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Large-Sample Confidence Interval for

a Population Proportion

Fall 2016 MGT 205


Estimating a Population Proportion

A food-products company conducted a market study by


randomly sampling and interviewing 1,000 customers to
determine which brand of breakfast cereal they prefer.
Suppose 313 consumers were found to prefer the
company’s brand. How would you estimate the true
fraction of all consumers who prefer the company’s
cereal brand?

Fall 2016 MGT 205


Estimating Population Proportions
• The career services director at Southern Technical
Institute reports that 80% of its graduates enter the
job market in a position related to their field of
study.
• A company representative claims that 45 % of
Burger King Sales are made at the drive-through
window.
• A survey of homes in the Chicago are indicated that
85 % of the new construction had central air
conditioning.
Fall 2016 MGT 205
Conditions Required for a Valid Large-
Sample Confidence Interval for p

1. A random sample is selected from the target population.

Fall 2016 MGT 205


Example 5- A large-sample
confidence interval for p
You are a production manager
for a newspaper. You want to
find the % defective. Of 200
newspapers, 35 had defects.
What is the 90% confidence
interval estimate of the
population proportion
defective?

Fall 2016 MGT 205


Fall 2016 MGT 205
Example 6- Applying the Adjusted
Confidence Interval
According to True Odds: How Risk Affects Your Everyday
Life, the probability of being the victim of a violent
crime is less than 0.01. Suppose that in a random
sample of 200 Americans, 3 were victims of a violent
crime. Estimate the true proportion of Americans who
were victims of a violent crime using a 95% confidence
interval?

Fall 2016 MGT 205


Determining the Sample Size

Fall 2016 MGT 205


Margin of Sampling Error

In general, we express the reliability associated with a


confidence interval for the population mean µ by
specifying the margin of sampling error within which
we want to estimate µ with 100(1 – α)% confidence.
The sampling error (denoted SE), then, is equal to the
half-width of the confidence interval.

Fall 2016 MGT 205


Margin of Sampling Error

Fall 2016 MGT 205


Relationship between sample size
and width of the CI

Fall 2016 MGT 205


Sample Size Example
What sample size is needed to be 90% confident
the mean is within  5? A pilot study suggested
that the standard deviation is 45.

Fall 2016 MGT 205


Sample Size Determination for
100(1 – ) % Confidence Interval
for p
In order to estimate p with a margin of error SE and
with 100(1 – )% confidence, the required sample size
is found by solving the following equation for n:

The solution for n can be written as follows:

Note: Always round n up to the nearest integer value.


Fall 2016 MGT 205
Example 7- Sample size for
estimating p
A cellular manufacturer that entered the postregulation market
too quickly has an initial problem with excessive customer
complaints and consequent returns of the cell phones for repair
or replacement. The manufacturer wants to determine the
magnitude of the problem in order to estimate its warrant
liability. How many cellular telephones should the company
randomly sample from its warehouse and check in order to
estimate the fraction defective, p, to within 0.01 with 90 %
confidence?

Fall 2016 MGT 205


Example 8
You work in Human Resources at
Merrill Lynch. You plan to survey
employees to find their average
medical expenses. You want to
be 95% confident that the
sample mean is within ± $50.
A pilot study showed that  was
about $400. What sample size
do you use?

Fall 2016 MGT 205


Finite Population Correction for
Simple Random Sample

Fall 2016 MGT 205


Finite Population Correction Factor

In some sampling situations, the sample size n may


represent 5% or perhaps 10% of the total number N of
sampling units in the population. When the sample size
is large relative to the number of measurements in the
population (see the next slide), the standard errors of
the estimators of µ and p should be multiplied by a
finite population correction factor.

Fall 2016 MGT 205


Rule of Thumb for Finite Population
Correction Factor

Use the finite population correction factor when


n/N > .05.

Fall 2016 MGT 205


Simple Random Sampling with
Finite Population of Size N
Estimation of the Population Mean

Estimated standard error:

s N-n
ŝ x =
n N

Approximate 95% confidence interval: x ± 2ŝ x

Fall 2016 MGT 205


Simple Random Sampling with
Finite Population of Size N
Estimation of the Population Proportion

Estimated standard error:

p̂(1 - p̂) N - n
ŝ p̂ =
n N

Approximate 95% confidence interval: p̂ ± 2ŝ p̂

Fall 2016 MGT 205


Example 9- Applying the Finite
Population Correction Factor
A specialty manufacturer wants to purchase remnants of sheet
aluminum foil. The foil, all of which is the same thickness, is
stored on 1,462 rolls, each containing a varying amount of foil.
To obtain an estimate of the total number of square feet of foil
on all the rolls, the manufacturer randomly sampled 100 rolls
and measured the number of square feet on each roll. The
sample mean was 47.4, and the sample standard deviation was
12.4.
a)Find an approximate 95% confidence interval for the mean
amount of foil on the 1,462 rolls.
b)Estimate the total number of square feet of foil on all the rolls
by multiplying the confidence interval by 1,462. Interpret the
result.
Fall 2016 MGT 205
Key Ideas
Population Parameters, Estimators, and
Standard Errors
Confidence Interval: An interval that encloses an
unknown population parameter with a certain level of
confidence (1 – )

Confidence Coefficient: The probability (1 – ) that a


randomly selected confidence interval encloses the
true value of the population parameter.
Fall 2016 MGT 205
Key Ideas
Key Words for Identifying the Target
Parameter

µ – Mean, Average

p – Proportion, Fraction, Percentage, Rate, Probability

Fall 2016 MGT 205


Key Ideas
Commonly Used z-Values for a Large-Sample
Confidence Interval

90% CI: (1 – ) = .10 z.05 = 1.645

95% CI: (1 – ) = .05 z.025 = 1.96

99% CI: (1 – ) = .01 z.005 = 2.575

Fall 2016 MGT 205


Key Ideas
Determining the Sample Size n

( ) (s ) ( SE )
2
Estimating µ: n = za 2 2 2

( ) ( pq) (SE )
2
Estimating p: n = za 2
2

Fall 2016 MGT 205


Key Ideas
Finite Population Correction Factor

Required when n/N > .05

Fall 2016 MGT 205


Key Ideas
Illustrating the Notion of “95% Confidence”

Fall 2016 MGT 205

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