Introduction to Probability

and Statistics
By: Robert J. Beaver • Barbara M. Beaver • William Mendenhall
14th edition (2013)

Chapter 8
Large-Sample Estimation
Introduction
• Populations are described by their probability
distributions and parameters.
• For quantitative populations, the location
and shape are described by m and s.
• For a binomial populations, the location and
shape are determined by p.
• If the values of parameters are unknown, we
make inferences about them using sample
information.
 Types of Inference
• Estimation:
• Estimating or predicting the value of the
parameter
• “What is (are) the most likely values of m or p?”
• Hypothesis Testing:
• Deciding about the value of a parameter based
on some preconceived idea.
• “Did the sample come from a population with m
= 5 or p = 0.2?”
Types of Inference
• Examples:
• A consumer wants to estimate the average
price of similar homes in her city before
putting her home on the market.
Estimation: Estimate m, the average home price.

–A manufacturer wants to know if a new

type of steel is more resistant to high
temperatures than an old type was.
Hypothesis test: Is the new average resistance, mN equal to the old
average resistance, mO?
Types of Inference
• Whether you are estimating parameters or testing
hypotheses, statistical methods are important
because they provide:
• Methods for making the inference
• A numerical measure of the goodness or reliability of the
inference
 Definitions
• An estimator is a rule, usually a formula, that tells
you how to calculate the estimate based on the
sample.
• Point estimation: A single number is calculated to
estimate the parameter.
• Interval estimation: Two numbers are calculated to create
an interval within which the parameter is expected to lie.
Properties of
Point Estimators
• Since an estimator is calculated from sample values, it
varies from sample to sample according to its
sampling distribution.
• An estimator is unbiased if the mean of its sampling
distribution equals the parameter of interest.
• It does not systematically overestimate or
underestimate the target parameter.
Properties of
Point Estimators
• Of all the unbiased estimators, we prefer the
estimator whose sampling distribution has the
smallest spread or variability.
Measuring the Goodness
of an Estimator
• The distance between an estimate and the true value
of the parameter is the error of estimation.

The distance between the bullet and

the bull’s-eye.

• In this chapter, the sample sizes are large,

so that our unbiased estimators will have
normal distributions. Because of the Central
Limit Theorem.
The Margin of Error
• For unbiased estimators with normal sampling
distributions, 95% of all point estimates will lie
within 1.96 standard deviations of the parameter of
interest.

•Margin of error: The maximum error of

estimation, calculated as
1.96  std error of the estimator
Estimating Means
and Proportions
•For a quantitative population,
Point estimator of population mean μ : x
s
Margin of error (n  30) :  1.96
n
•For a binomial population,
Point estimator of population proportion p : pˆ = x/n
pˆ qˆ
Margin of error (n  30) :  1.96
n
 Example
• A homeowner randomly samples 64 homes
similar to her own and finds that the average
selling price is $252,000 with a standard
deviation of $15,000. Estimate the average
selling price for all similar homes in the city.
Point estimator of μ: x = 252, 000
s 15, 000
Margin of error :  1.96 = 1.96 = 3675
n 64
 Example
A quality control technician wants to estimate
the proportion of soda cans that are underfilled.
He randomly samples 200 cans of soda and
finds 10 underfilled cans.
n = 200 p = proportion of underfilled cans
Point estimator of p : pˆ = x/n = 10 / 200 = .05
pˆ qˆ (.05)(.95)
Margin of error :  1.96 = 1.96 = .03
n 200
 Interval Estimation
• Create an interval (a, b) so that you are fairly
sure that the parameter lies between these two
values.
• “Fairly sure” is means “with high probability”,
measured using the confidence coefficient, 1-a.
Usually, 1-a = .90, .95, .98, .99
• Suppose 1-a = .95 and
that the estimator has a
normal distribution.
Parameter  1.96SE
 Interval Estimation
• Since we don’t know the value of the parameter,
consider Estimator  1.96SE which has a variable
center.

Worked
Worked
Worked
Failed

• Only if the estimator falls in the tail areas will

the interval fail to enclose the parameter. This
happens only 5% of the time.
 To Change the
Confidence Level
• To change to a general confidence level, 1-a,
pick a value of z that puts area 1-a in the center
of the z distribution. Tail area z
a/2
.05 1.645
.025 1.96
.01 2.33
.005 2.58

100(1-a)% Confidence Interval: Estimator  za/2SE

Confidence Intervals
for Means and Proportions
•For a quantitative population,
Confidenceintervalfor a population mean μ :
s
x  za / 2
n

•For a binomial population,

Confidenceintervalfor a population proportion p :
pˆ qˆ
pˆ  za / 2
n
 Example
• A random sample of n = 50 males showed a
mean average daily intake of dairy products
equal to 756 grams with a standard deviation of
35 grams. Find a 95% confidence interval for the
population average m.
s 35
x  1.96  756  1.96  756  9.70
n 50
or 746.30  m  765.70 grams.
 Example
• Find a 99% confidence interval for m, the
population average daily intake of dairy products
for men.
s 35
x  2.58  756  2.58  756  12.77
n 50
or 743.23  m  768.77 grams.

The interval must be wider to provide for the

increased confidence that is does indeed
enclose the true value of m.
 Example
• Of a random sample of n = 150 college students,
104 of the students said that they had played on a
soccer team during their K-12 years. Estimate the
porportion of college students who played soccer
in their youth with a 98% confidence interval.

pˆ qˆ 104 .69(.31)
pˆ  2.33   2.33
n 150 150
 .69  .09 or .60  p  .78.
One Sided
Confidence Bounds
• Confidence intervals are by their nature two-
sided since they produce upper and lower
bounds for the parameter.
• One-sided bounds can be constructed simply
by using a value of z that puts a rather than
a/2 in the tail of the z distribution.
LCB : Estimator - za  (Std Error of Estimator)
UCB : Estimator  za  (Std Error of Estimator)
Choosing the Sample Size
• The total amount of relevant information in a
sample is controlled by two factors:
- The sampling plan or experimental design:
the procedure for collecting the information
- The sample size n: the amount of information
you collect.
• In a statistical estimation problem, the
accuracy of the estimation is measured by the
margin of error or the width of the confidence
interval.
 Choosing the Sample Size
1. Determine the size of the margin of error, B, that you
are willing to tolerate.
2. Choose the sample size by solving for n in the inequality:
1.96 SE  B, where SE is a function of the sample size n.
3. For quantitative populations, estimate the population
standard deviation using a previously calculated value of
s or the range approximation s  Range / 4.
4. For binomial populations, use the conservative
approach and approximate p using the value p = .5.
 Example
A producer of PVC pipe wants to survey
wholesalers who buy his product in order to
estimate the proportion who plan to increase their
purchases next year. What sample size is required if
he wants his estimate to be within .04 of the actual
proportion with probability equal to .95?

pq .5(.5)
1.96  .04  1.96  .04
n n
1.96 .5(.5)  n  24.52 = 600.25
 n = 24.5
.04
He should survey at least 601
wholesalers.
Key Concepts
I. Types of Estimators
1. Point estimator: a single number is calculated to estimate
the population parameter.
2. Interval estimator: two numbers are calculated to form an
interval that contains the parameter.
II. Properties of Good Estimators
1. Unbiased: the average value of the estimator equals the
parameter to be estimated.
2. Minimum variance: of all the unbiased estimators, the best
estimator has a sampling distribution with the smallest
standard error.
3. The margin of error measures the maximum distance
between the estimator and the true value of the parameter.
 Key Concepts
III. Large-Sample Point Estimators
To estimate one of four population parameters when
the sample sizes are large, use the following point
estimators with the appropriate margins of error.
Key Concepts
IV. Large-Sample Interval Estimators
To estimate one of four population parameters when
the sample sizes are large, use the following interval
estimators.
Key Concepts
1. All values in the interval are possible values for the
unknown population parameter.
2. Any values outside the interval are unlikely to be the value
of the unknown parameter.
3. To compare two population means or proportions, look for
the value 0 in the confidence interval. If 0 is in the interval,
it is possible that the two population means or proportions
are equal, and you should not declare a difference. If 0 is
not in the interval, it is unlikely that the two means or
proportions are equal, and you can confidently declare a
difference.
V. One-Sided Confidence Bounds
Use either the upper () or lower (-) two-sided bound,
with the critical value of z changed from za / 2 to za.