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Confidence Intervals and Confidence Levels

A confidence interval an estimated range of values that is likely to include the population
parameter being calculated. For instance, instead of estimating the mean age of a certain population
to be a single value like 25.5 years, we could say that the mean age is somewhere between 23 and
28. This confidence interval contains the single value we are estimating, yet it gives us a wider net
to be right.

When we use confidence intervals to estimate a number or population parameter, we can also
estimate just how accurate our estimate is. The likelihood that our confidence interval will
contain the population parameter is called the confidence level. For example, how confident
are we that our confidence interval of 23 – 28 years of age contains the mean age of our population?
If this range of ages was calculated with a 95 percent confidence level, we could say that we are
95 percent confident that the mean age of our population is between 23 and 28 years. Or, the
chances are 95 out of 100 that the mean age of the population falls between 23 and 28 years.

Confidence levels can be constructed for any level of confidence, however, the most commonly
used are 90 percent, 95 percent, and 99 percent. The larger the confidence level is, the narrower
the confidence interval. For instance, when we used a 95 percent confidence level, our confidence
interval was 23 – 28 years of age.

If we use a 90 percent confidence level to calculate the confidence level for the mean age of our
population, our confidence interval might be 25 – 26 years of age. Conversely, if we use a 99
percent confidence level, our confidence interval might be 21 – 30 years of age.

Note:
1. The area under the curve excluding the tails, 1 − 𝛼, is called the confidence coefficient.
2. The combined area in both tails is called the error probability,
3. The confidence coefficient multiplied by 100, expressed as a percentage is the confidence
level

Trial Questions
1. An economist wants to estimate the average amount in checking accounts at banks in a
given region. A random sample of 100 accounts gives 𝑥̅ =\$357.60 and s=\$140.00. Give a
95% confidence interval for 𝜇, the average amount in any checking account at a bank in
the given region
2. A large drugstore wants to estimate average weekly sales for a brand of soap. A random
sample of 13 weeks give the following figures: 123, 110, 95, 120, 87, 89, 100, 105, 98, 88,
75, 125, 101. Give a 95% confidence interval for the average weekly sales.
3.