Chapter 8 Estimation of the Mean and Proportion

8.1 Estimation: An Introduction

- The assignment of value(s) to a population parameter based on a value of the
corresponding sample statistic is called estimation.

- In inferential statistics, is called the true population mean and p is called the
true population proportion. There are many other population parameters, such as
the median, mode, variance, and standard deviation.

- The value(s) assigned to a population parameter based on the value of a sample
statistic is called an estimate. The sample statistic used to estimate a population
parameter is called an estimator.

Example of estimation:
Suppose the manager takes a sample of 40 new employees and finds that the mean time,
x , taken to learn this job for these employees is 5.5 hours. If he or she assigns this value
to the population mean, then 5.5 hours is called an estimate of . The sample statistic
used to estimate a population parameter is called an estimator. Thus, the sample mean,
x , is an estimator of the population mean, .


The estimation procedure involves the following steps:
1. Select a sample.
2. Collect the required information from the members of the sample.
3. Calculate the value of the sample statistic.
4. Assign value(s) to the corresponding population parameter.

Remarks:
The procedures to be learned in this chapter assume that the sample taken is a sample
random sample.



8.2 Point and Interval Estimates

- If we select a sample and compute the value of the sample statistics for this
sample, then this value gives the point estimate of the corresponding population
parameter.

- A point estimate is a single value (or point) used to approximate a population
parameter.

- Each sample selected from a population is expected to yield a different value of
the sample statistic. Thus, the value assigned to a population mean, , based on a
point estimate depends on which of the sample is drawn. Consequently, the point

estimate assigns a value to that almost always differs from the true value of the
population mean.

- In interval estimation, an interval that constructed around the point estimate, and
it is stated that this interval is likely to contain the true value of a population
parameter.

- Each interval is constructed with regard to a given confidence level and is called a
confidence interval. The confidence interval is given as:
Point estimate Margin of Error

- The confidence level associated with a confidence interval states how much
confidence we have that this interval contains the true population parameter. The
confidence level is denoted by % 100 ) 1 ( o



8.3 Estimation of a population mean: o known

Construct a Confidence Interval for population mean when the population standard
deviation is known. There are three possible cases:

Case 1: If the following three conditions are fulfilled:
1. The population standard deviation o is known
2. The sample size is small ( ie, ) 30 < n
3. The population from which the sample is selected is normally distributed,
then we use normal distribution to make the confidence interval for .

Case 2: If the following two conditions are fulfilled
1. The population standard deviation o is known
2. The sample size is large (ie, ) 30 > n ,
then we use normal distribution to make the confidence interval for .

Case 3: If the following three conditions are fulfilled:
1. The population standard deviation o is known
2. The sample size is small ( ie, ) 30 < n
3. The population from which the sample is selected is not normally distributed (or
its distribution is unknown).
then we use a nonparametric method to make the confidence interval for .







Confidence interval for (o is known)
- The % 100 ) 1 ( o confidence interval for under Cases I and II is

x
z x o
o 2

where
n
x
o
o = and
2
) (
2
o
o
= > P z Z
The value of
2 o
z can be obtained from the standard normal distribution table.













Example 8.1: A publishing company has just published a new college text book. Before
the company decides the price at which to sell this textbook, it wants to know the average
price of all such textbooks in the market. The research department at the company took a
sample of 25 comparable textbooks and collected information on their prices. This
information produced a mean price of $90.50 for this sample. It is known that the
standard deviation of the prices of all such textbooks is $7.50 and the population of such
prices is normal
a) What is the point estimate of the mean price of all such college textbooks?
b) Construct a 90% confidence interval for the mean price of all such college
textbooks.

Solution:
25 = n 50 . 90 = x 50 . 7 = o
The standard deviation of x is
50 . 1
25
50 . 7
= = =
n
x
o
o
a) The point estimate of mean price of all such college textbooks is $90.50.

b) o 1 =0.9 and ( ) 05 . 0 2 90 . 0 1 2 = = o .
From Table 5, 6449 . 1
2
=
o
z
The 90% confidence interval for is
x
z x o = ) 50 . 1 ( 6449 . 1 5 . 90
) 97 . 92 , 03 . 88 ( =

If we talk all possible sample of 25 such college textbooks each and construct a 90%
confidence interval for around each sample mean, we can expect that 90% of these
intervals will include and 10% will not.



Example 8.2: In a 2009 survey by I-Pension LLC, adults with annual household incomes
of $50,000 to $125,000 were asked about the average time they spend reviewing their
401(k) statements. Of the adults surveyed, about 72% said they spend less than 5
minutes, and 27% they spend 5 to 10 minutes to review their 401(k) statements (USA
TODAY, February 16, 2009). Suppose a random sample of 400 adults of all income levels
who have 401(k) accounts were recently asked about the times they spend reviewing their
401(k) statements. The sample produced a mean of 8 minutes. Assume that the standard
deviation for the mean time spent by all 401(k) account holders reviewing their 401(k)
statements.

Solution:




























The width of a confidence interval depends on:
1. The value of z , which depends on the confidence level
2. The sample size n

To decrease the width of a confidence interval:
1. Lower the confidence level
2. increase the sample size

8.4 Determining the sample size for the estimation of mean
- Sample size for estimating mean


2
2
(

=
E
z
n
o
o


where
2 o
z = critical z score based on the desired confidence interval
E = desired margin of error
o = population standard deviation

- When finding the sample size n, if the use of formula does not result in a whole
number, always increase the value of n to the next larger whole number.

Remark:
When o is not known, we can estimate o using these methods:
1. 4 range ~ o
2. Estimate the value of o by using the earlier result.

Example 8.3: An alumni association wants to estimate the mean debt of this years
college graduates. It is known that the population standard deviation of the debts of this
years college graduates is $11800. How large a sample should be selected so that the
estimate with a 99% confidence level is within $800 of the population mean?

Solution:



















8.5 Estimation of population mean: o not known

Construct a Confidence Interval for population mean when the population standard
deviation is not known. There are three possible cases:

Case 1: If the following three conditions are fulfilled:
1. The population standard deviation o is not known
2. The sample size is small ( ie, ) 30 < n
3. The population from which the sample is selected is normally distributed,
then we use t distribution to make the confidence interval for .

Case 2: If the following two conditions are fulfilled
1. The population standard deviation o is not known
2. The sample size is large (ie, ) 30 > n ,
then we use Normal distribution to make the confidence interval for .

Case 3: If the following three conditions are fulfilled:
1. The population standard deviation o is not known
2. The sample size is small ( ie, ) 30 < n
3. The population from which the sample is selected is not normally distributed (or
its distribution is unknown),
then we use a nonparametric method to make the confidence interval for .








Use the t distribution
to estimate
Use the normal
distribution to
estimate

The t distribution
The t distribution is a specific type of bell-shaped distribution with a lower height
and a wider spread than the standard normal distribution.
As the sample size becomes larger, the t distribution approaches the standard
normal distribution.
The t distribution has only one parameter, called the degrees of freedom (df) with
1 , = n df u .
The mean and standard deviation of the t distribution is equal to 0 and
) 2 /( df df .




Confidence interval for (o is unknown)
- The % 100 ) 1 ( o confidence interval for is
( ) x n
s t x
2 , 1 o

where
n
s
s
x
=
and
( ) ( )
( )
2
2 , 1 1
o
o
= > P
n n
t t
- The value of
1 n
t is obtained from the t distribution table for 1 = n df degrees
of freedom.











Example 8.4: Dr. Moore wanted to estimate the mean cholesterol level for all adult men
living in Hartford. He took a sample of 25 adult men from Hartford and found that the
mean cholesterol level for this sample is 186mg/dL with a standard deviation of
12mg/dL. Assume that the cholesterol levels for all adult men in the town are normally
distributed. Construct a 95% confidence interval for the population mean .

Solution:
25 = n 186 = x 12 = s
40 . 2
25
12
= = =
n
s
s
x

o 1 =0.95 and 025 . 0 2 = o .
From Table 10,
025 . 0 , 24
t = 2.064
The 95% confidence interval is
x
ts x = ) 4 . 2 ( 064 . 2 186
95 . 4 186 =
= (181.05, 190.95)






















Example 8.5: Sixty-four randomly selected adults who buy books for general reading
were asked how much they usually spend on books per year. The sample produced a
mean of $1450 and a standard deviation of $300 for such annual expenses. Determine a
99% confidence interval for the corresponding population mean.

Solution:









































8.6 Estimation of a population proportion: large samples

- In the case of a proportion, a sample is considered to be large if np and nq are
both greater than 5.
- If p and q are unknown, then p n and q n should each be greater than 5 for the
sample to be large.

- The % 100 ) 1 ( o confidence interval for p for large samples is
n
q p
z p


)

,

(
n
q p
z p
n
q p
z p +
The value of z used here is read from the standard normal distribution table for the
given confidence level.


Example 8.6: According to a survey conducted by Pew Research Center in June 2009,
44% of people aged 18 to 29 years said that religion is very important to them. Suppose
this result is based on a sample of 1000 people aged 18 to 29 years.
a) What is the point estimate of the population proportion?
b) Find, with a 99% confidence level, the percentage of all adult Americans who
frequently have symptoms of sleep problems such as frequent waking during the
night or snoring.























8.7 Determining the sample size for the estimation of proportion

- Sample size for estimating proportion p,

known not is p
E
z
n
known is p
E
q p z
n

25 . 0

2
2
2
2
2
2
o
o
=
=

- Note that 0.25 is the largest value of q p .


Example 8.7: Lombard Electronics Company has just installed a new machine that
makes a part that is used in clocks. The company wants to estimate the proportion of
these parts produced by this machine that are defective. The company manager wants this
estimate to be within 0.02 f the population proportion for a 95% confidence level. What
is the most conservative estimate of the sample size that will limit the margin of error to
within 0.02 of the population proportion?

Solution:




























Example 8.8: Consider Example 8.7 again. Suppose a preliminary sample of 200 parts
produced by this machine showed that 7% of them are defective. How large a sample
should the company select so that the 95% confidence interval for p is within 0.02 of the
population proportion?

Solution: