CHAPTER 3

STATISTICAL ESTIMATION
o The sampling distribution of the mean shows how far sample means could
be from a known population mean.
o Similarly, the sampling distribution of the proportion shows how far
sample proportions could be from a known population proportion.
o In estimation, our aim is to determine how far an unknown population
mean could be from the mean of a simple random sample selected from
that population; or how far an unknown population proportion could be
from a sample proportion.
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 Basic concepts:
Estimation: is the process of using statistics as estimates of parameters.

Estimator- refers to any sample statistic that is used to estimate a population parameter.
E.g. x for  p for p.
Estimate- is a specific numerical value of our estimator. E.g. = 9, 2, 5

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Important Properties of Estimators

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3. Consistency:
A statistic is a consistent estimator of a population
parameter if, as the sample size increases, it becomes
almost certain that the value of the statistic comes very
close to the value of the population parameter.
4. Sufficiency:
A sufficient statistic is an estimator that utilizes all the
information a sample contains about the parameter to be
estimated. For example, the sample mean is a sufficient
estimator of the population mean.

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Types of Estimates
1. A point estimate: -
Is a single number that is used to estimate an
unknown population parameter.
The most important point estimates (given that they are single values) are:

o Sample mean x for population mean 

o Sample proportion p for population proportion p

o Sample variance s 2 for population variance  2 and

o Sample standard deviation s for population standard deviation 

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2. An interval estimate
 It is a range of values used to estimate a population parameter.
 It describes the range of values with in which a parameter might lie.
Example:
Suppose we have the sample 10, 20, 30, 40 and 50 selected randomly from a population whose

mean  is unknown.

 xi 10  20  30  40  50
The sample Mean, x    30 is a point estimate of  .
n 5

On the other hand, if we state that the mean,  is between x  10 , the range of values from 20 (30-

10) to 40 (30+10) is an interval estimate.

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Interval estimation for population mean μ

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Cont’d…..

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 Confidence interval for population mean is affected by
1)The population distribution: whether the population is normally
distributed or not.
2) The standard deviation: whether it is known or not.
3) The sample size: whether n is large or not.

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10
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Selected Proportions of Area under the Normal Curve
z (the number of standard deviation units Proportion of area in the interval
from the mean) μ  Zσ
n
1.645 0.90
1.96 0.95
2.58 0.99

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 α σ 500
Ans(a)  X  Z 2  8,900  1.96
n 15
500
 8,900  1.96( )  8,900  253  8,647 to 9,153
3.87
Ans(b)  8,900  1.645(129. 20)  8,900  213  8,687 to 9,113 hr

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 α σ 500
Ans  X  Z 2  8,900  1.96
n 35
500
 8,900  1.96( )  8,900  1.96(84.46 )  8,734 to 9,066
5.92

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µ  X  Zα 2 s
n

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 s 14
σx    2.56
n 30

μ  X  Z2 σ
n
 180  1.96x2.56  $174.98 to $185.02

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17
 S N n
Solution : S x  *
n N 1
8 800  50
i. = *  1.10
50 800  1

ii. α = 1 – C = 1- 0.98 = 0.02

 2 = 0.02/2 = 0.01
iii. Z  / 2  Z 0.01  2.33
N  n
iv.   X  Z /2
s *
n N 1
= 34.3 ± 2.33(1.10)
= 34.3 ± 2.56
31.74 ≤  ≤ 36.86
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If the sample size is small (n<30), we can develop an interval estimate of a
population mean only if the population has a normal probability distribution.
If the sample standard deviation s is used as an estimator of the population
standard deviation and if the population has a normal distribution, interval
estimation of the population mean can be based up on a probability
distribution known as t-distribution.

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 X   X  
t  
SX s
n
This formula is essentially the same as the z-formula, but the distribution table values are
not. The confidence interval to estimate mean becomes:

  X  t / 2 ,v s
n
Where: X = sample mean

α=1–C

ν = n – 1 (degrees of freedom)

s = sample standard deviation

n = sample size

 = unknown population mean

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Steps:
i. Calculate degrees of freedom (v=n-1) and sample standard error of the mean.
ii. Compute  2

iii. Look up t / 2 ,V
iv. Construct the confidence interval
A. Interpret results

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22
Solution:
S 500
i. SX  = = 129.09 ν = n – 1 = 15-1 = 14
n 15
ii. α = 1 – C = 1- 0.95 = 0.05
 2 = 0.05/2 = 0.025
t  2 , v  t 0.025,14  2.145
iii.   X  t / 2 ,v s
n
= 8,900± 2.145(129.09)
= 8,900 ± 276.89
= 8,623 ≤  ≤ 9,176
The confidence interval is wider than the one in the above example 1 23
B. Determine the 90 percent confidence interval for estimating the population
mean and compare this interval with the answer to example 1 above
Ans: 8,672to 9,128 hr
Example: 2
Sales personnel for X Company are required to submit weekly reports listing
customer contacts made during the week. A sample of 61 weekly contact
reports showed a mean of 22.4 customer contacts per week for the sales
personnel. The sample standard deviation was 5 contacts.
Required
A) Develop a 95% confidence interval estimate for the mean number of
weekly customer contacts for the population of sales personnel.
Given
n= 61 weekly contact reports = 22.4 contacts
s = 5 contacts C = 0.95 X
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 Solution
S 5
i. SX  = = 0.64
n 61
ii. α = 1 – C = 1- 0.95 = 0.05

 2 = 0.05/2 = 0.025

iii. Z  / 2  Z 0.025  1.96

iv.   X  Z / 2 s
n
= 22.4 ± 1.96(0.64)

= 22.4 ± 1.25

21.15 ≤  ≤ 23.65 25
B) Assume that the population of weekly contact data has a normal
distribution. Use the t distribution to develop a 95% confidence
interval for the mean number of weekly customer contacts.
C) Compare your answer for parts (a) and (b).
What do you conclude from your results?
Given

n= 61 weekly contact reports X = 22.4 contacts

S = 5 contacts C = 0.95

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 S 5
i. SX  = = 0.64
n 61
ν = n – 1 = 61 – 1 = 60

ii. α = 1 – C = 1- 0.95 = 0.05

 2 = 0.05/2 = 0.025

iii. t / 2,v  t 0.025, 60  2.00

iv.   X  t / 2 ,v s
n
= 22.4 ± 2.00 (0.64)

= 22.4 ± 1.28

21.12 ≤  ≤ 23.68
As the sample size increases, the t-distribution & z distribution approximately
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be equal
 Interval Estimation of the Population Proportion
PP
PP
Z  
p Pq
n
P pZ p q
n
Since Z can assume both positive and negative values, it becomes

P pZ pq  pZ Sp
 /2 n  /2
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Example 1:
Recently, a study of 87 randomly selected companies with telemarketing
operation was completed. The study revealed that 39% of the sampled
companies had used telemarketing to assist them in order processing. Using
this information estimate the population proportion of telemarketing
companies who use their telemarketing operation to assist them in order
processing taking a 95% confidence level.
Given:
n= 87 p = 0.39
q = 0.61 C = 0.95

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Solution:
i. Sp  pq = 0.61 * 0.39 = 0.0523
n 87
ii. α = 1 – C = 1- 0.95 = 0.05
 2 = 0.05/2 = 0.025
iii. Z  / 2  Z 0.025  1.96
iv. P  p  Z / 2 S p
= 0.39 ± 1.96(0.0523)
= 0.39 ± 0.1025
0.2875 ≤ P ≤ 0.4925
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Example 2:
A marketing research firm contacts a random sample of 100 students in a university and
finds that a sample proportion of 0.40 prefer Casio calculator manufactured by the
client firm to all other brands. The 95 percent confidence interval for the proportion of
all students in the university who prefer the client firm’s Casio calculator is determined
as follows:
pq 0.40x0.60 0.24
S     0.0024  0.05
p n 100 100

pZ S  0.40  1.96(0.05)

α/2 p
 0.40  0.098  0.40  0.10
Ans: 0.30 to 0.50
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 p?
0.73  0.87
Pointes estimate   0.80 or
2
0. 73  p  Z  / 2s p

0. 87  p  Z  / 2s p

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B.
P  p  Z / 2 S p
0.87 = 0.8+ Z / 2 S p

0.07 = Z / 2 0.8 * 0.2

400
0.07 = Z  / 2 * 0.02
3.50 = Z  / 2
(P/Z=3.5) = 0.4997
C = 0.4997*2
= 99.94 %
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Example 4:
A random sample of 400 faculty members at HU contained 120 people
who believed that the University should improve its library service. On
the basis of this sample information, an analyst calculated the confidence
interval (0.25, 0.35) for the population proportion of faculty members
favoring improvement. What is the level of confidence of this interval?
Given:
n= 400 X = 120
Interval estimate 0.25 ≤ P ≤ 0.35
Required: C =?

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Solution:

P  p  Z / 2 S p
0.25 = 0.30 - Z / 2 S p

0.05 = Z / 2 0.7 * 0.3

400
0.05 = Z  / 2 * 0.023
2.17 = Z  / 2
(P/Z=2.17) = 0.485
C = 0.485*2
= 97%
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 SAMPLE SIZE DETERMINATION
o The reason for taking a sample from a population is that it would
be too costly to gather data for the whole population.
o But collecting sample data also costs money; and the larger the
sample, the higher the cost.
o To hold cost down, we want to use as small a sample as possible.
o On the other hand, we want a sample to be large enough to provide
“good” approximation/estimates of population parameters.
o Consequently, the question is “How large should the sample be?”

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The answer depends on three factors:
1.How precise (narrow) do we want a confidence interval to be?
2.How confident do we want to be that the interval estimate is
correct?
3.How variable is the population being sampled?

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Sample size for estimating population mean
The confidence interval for mean is

  X  Z / 2 
n

From the above expression Z / 2 is called error of estimation (e). So
n
σ
e  Zα 2
n

 Zα 2 σ 2
n μ



 e 
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e = Birr 1.00 σ = Birr 6.25 C = 0.95
Z  / 2  Z 0.025  1.96

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40
 Sample size for estimating population proportion, p.
pq
The confidence interval for p is P  p  Z α/2
n
pq
The expression Z α/2 is called the error term (e).
n

pq
That is, e  Z / 2
n
pq
Squaring both sides e 2
 Z / 2
2

n
2
Z  / 2 pq  Z / 2 
2

then np  np    pq
e 2
 e 
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 EXERCISE
Determine the sample size necessary to estimate p for the following
information.
a)e = .02, p is approximately 0.40, and confidence level is 96%
b)e is to be within .04, p is unknown, & confidence level is 95%
c)e is to be within 5%, p is approximately 55%, and confidence level is 90%
d)e is to be no more than .01, p is unknown, and confidence level is 99%
Answer
a. 2522 b. 601 C. 268 D. 16,577

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END OF CHAPTER
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