INTRODUCTORY STATISTICS

Chapter 8 Confidence Intervals

Introduction
Suppose you were trying to determine the mean rent of a two-bedroom apartment
in your town. You might look in the classified section of the newspaper, write down
several rents listed, and average them together. You would have obtained a point
estimate of the true mean.

We use sample data to make generalizations about an unknown population. This

part of statistics is called inferential statistics. The sample data help us to make an
estimate of a population parameter. We realize that the point estimate is most
likely not the exact value of the population parameter, but close to it. After
calculating point estimates, we construct interval estimates, called confidence
intervals.

3
If you worked in the marketing department of an entertainment company, you
might be interested in the mean number of songs a consumer downloads a month
from iTunes. If so, you could conduct a survey and calculate the sample mean, ",̅
and the sample standard deviation, #. You would use "̅ to estimate the population
mean and s to estimate the population standard deviation. The sample mean, "̅ , is
the point estimate for the population mean, $. The sample standard deviation, s, is
the point estimate for the population standard deviation, σ. Each of "̅ and # is
called a statistic.

A confidence interval is another type of estimate but, instead of being just one
number, it is an interval of numbers. It provides a range of reasonable values in
which we expect the population parameter to fall. There is no guarantee that a
given confidence interval does capture the parameter, but there is a predictable
probability of success.

4
8.1
A Single Population Mean Using
the Normal Distribution
The Level of Confidence

Statisticians assign a level of confidence to the interval estimates they produce.

The confidence coefficient refers to the probability of correctly including the

population parameter being estimated in the interval that is produced. This
probability is designated 1 − '.

The word confidence is used because the probability value shows the likelihood
that the computed spread of values will include the population mean. That is the
higher level of probability associated with an interval estimator, the more
confidence there is that the method of estimation will produce a result that
contains the population mean.

6
In practice, the confidence level is generally identified before estimation. Thus, a 90
percent level of confidence might be specified, and this means that an analyst
wants to be 90 percent sure that the population mean is included in the interval.

The level of confidence is the confidence coefficient expressed as a percent and

equals 1 − ' ×100 percent.

What is the appropriate z value to use to construct an interval estimate in which we

can have 90 percent confidence that it will contain the population mean?
The answer is the z value that separates the middle 90 percent of the area under
the normal curve from the remaining 10 percent.

0.9

o og
Is

7
Confidence Interval
Now, we are ready to give a general form for an interval estimate of $.

The chance of error is labelled ' and in decimal form equals 1 minus the confidence
coefficient. For example, if the confidence coefficient is 0.95 (or the confidence
level is 95 percent), then ' is 1 − 0.95 = 0.05. To have a confidence coefficient of
1 − ' , the total error is divided evenly between the chance of overestimation and
the chance of underestimation, and we would have an area of !⁄" in each tail of the
normal distribution. Thus, an interval estimate for $ can be constructed in the
following manner: error c I

µMµnof
"̅ − /! 0$̅ < $ < "̅ + /! 0$̅
" "
E2 EtZ 6

Where:
"̅ =the sample mean p
0$̅ = the standard error of the mean
!
/! = the / value such that 3 / < /! =
E
" " "
[or, such that 3 −/! < / < /! = 1 − ']
" "
Z
E 8
Commonly Used Confidence Levels and Confidence Intervals

Confidence level Z value General Form of Confidence Interval

90 1.64 "̅ − 1.64 ("̅ < * < "̅ + 1.64 ("̅

95 1.96 "̅ − 1.96 ("̅ < * < "̅ + 1.96 ("̅

99 2.58 "̅ − 2.58 ("̅ < * < "̅ + 2.58 ("̅

99 i

O99
p

em 9
Writing an Interpretation

The interpretation should clearly state the confidence level, explain what population
parameter is being estimated (here, a population mean), and state the confidence
interval (both endpoints).
"We estimate with ___% confidence that the true population mean (include the
context of the problem) is between ___ and ___ (include appropriate units)."

10
 Example
A manager at the Papyrus Paper Company wants to estimate the mean time required
for a new machine to produce a ream of paper. A random sample of 36 reams
required an average machine time of 1.5 minutes for each ream. Assuming 0 = 0.3
minute,
a) Construct an interval estimate with a confidence level of 95 percent. b
The population
standard
36 deviati
C Ii n is known
F I 5
Zz by Lu LI
I 12 be
0
G 0 05
1 g t.gg o os µ 41.5 4.96 0 05

Level of confidence is 95.8 1.402 S M T l 598

0.95 0.025
0 95 Interpretation
2 We estimate with 95 confident that the
true population meantime required for the
new machine to produce a ream of paper
20.025
Zo025 is between 1.402 and 1.598 minutes
11
 b) Construct an interval estimate with a confidence level of 80 percent.

Confidence level is 80

C I
0.8
1 0 4M E t Zo ol 6T
20.82 21 01 I Zoo 6
I 51 1.283005
i s u 28 co os but
Z
0.1
Zo
1 436 L M T l 564

Z 1.28 Interpret
0I
b We estimate with 807 confident

but A ream of paper is between 1.436

we use its absolute wave
and I 564 minutes
only when we want to construct C I 12
Homework
If it is known that 0 = 3.81, the population is normally distributed, and the sample
statistics are "̅ = 62.7 and : = 100,
a. Construct a 99 percent confidence interval for estimating the value of $.
b. Construct an 85 percent confidence interval for estimating the value of $.

(No need to hand in)

13