Business Statistics, 5th ed.

by Ken Black
Chapter 8
Discrete Distributions

Statistical Inference:
Estimation for
Single Populations

PowerPoint presentations prepared by Lloyd Jaisingh,

Morehead State University

Learning Objectives
Know the difference between point and interval
estimation.
Estimate a population mean from a sample mean
when s is known.
Estimate a population mean from a sample mean
when s is unknown.
Estimate a population proportion from a sample
proportion.
Estimate the population variance from a sample
variance.
Estimate the minimum sample size necessary to
achieve given statistical goals.

Statistical Estimation
Point estimate -- the single value of a statistic
calculated from a sample which is used to
estimate a population parameter
Interval Estimate -- a range of values calculated
from a sample statistic(s) and standardized
statistics, such as the z
Selection of the standardized statistic is
determined by the sampling distribution.
Selection of critical values of the standardized
statistic is determined by the desired level of
confidence.

100(1 - )%Confidence Interval to

Estimate when s is Known
x
x
n

Point estimate

x z / 2

Interval
Estimate

s
n

or
x z / 2

s
n

x z / 2

s
n

Distribution of Sample Means

for (1-)% Confidence

z
Z

22

Zz

22

Distribution of Sample Means

for (1-)% Confidence

.5

.5

z
Z

22

z
22

Distribution of Sample Means

for (1-)% Confidence

1
2

1
2

z
Z

22

Z2
2

Distribution of Sample Means

for 95% Confidence

.025

.025
95%
.4750

.4750

Z
-1.96

1.96

95% Confidence Interval for

x 510, s 46, n 85, z / 2 1.96
x z / 2

x z / 2

n
n
46
46
510 1.96
510 1.96
85
85
510 9.78 510 9.78
500.22 519.78

95% Confidence Intervals for

95%

X
X
X
X

X
X

95% Confidence Intervals for

Is our interval,
95%

X
X
X
X

X
X

500.22
519.78, in the
red?

Demonstration Problem 8.1

x 10.455, s 7.7, n 44.
90% confidence z / 2 1.645
x z / 2

x z / 2

n
n
7.7
7.7
10.455 1.645
10.455 1.645
44
44
10.455 1.910 10.455 1.910
8.545 12.365

Demonstration Problem 8.2

x 34 .30 , s 8, N = 800 , and n 50 .
98 % confidence z 2.33
s N n
s N n
x z / 2
x z / 2
n N 1
n N 1
8 800 50
8 800 50
34.30 2.33
34.30 2.33
50 800 1
50 800 1
34.30 2.554 34.30 2.554
31.75 36.85

Confidence Interval to Estimate

when n is Large and s is Unknown

x z

/2

s
n

/2

s
x z
n

or
x z

/2

s
n

Car Rental Firm Example

x 85 .5, S 19 .3, and n 110 .
99 % confidence z 2.575
s
xz

n
19.3
85.5 2.575

110
85.5 4.7
80.8

s
xz
n
19.3
85.5 2.575
110
85.5 4.7
90.2

Z Values for Some of the More

Common Levels of Confidence
Confidence
Level

z/2 Value

90%

1.645

95%

1.96

98%

2.33

99%

2.575

Estimating the Mean of a Normal

Population: Unknown s
The population has a normal distribution.
The value of the population standard
deviation is unknown.
z distribution is not appropriate for these
conditions
t distribution is appropriate

The t Distribution
Developed by British statistician, William
Gosset
A family of distributions -- a unique
distribution for each value of its parameter,
degrees of freedom (d.f.)
Symmetric, Unimodal, Mean = 0, Flatter
than a z
x

t formula t
s
n

Comparison of Selected t Distributions

to the Standard Normal
Standard Normal
t (d.f. = 25)
t (d.f. = 5)
t (d.f. = 1)

-3

-2

-1

Table of Critical Values of t

df
1
2
3
4
5

t0.100 t0.050 t0.025 t0.010 t0.005

3.078
1.886
1.638
1.533
1.476

6.314
2.920
2.353
2.132
2.015

12.706
4.303
3.182
2.776
2.571

31.821
6.965
4.541
3.747
3.365

63.656
9.925
5.841
4.604
4.032

1.714

25

1.319
1.318
1.316

1.708

2.069
2.064
2.060

2.500
2.492
2.485

2.807
2.797
2.787

29
30

1.311
1.310

1.699
1.697

2.045
2.042

2.462
2.457

2.756
2.750

40
60
120

1.303
1.296
1.289
1.282

1.684
1.671
1.658
1.645

2.021
2.000
1.980
1.960

2.423
2.390
2.358
2.327

2.704
2.660
2.617
2.576

23

24

1.711

With df = 24 and = 0.05,

t = 1.711.

Confidence Intervals for of a Normal

Population: Unknown s
x t / 2,n 1

s
n

or
x t / 2,n 1
df n 1

s
s
x t / 2,n 1
n
n

Solution for Demonstration Problem 8.3

x 2.14 , s 1.29 , n 14 , df n 1 13

1 .99

0.005
2
2
t .005,13 3.012
s
x t / 2, n 1

n
1.29
2.14 3.012

14
2.14 1.04
1.10

s
x t / 2, n 1
n
1.29
2.14 3.012
14
2.14 1.04
3.18

MINITAB Solution for Demonstration

Problem 8.3

Comp Time: Excel Normal View

Comp Time: Excel Formula View

B

Comp Time Data

21

17

20

16

29

12

4
5

11

21

25

15

16

=B7+B13*B9

n=

Mean =

S=

9
10

Std Error =

11

0.1

12

df =

=B6-1

13
14

t=

15

=COUNT(A2:F4)
=AVERAGE(A2:F4)
=STDEV(A2:F4)
=B8/SQRT(B6)

=TINV(B11,B12)
=B7-B13*B9

Confidence Interval to Estimate

the Population Proportion
p z / 2

p q
p p z / 2
n

where :
p = sample proportion
q = 1 - p
p = population proportion
n = sample size

p q
n

Solution for Demonstration Problem 8.5

x 34

0.16
n 212
q = 1 - p 1 0.16 0.84
90% Confidence z 1.645
n 212, x 34, p

p z / 2
0.16 1.645

p q
p p z / 2
n

p q
n

(0.16)(0.84)
(0.16)(0.84)
p 0.16 1.645
212
212
0.16 0.04 p 0.16 0.04
0.12 p 0.20

Population Variance
Variance is an inverse measure of the groups
homogeneity.
Variance is an important indicator of total quality
in standardized products and services. Managers
improve processes to reduce variance.
Variance is a measure of financial risk. Variance of
rates of return help managers assess financial and
capital investment alternatives.
Variability is a reality in global markets.
Productivity, wages, and costs of living vary
between regions and nations.

Estimating the Population Variance

Population Parameter s

Estimator
of
s

(
x

x
)
2
s
n 1

formula for Single Variance

2

(n 1) s 2

s2

degrees of freedom n - 1

Confidence Interval for s2

n 1s

/2

n 1s

1 / 2

df n 1
1 level of confidence

Selected 2 Distributions
df = 3
df = 5
df = 10

2 Table
df
0.975
0.950
1 9.82068E-04 3.93219E-03
2
0.0506357
0.102586
3
0.2157949
0.351846
4
0.484419
0.710724
5
0.831209
1.145477
6
1.237342
1.63538
7
1.689864
2.16735
8
2.179725
2.73263
9
2.700389
3.32512
10
3.24696
3.94030

0.100
2.70554
4.60518
6.25139
7.77943
9.23635
10.6446
12.0170
13.3616
14.6837
15.9872

0.050
3.84146
5.99148
7.81472
9.48773
11.07048
12.5916
14.0671
15.5073
16.9190
18.3070

0.025
5.02390
7.37778
9.34840
11.14326
12.83249
14.4494
16.0128
17.5345
19.0228
20.4832

df = 5

0.10

0
20
21
22
23
24
25

9.59077
10.28291
10.9823
11.6885
12.4011
13.1197

10.8508
11.5913
12.3380
13.0905
13.8484
14.6114

28.4120
29.6151
30.8133
32.0069
33.1962
34.3816

31.4104
32.6706
33.9245
35.1725
36.4150
37.6525

34.1696
35.4789
36.7807
38.0756
39.3641
40.6465

70
80
90
100

48.7575
57.1532
65.6466
74.2219

51.7393
60.3915
69.1260
77.9294

85.5270
96.5782
107.5650
118.4980

90.5313
101.8795
113.1452
124.3421

95.0231
106.6285
118.1359
129.5613

10

15

20

9.23635
With df = 5 and =
0.10, 2 = 9.23635

Two Table Values of 2

df = 7

.05
.95
.05
0

2.16735

10

12

14

16

18

20

14.0671

df
1
2
3
4
5
6
7
8
9
10

0.950
3.93219E-03
0.102586
0.351846
0.710724
1.145477
1.63538
2.16735
2.73263
3.32512
3.94030

0.050
3.84146
5.99148
7.81472
9.48773
11.07048
12.5916
14.0671
15.5073
16.9190
18.3070

20
21
22
23
24
25

10.8508
11.5913
12.3380
13.0905
13.8484
14.6114

31.4104
32.6706
33.9245
35.1725
36.4150
37.6525

90% Confidence Interval for s2

s 2 .0022125, n 8, df n 1 7, .10

2 / 2 02.1/ 2 .205 14.0671

12 / 2 120.1/ 2 .295 2.16735
______________________________________
(n 1) s 2

2 / 2

s 2

(n 1) s 2

12 / 2

(8 1).0022125
(8 1).0022125
s 2
14.0671
2.16735
.001101 s 2 .007146

Solution for Demonstration Problem 8.6

s 2 1.2544, n 25, df n 1 24, .05

/2

2
1 / 2

2
0.05 / 2

2
1 0.05 / 2

n 1s 2

2
.025

39.3641
2
.975

s
0.7648 s

n 1s 2

/2

25 1(1.2544)

12.4011

39.3641

1 / 2

25 1(1.2544)

12.4011

2.4277

Determining Sample Size

when Estimating
z formula

Error of Estimation E x
(tolerable error)
2
Estimated Sample Size

zs
n
E
2

Estimated s

1
range
4

z s

Sample Size When Estimating : Example

E 1, s 4
90% confidence z 1.645

z s
n
E
2

(1.645) 2 ( 4) 2

12
43.30 or 44

Solution for Demonstration Problem 8.7

E 2, range 25
95% confidence z 1.96
1
1
estimated s : range 25 6.25
4
4

zs
E
2

(1.96) 2 (6.25) 2

22
37.52 or 38

Determining Sample Size

when Estimating p
z
formula

p p
pq
n

Error of Estimation (tolerable

error)

E p p

Estimated Sample
Size
n

z 2 pq

Solution for Demonstration Problem 8.8

E 0.03
98% Confidence Z 2.33
estimated P 0.40
Q 1 P 0.60
z 2 pq
n
E2
(2.33) 2 (0.40)(0.60)

(.003) 2
1,447.7 or 1,448

Determining Sample Size when

Estimating p with No Prior Information
p

pq

0.5

0.25

z = 1.96
E = 0.05

400
350
300

0.4

0.24

0.3

0.21

250
n 200
150

0.2

0.16

0.1

0.09

100
50
0
0

z
n
E

1
4
2

0.1

0.2

0.3

0.4

0.5
P

0.6

0.7

0.8

0.9

Example: Determining n when

Estimating p with No Prior Information
E 0.05
90% Confidence z 1.645
with no prior estimate of p, use p 0.50
q 1 p 0.50
2

pq
z
n
E
2

(1.645) 2 (0.50)(0.50)

(.05) 2
270.6 or 271

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