Chapter 8

Confidence Interval Estimation

Chapter Topics

• State Estimation Process

• Introduce Properties of Point Estimates
• Explain Confidence Interval Estimates
• Compute Confidence Interval Estimation for Population Mean
( known and unknown)
• Compute Confidence Interval Estimation for Population
Proportion
• Compute Sample Size
Statistical Methods

Statistical
Methods

Descriptive Inferential
Statistics Statistics

Hypothesis
Estimation
Testing
Inference Process

Estimates Population
& Tests

Sample
Statistics
X, Ps Sample

Population Parameters Are Estimated with Point Estimator

 Estimate Population with Sample
Parameter... Statistic
Mean µ X
Proportion p ps
2
Variance σ2 s
Differences µ1 − µ2 X1 − X 2

Confidence Interval Estimation Process

I am 95%
Population Random Sample confident
that µ is
Mean
Mean, µ, is between
unknown X = 50
40 & 60.

Confidence Interval Estimates

Provide range of values
– Takes into consideration variation in sample statistics from
sample to sample
– Is based on observation from one sample
– Gives information about closeness to unknown population
parameters
– Is stated in terms of level of confidence
Never 100% certain
Elements of Confidence Interval Estimation

A Probability That the Population Parameter

Falls Somewhere Within the Interval.
Sample
Confidence Interval Statistic

Confidence Confidence
Limit (Lower) Limit (Upper)
Confidence Intervals

X ± Z ⋅σ X = X ± Z ⋅ σ
n
σx_

X
µ − 2.58⋅σ X µ −1.645⋅σ X µ µ +1.645⋅σ X µ + 2.58⋅σ X
µ −1.96⋅σ X µ +1.96⋅σ X
90% Samples
95% Samples
99% Samples
Level of Confidence
• Probability that the unknown population parameter falls within
the interval
• Denoted (1 - =% )α level of confidence
α Is Probability That the Parameter Is Not Within the Interval
• The typical values are 99%, 95%, 90%. Corresponding Z values
are 2.58, 1.96, 1.645 (for two side problems).
Experiment: throw 2 dice, use mean ±2 to construct a 94.5%
confidence interval estimate for µ.
Interval and Level of Confidence

Sampling Distribution of the Mean

σX
µ − Zα / 2σ X α /2 µ + Zα / 2σ X
1−α α /2

Intervals X
extend from µX = µ
( 1 − α ) 100%
X − Zσ X of intervals
constructed
to contain µ ; α
X + Zσ X 100% do not.

Confidence Intervals
Factors Affecting Interval Width
1. Data Dispersion
Measured by σ
2. Sample Size

X  / n
3. Level of Confidence (1 - α)
Affects Z

Confidence Interval Estimates

Confidence
Intervals

Mean Proportion

σ Known σ Unknown

Confidence Interval Estimate For Mean (σ Known)

Assumptions
– Population standard deviation (σ) is known
– Population is normally distributed
– If not normal, can be approximated by normal distribution
(n ≥ 30)
Confidence Interval Estimate

σ σ
X − Zα / 2 ⋅ ≤ µ ≤ X + Zα / 2 ⋅
n n
Example :
Population is normally distributed with σ = 10. The mean of a random
sample of n = 25 is X = 50. Set up a 95% confidence interval estimate
for µ.

X − Zα ⋅ σ ≤ µ ≤ X + Zα ⋅ σ
2 n 2 n

50−1.96⋅ 10 ≤ µ ≤ 50+1.96⋅ 10
25 25
46.08 ≤ µ ≤ 53.92
Confidence Interval Estimate Mean (σ Unknown)
Assumptions
Population Standard Deviation (σ) Is Unknown
Population Must Be Normally Distributed
Use Student’s t Distribution
Confidence Interval Estimate:

S S
X − t α / 2, n −1 ⋅ ≤ µ ≤ X + t α / 2, n −1 ⋅
n n

Student’s t Table
Assume: n = 3
α/2 df = n - 1 = 2
Upper Tail Area α = .10
df .25 .10 α/2 =.05
.05
1 1.000 3.078 6.314

2 0.817 1.886 2.920 α/2 =.05

3 0.765 1.638 2.353

0 2.920 t
t Values
Confidence Interval Estimate for Proportion
Assumptions
Two categorical outcomes
Population follows binomial distribution
Normal approximation can be used if
n·p ≥ 5 and n·(1 - p) ≥ 5
Confidence interval estimate:

pS ( 1 − pS ) pS ( 1 − pS )
p S − Zα / 2 ≤ p ≤ pS + Zα / 2
n n
Example:
A random sample of 400 voters showed 32 preferred candidate A. Set
up a 95% confidence interval estimate for p.
Ps = 32/400 = .08
ps ⋅ (1 − ps ) ps ⋅ (1 − ps )
ps − Z α / 2 ⋅ ≤ p ≤ ps + Z α / 2 ⋅
n n
.08 ⋅ (1−.08 ) .08 ⋅ (1−.08)
.08 − 196
. ⋅ ≤ p ≤ .08 + 196
. ⋅
400 400
.053 ≤ p ≤ .107