SH1660

Estimation of Parameters 1

Estimation is a kind of inference where we estimate the value of a population based on the
information obtained by the sample.

Assumptions about the random variable !

We have a simple random sample of size " drawn from a population of # values.
The value of $, the population standard deviation, is known.
If the # distribution is normal, then our methods work for any sample size ".
If # has an unknown distribution, then we require a sample size " 30. However, if the #
distribution is distinctly skewed and definitely not mound-shaped, a sample size 50 or even
100 or higher may be necessary.
Point Estimate is a single number that gives an estimate of a population parameter.

Interval estimate is a range of scores likely to contain the estimated parameter.

Margin of Error is the magnitude of the difference between the sample point estimate and the true
population parameter value.

CONFIDENCE LEVEL

For a confidence level c, the critical value &' is the number such that the area under the standard normal
curve between &' and &' equals ), where ) is any value between 0 and 1 or is in the interval (0,1).

The area under the normal curve from &' to &' is the probability that the standardized normal variable
& lies in that interval. Thus, (&' & &' ) = ) .

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 SH1660

FINDING A CRITICAL VALUE

Use the Z table given before to find a number &..22 , such that 99% of the area under the standard
normal curve lies between &..22 and &..22 . That is, we will find &..22 , such that

4(&..22 < & < &..22 ) = 0.99

SOLUTION:
We learned previously how to find the z value when we were given an area between z and z. One of
the things we did was finding the corresponding area to the left of z. If A is the area between z and
(1 5)7
and z, then 2 is the area to the left of z. In our case, the area between z and z is 0.99. The
(1 0.99)7
corresponding area in the left tail is 2 = 0.005.

Next, we use our &-table to find the &-value corresponding to a left-tail area of 0.0050.

If we refer to our &-table, we can see that the desired area, 0.0050, is exactly halfway between the
areas corresponding to & = 2.58 and & = 2.57. Since the area is so close together, we can use the
more conservative z value 2.58 rather than interpolate. As a matter of fact, &..22 2.576.
Nevertheless, to two (2) decimal places, we use &..22 = 2.58 as the critical value for a confidence level
of ) = 0.99. We have
4(2.58 < & < 2.58) 0.99

Excerpt from z-Table

z .00 .07 .08 .09

-3.4 .0003 .0003 .0003 .0002

-2.5 .0062 .0051 .0049 .0048

.0050

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Confidence Interval
A c confidence interval for is an interval computed from sample data in such a way that c is the
probability of arriving at an interval containing the actual value of . In other words, c is the proportion
of confidence intervals, based on random samples of size n that contain .

Sample problem: Confidence Interval

Jogging is Reas hobby. It is part of her weekly exercise. She usually jogs 2 miles per week. The
standard deviation of her times is $ = 1.80 minutes. She has decided to record her times to jog 2
miles. She has a random sample of 90 of these times. For these 90 times, the mean was # = 15.60
minutes. Let @ be the mean jogging time for the whole distribution of Reas 2-mile running times.
Find a 0.95 confidence interval for @.

Confidence Interval: Solution and Interpretation

Answer:
$
A = &'
"
1.80
A = 1.96 C D
90
A 0.37

#A <@ <#+A

15.60 0.37 < @ < 15.60 + 0.37

15.23 < @ < 15.97

We therefore conclude that the interval from 15.23 minutes to 15.97 minutes with 95% confidence
level is the one that contains the population mean of jogging times for Rea.

Sample Situation

You are part of a statistical research project in your company. Your team has decided in advance on
the confidence level you wish to use and on the selection of the maximum margin of error A you want
for your project. After choosing, what is the next step you need to take?

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