Slide 9-1

Chapter 9
Confidence Intervals: Admitting that Estimates Are Not Exact

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Overview
Computed from data Has a known probability of including the unknown population parameter being estimated

Confidence Interval

Statistical Inference
An exact probability statement about the population, based on sample data

Confidence Level
The probability of including the population parameter within the confidence interval
95% is the usual standard. Also: 99%, 99.9%, 90%
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Approximate Confidence Interval

2(Standard error of estimator)
We are 95% sure the population parameter is in this interval

Estimator

For population mean:

X s 2S X

For population percentage (binomial):

p s 2S p

Because an estimator (if normally distributed) has a 95% chance of being within two of its standard deviations from its mean
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Why does it work?

X is within 2 S X of its mean Q about 95% of the
Because S X is an estimator of W X (the standard deviation of the sampling distribution of X )
WX
Q
X is in here 95% of the time

time

SX

Q is in here about 95% of the time

This also says that Q is within 2 S X of X about 95% of the time

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Confidence Interval for the Mean

We are 95% sure that the unknown population mean Q is between

X  tS X

and

X  tS X

where t is from the t table For smaller sample sizes (n = 40 or less)

t is larger than 1.96 (approximately 2)
Because we used the Standard Error ( S X ) as an estimator in place of the Population Standard Deviation ( W X ) of the sample average

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Example: Restaurant Survey

n = 100 residents X = $23.91 average expenditures S = $11.49 variability of individuals S X = $1.149 variability of the sample average t = 1.960 for 2-sided 95% confidence, from the t table

From X  tS X ! 23 .91  1.960 v 1.149 ! $21 .66 To X  tS X ! 23 .91  1.960 v 1.149 ! $26 .16 We are 95% sure that the unknown population mean expenditure Q is between $21.66 and $26.16 for all N = 77,386 residents in the population
Even though we only observed 100 people!
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Example: Medical Production

n = 10 production runs X = 68.3 grams produced S = 14.6 grams

Production of a new drug for heart attack treatment

Yearly budget needs to know about

Q = mean production rate of the process

95% confidence interval calculation

S X ! S / n ! 14.6 / 10 ! 4.617

t = 2.262 for 2-sided 95% confidence with n = 10 From X  tS X ! 68 .3  2.262 v 4.617 ! 57 .86 To X  tS ! 68 .3  2.262 v 4.617 ! 78 .74
X
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Example (continued)
We are 95% sure that the unknown mean production rate Q is between 57.86 and 78.74 grams per production run This tells you what is likely to happen in the future, if there are many more production runs like the ones in the sample
The confidence interval reflects the uncertainty due to variability from one production run to another

Confidence interval statement

The interval does not reflect uncertainty due to other causes (e.g., future improvements in the process)

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Example (continued: 99%)

t = 3.250 for 2-sided 95% confidence with n = 10 From To

Using the 99% confidence level

X  tS X ! 68 .3  3.250 v 4.617 ! 53 .29

X  tS X ! 68 .3  3.250 v 4.617 ! 83 .31

99% confidence 95% confidence

50

60 Grams produced

70

S = 14.6

80

90

S X ! 4.617 X ! 68 .3

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Assumptions

Assumptions needed for validity of the Confidence Interval

1. Data are a RANDOM SAMPLE from the population of interest
(So that the sample can tell you about the population)

2. The sample average X is approximately NORMAL

Either the data are normal (check the histogram) Or the central limit theorem applies:
Large enough sample size n, distribution not too skewed

(So that the t table is technically appropriate)

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Interpretation
Population mean Q is fixed and unknown Confidence interval is random and known The probability is 0.95 that Q is between

Interpreting a Confidence Interval

X s tS X

X  tS X

and

X  tS X

We are 95% sure that (for example) Q is between 57.86 and 78.74 Lifetime average: about 95% of confidence intervals included Q.
You may never know which ones!
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Imagine Many Samples

Missed! Missed!

The interval you computed 22 23 The population mean Q = 23.29

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24

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Binomial Confidence Interval

From p  tS p to p  tS p for large n Example: X = 83 out of n = 268 interviewed said they would buy the product T = ? = percent of population who would have said that they would buy the product p = 83/268 = 0.3097, or 31.0%, is the sample proportion
An estimate of T

S p ! p(1  p ) / n ! 0.3097 v (1  0.3097 ) / 268 ! 0.0282

Indicates the uncertainty in p

Confidence interval: p s tS p ! 0.3097 s 1.960 v 0.0282 We are 95% sure that T is between 25.4% and 36.5%
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Slide 9-14 Fig 9.4.1

One-Sided Confidence Interval

Choose one:
We are 95% sure that the population mean is at least as large as X  tonesided S X Or: We are 95% sure that the population mean is not larger than X  tonesided S X

Where t is from the one-sided t table

95% one-sided

95% one-sided 90% two-sided 95% two-sided Standard error Sample average

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Example: Medical Production

n = 10 production runs X = 68.3 grams produced S = 14.6 grams S X ! S / n ! 14.6 / 10 ! 4.617

Production of a new drug for heart attack treatment

Yearly budget needs to know about

Q = mean production rate of the process

99% one-sided confidence interval calculation

t = 2.821 for 1-sided 99% confidence with n = 10

X  tone sided S X ! 68 .3  2.821 v 4.617 ! 55 .28 We are 99% sure that the mean production rate Q is at least 55.28
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