HARAMBEE UNIVERSITY

FACULTY OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT

Course Title: Statistics for Management II

Course Code: MGMT 2042
Credit Hours: 3
CHAPTER-ONE
1.1 Sampling and Sampling Distributions
Objectives:
After completing this chapter, you should be able to;
-Understand sampling and sampling distributions.
-Identify different types of sampling techniques.
-Compute sampling distributions of the means and proportions
1.1 SAM PLING THEORY
1.1.1. Basic Definitions
Sampling: is a technique that is used to select a sample out of a population. It is a process of
gathering information from part of the population.
Common terminologies of sampling
Population (universe) – it is a collection of items or individuals chosen for a
study. The characteristic of a population is known as parameter.
Sample – it is a subset of a population. It is some representative group of the studied population.
The characteristic of a sample is known as statistic.
Census – it is a complete enumeration or measurement of every individual or item
in the population. It is gathering information from all elements of a population.

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Sampling error – it is the difference between the population parameter and the
observed probability sample statistic.
Non-sampling error – it is an error that occurs in the collection, recording and computation of
data.
Sampling with replacement – a sampling procedure in which sample items are returned to the
population; as a result, there is a possibility of their being chosen again in the sample.
Sampling without replacement – a sampling procedure in which sample items are not returned
to the population; as a result, none of these can be selected in the sample again.
1.1.2. The need for samples
The purpose of inferential statistics is to find out something about the population based on a
sample. In the next section we will discuss about the major reasons for sampling.
Some reasons of sampling are;
i. To contact the whole population would be time consuming.
ii. The cost of studying all the items in the population may be prohibitive.
iii. The physical impossibility of checking all items in the population.
iv. The destructive nature of some tests.
v. The sample results are adequate.
1.1.3 Sampling and non-sampling errors
Sampling error occurs when the sample is not representative of the population. When random
sampling techniques are used to select elements for the sample, sampling errors
occurs by chance. Non sampling errors include missing data, recording errors, input processing
errors, and analysis errors.
Sampling errors may rise when there is a difference between a sample statistic; say sample mean
and the population mean.
Population Mean: is the sum of elements in a population divided by the number of elements.
Sample Mean: is the sum of the elements in the sample divided by the number of the sample
elements.
E.g. suppose that you have a population consists of five households, A, B, C, D, and E. Their
monthly income is as follows:
Households: A B C D E Total
Monthly income 10,000 7,400 12,000 20,000 5,600 55,000

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Assume that you take a sample of three households, A, C, D. Find out sampling
and non-sampling errors in selecting these samples.
So/n
Population mean =x/N] =55,000/5=11,000, the mean income of the population
Sample mean = x/n] =42,000/3=14,000, the mean income of the sample
Thus the difference between sample mean and population mean is:
(sample mean)- (population mean) =14,000-11,000=3,000
Now, suppose that you selected the above mentioned sample comprising A, C, and D households
and the income of household C has wrongly been recorded as 15,000. This will result in the
sample means; =10,000+15,000+20,000/3= 15,000
This means that the difference between the sample mean and the population mean is: x=15,000-
14,000= 1,000
You should recognize that this difference between the sample mean and the population mean is
not due to sampling error alone. There is also a non-sampling error.
Sampling error=3,000
Non sampling error=1,000
Total error=4,000
1.1.4 Types of samples
There are two main types of sampling
i) Random(probability) sampling
ii) Non-random(non-probability) sampling
In random sampling every unit of the population has the same probability of being selected in the
sample. Every element has a known, non-zero chance of being selected and included in the
sample.
In non-random sampling every unit of the population does not have the same probability of being
selected. Here members are not selected by chance.
Random Sampling Techniques
A. Simple random sampling: the most widely used type of sampling is a simple random
sample. A sample selected so that each item or person in the population has the same chance of
being included. A table of random numbers is an efficient way to select members of the sample.
Every

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sample of size n has the same chance of being chosen.
To illustrate the definition, suppose that Belay, Chaltu, Dawit and Eden are an office staff
population. All four want the same vacation period, but only two can be away at the same time.
Consequently, chips lettered B, C, D and E (for Belay, Chaltu, Dawit and Eden) are shaken in the
container, and the office manager(blindfolded) draws out two chips. The possible sample of size
2 from the B, C, D, E population are;
BC BD BE CD CE DE
Note that B appears in three of the six samples; so
P(B)=3/6=1/2
Similarly, P(C)=P(D)=P(E)=1/2;
so i) each element of the population has the same chance, ½, of being chosen to have the desired
vacation period. Moreover,
ii) each of the six possible samples has the same chance,1/6, of being selected. Consequently,
the selection method satisfies the definition of a simple random sample.
Simple Random Sampling
In statistics, a simple random sample from a population is a sample chosen randomly, so that
each possible sample has the same probability of being chosen. One consequence is that each
member of the population has the same probability of being chosen as any other. In
small populations such sampling is typically done "without replacement", i.e., one deliberately
avoids choosing any member of the population more than once. Although simple random
sampling can be conducted with replacement instead, this is less common and would normally be
described more fully as simple random sampling with replacement. Simple random sampling is a
method
of selecting n units out of a finite population of size N by giving equal probability to all units, or
a sampling procedure in which all possible combinations of n units that may be formed from the
finite population of size N units have the same probability of selection. There are N Cn distinct
possible samples in the case of sampling without replacement; the chance of selecting each one
of them is 1/ N Cn. There are N n possible samples in the case of sampling with replacement, the
chance of selecting each one of them is 1/ N n Conceptually, simple random sampling is the
simplest of the probability sampling techniques. It requires a complete sampling frame, which
may not be available or feasible to construct for large populations. Even if a complete frame is

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available, more efficient approaches may be possible if other useful information is available
about the units in the population.
Check point
Three students have taken a class test which is marked out of 10. We want to estimate the mean
mark using the sample mean as the estimate of the population mean. We take a sample of size 2
in two cases and suppose the marks of the three students are 1, 2 and 6.
The population mean μ is (1+2+6)/3 = 3
The population variance s2 = Ʃ ( xi−μ ¿ ¿2 / N = 14/3 = 4.67
i) Sampling without replacement
ii) Sampling with replacement
B. Systematic random sampling: In this way of sampling every K th element in the population
is selected. First the sampling interval K is calculated as the population size divided by the
sample size (N/n). Second a random starting point is selected from 1 up to 9, and then the
samples are selected by adding the interval from the starting number.
C. Stratified random sampling: In stratified random sampling a population is divided into non
overlapping subpopulations, called strata and a sample is randomly selected from each stratum.
Stratification is often done by using different variables such as gender, geographic
region, religion, ethnicity, educational level, income level etc.
D. Cluster sampling: In cluster (area) sampling a population is divided into clusters
using naturally occurred boundaries. Then clusters are randomly selected and after clusters have
been selected all or part of the elements in each cluster are included in the sample.
Exercise: What is the difference between stratified and cluster sampling?
Non-random sampling
a) Quota sampling: It is similar to stratified random sampling. Certain population sub classes
such as age, gender, or geographic region are used as strata. Here the researcher uses non-
random sampling method to gather data from one stratum until the desired quota of sample is
filled.
b) Judgment sampling: In this way of sampling elements are selected by the judgment of the
researcher. If we believe that some population members have more or better information and
more representative of the population than other. And if we want to take small
amount of samples we use this method of sampling.

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c) Convenience sampling: Here elements are selected for the convenience of the researcher. The
researcher will choose items that are readily available, nearby, and/or willing to participate.

1.2 Sampling Distributions

A sampling distribution is a probability distribution of sample statistics (sample means or sample
proportions).
A sampling distribution refers to a probability distribution of a statistic that comes from choosing
random samples of a given population. Also known as a finite-sample distribution, it represents
the distribution of frequencies on how spread apart various outcomes will be for a specific
population.
1.2.1 Sampling distribution of the sample mean
Sample means vary from sample to sample. A probability distribution of all possible sample
means of a given sample size is called Sampling distribution of the sample mean.
The following example illustrates the construction of a sampling distribution of the sample mean.
Example 1:
The employees and hourly earnings of a company is given below
Employee name A B C D E G H
Hourly earning 7 birr 7birr 8 birr 8birr 7birr 8birr 9birr

1. What is the population mean?

2. What is the sampling distribution of the sample mean for samples of size 2?
3. What is the mean of the sampling distribution?
4. What observations can be made about the population and the sampling distribution?
Solution:
1. The population mean is 7.71.
=∑ (7+7+8+8+7+8+9)/7 =7.71
2. First calculate the number of samples of size 2
NCn= N! = 7! = 21.
n! (N-n)! 2! (7-2)!

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 sample employees Hourly earning sum mean
1 A,B 7,7 14 7
2 A,C 7,8 15 7.5
3 A,D 7,8 15 7.5
4 A,E 7,7 14 7
5 A,F 7,8 15 7.5
6 A,G 7,9 16 8
7 B,C 7,8 15 7.5
8 B,D 7,8 15 7.5
9 B,E 7,7 14 7
10 B,F 7,8 15 7.5
11 B,G 7,9 16 8
12 C,D 8,8 16 8
13 C,E 8,7 15 7.5
14 C,F 8,8 16 8
15 C,G 8,9 17 8.5
16 D,E 8,7 15 7.5
17 D,F 8,8 16 8
18 D,G 8,9 17 8.5
19 E,F 7,8 15 7.5
20 E,G 7,9 16 8
21 F,G 8,9 17 8.5

Sampling distribution of the sample mean for n=2

Sample mean Number of means probability
7 3 0.1429
7.5 9 0.4285
8 6 0.2857
8.5 3 0.1429
1.0000

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3. The mean of the sampling distribution of the sample mean is:
∑ (7+7.5+……. +8.5)/21 =162/21 =7.71
4. Observations:
 The mean of the distribution of the sample mean (7.71) is equal to the
mean of the population: µ=µx