a very important concept since it leads us to the correct formulas for Confidence
Intervals and Hypothesis tests.

7-3 σ KNOWN (rarely happens)

We will cover the material in Section 7-3 briefly and then concentrate more on section 7-
4. The reason for this is because the population standard deviation is rarely known.
Remember that the population standard deviation σ is different from the sample standard
deviation s.

The way we construct a Confidence Interval for the population mean is quite similar to
how we learned to construct one for the population proportions in Section 7-2. The
formula for E is different and can be found on page 339. We can calculate E if we know
the critical value, the population standard deviation, and the sample size. We find the
critical values the same as way as we did in Section 7-2 by using the Normal distribution.

Sample sizes can also be determined by using Formula 7-5 on page 343.

7-4 σ UNKNOWN – this is the method most used.

When the population standard deviation is unknown (which is almost always the case) we
use the methods in section 7-4. There is a difference in the way we find the critical
values. Instead of using the Normal distribution we use the Student-t distribution.
Understanding how to find the critical values from Table A-3 (page 774) is important.

Instead of using σ (population standard deviation), we use s (the sample standard

deviation).

The chart and Table on pages 354 – 355 are good guides to decide whether to use z
(normal distribution) or t (Student-t distribution).