Chapter 3

STATISTICAL ESTIMATIONS

1
 Introduction
The sampling distribution of the mean shows how far sample mean
could be from a known population mean.
 The sampling distribution of the proportion shows how far sample
proportions could be from a known population proportion.
In estimation, our aim is to determine how far an unknown population
mean could be from the mean of a simple random sample selected.
Estimation: is the process of using statistics as estimates of
parameters.
Statistical inference - is the process of using limited information, a
sample
A statistic- is a summary measure that is computed to describe a
characteristic for only a sample of the population.

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 Estimator- refers to any sample statistic that is used to estimate a
population parameter. E.g. for for p.
 Estimate- is a specific numerical value of our estimator.

E.g. 9, 2, 5
………...…………. Estimators
…………………… items being estimated/parameters
1, 0.5, 9, 3 …………………... Estimates
In inferential statistics, μ is called the true population mean and p is
called the true population proportion. There are many other population
parameters, such as the median, mode, variance, and standard
deviation. Examples of estimation:
 Mean fuel consumption for a particular model of a car
 Average time taken by new employees to learn a job
 Mean housing expenditure per month incurred by households

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Ifwe can conduct a census each time we want to find the value of a
population parameter, then the estimation procedures are not needed.

The estimation procedure involves the following steps.

 Select a sample.
 Collect the required information from the members of the sample.
 Calculate the value of the sample statistic.
 Assign value(s) to the corresponding population parameter.
Four important properties of estimators
A number of different estimators are possible for the same population
parameter, but some estimators are better than others. To understand
how, we need to look at four important properties of estimators:
unbiasedness, efficiency, consistency, and sufficiency.

4
Unbiasedness: An estimator exhibits unbiasedness when the
mean of the sampling estimator is equal to the population parameter:
E (X) =.
Efficiency refers to the size of the standard error of the statistics.
The most efficient estimator is the one with the smallest variance.
Consistency: A statistic is a consistent estimator of a population
parameter, if as the sample size increases, it becomes almost
certain that the value of the statistic comes very close to the value of
the population parameter. For example, the sample mean is an
unbiased and a consistent estimator of population mean.
Sufficiency: A sufficient statistic is an estimator that utilizes all the
information a sample contains about the parameter to be estimated.
For example, the sample mean is a sufficient estimator of the
population mean.
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Types of estimates:

 We can make two types of estimates about a population: a point

estimate and an interval estimate.
1. A Point estimate
is a single number that is used to estimate an unknown population
parameter.
The most important point estimates (given that they are single values)
are:
o Sample mean for population mean ;
o Sample proportion for population proportion (P);
o Sample variance for population variance and
o Sample standard deviation for population standard deviation

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Point estimate of population mean,
 Assume that random sample of n= 6 elements from a population
whose parameter is not known.
1 2 4 5 7 11
The sample mean is
 The estimator is , and 5 is the point estimate of the unknown
population mean.
 On the other hand, if we state that the mean,, is between , the range
of values from 3 (5-2) to 7 (5+2) is an interval estimate.
Point estimate of the population proportion
 Sample proportion is an estimator of population proportion, P.
 Population proportion P is equal to the number of elements in the
population belonging to the category of interest divided by the total
number of elements in the population

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Sample proportion
The above array contains two even numbers 2 and 4. Calling the even
numbers success, the sample proportion of success is:

The statistic is an estimator of the unknown population proportion of

success and is a point estimate of the population proportion.

Point estimate of the unknown population standard deviation

We will use the symbol (S) to mean an estimate of the unknown

population standard deviation (σ). The estimator, called sample

standard deviation, is defined by the formula
Where = sample mean
n= sample size

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For the random sample 1, 2, 4, 5, 7, 11 write the symbol
for and compute the sample standard deviation.
Solution

=3.633

9
 Point Estimator of Standard Error of the
Mean
Standard error of the mean is computed by

when the sample size is less than 5 % of the population size.

Where = Sample standard deviation
n= sample size
Thus, S is the estimator for σ, and is the estimator for
We have calculated S= 3.633 for the random sample of 1, 2, 4, 5, 7,
11.
=

10
 A Point Estimate of Sample Standard
Error of the Proportion
Standard error of the proportion answers how far an unknown
population proportion might be from sample proportion. The symbol will
be used to mean standard error of the proportion.

Where = sample proportion of success

n= sample size
Example;-Let an even number be success, and suppose a sample of
200 numbers be selected randomly from a population that contains 120
even numbers. Write the symbol for and compute the value of the point
estimator of the standard error of the proportion.

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The following table shows some population parameters and
their estimators.
Population parameter sample statistic
Mean
Standard deviation σ S
Variance σ2 S2
Proportion P
Standard error of the mean

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Interval Estimate
Interval estimate is a range of values that conveys the fact that
estimation is an uncertain process.
Interval estimate states the range within which a population
parameter probably lies.
The interval with in which a population parameter is expected to
lie is usually referred to as the confidence interval.
Two confidence intervals are used extensively.
1. 95% confidence interval and
2. 99% confidence interval
A 95% confidence interval means that about 95% of the
similarly constructed intervals will contain the parameter being
estimated. If we use the 99% confidence interval we expect about
99% of the intervals to contain the parameter being estimated.
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 Interval Estimation of Population
Mean
As a result of the Central Limit Theorem the following (z) formula for
sample mean can be used when sample sizes are large, regardless of
the shape of the population distribution or for smaller sizes if the
population is normally distributed.

Thus, the preceding expression takes the form:

The confidence interval for population mean is affected by:

1. The population distribution, i.e., whether the population is normally
distributed or not
2. The standard deviation, i.e., whether is known or not.
3. The sample size, i.e., whether the sample size, n, is large or not.

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 Confidence interval estimate of -
Normal population, known
A confidence interval estimate for () is an interval estimate
together with a statement of how confident we are that the interval
estimate is correct.
When the population distribution is normal and at the same time is
known, we can estimate (regardless of the sample size) using the
following formula.

Where:
= sample mean, n = sample size
Z = value from the standard normal table reflecting confidence level
σ = population standard deviation
α = the proportion of incorrect statements (α = 1 – C)
 = unknown population mean

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To find the interval estimate of population mean, we have the
following steps.
1. Compute the standard error of the mean
2. Compute from the confidence coefficient.
3. Find the Z value for the from the table
4. Construct the confidence interval
5. Interpret the results
Example:
The vice president of operations for Ethiopian Tele Communication
Corporation (ETC) is in the process of developing a strategic
management plan. He believes that the ability to estimate the length of
the average phone call on the system is important. He takes a random
sample of 60 calls from the company records and finds that the mean
sample length for a call is 4.26 minutes.
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Past history for these types of calls has shown that the population
standard deviation for call length is about 1.1 minutes. Assuming that
the population is normally distributed and he wants to have a 95%
confidence, help him in estimating the population mean.
Solution:
n= 60 calls, = 4.26 minutes, σ = 1.1 minut, C= 0.95
i. = = 0.142 iv.
ii. α = 1 – C = 1- 0.95 = 0.05 = 4.26 ± 1.96(0.142)
 = 0.05/2 = 0.025 = 4.26 ± 0.28
iii. =3.98 ≤  ≤ 4.54

The vice-president of ETC can be 95% confident that the aver.

length of a call for the population is b/n 3.98 and 4.54 minutes.
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 Confidence estimate of µ, normal
population, σ unknown
In this case we search (Z) value of /2 and use the formula ) to
estimate the interval within which the population mean lies with C
Confidence coefficient. However, most of the time population
mean  is unknown, so is population standard deviation, d.
therefore, d must be estimated from sample standard deviation.

After calculate the standard deviation, standard error must be

computed using the following formula.
When population standard deviation known, the interval
estimate can be calculated as

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Degree of freedom for t-distribution can be calculated as
.
Where = degree of freedom, n= sample size
As increases, the tail area decreases; so is the t-value.
As degrees of freedom increases, the t-distribution approaches the
standard normal distribution. When degree of freedom is 30, t-
distribution approximately similar to normal distribution.

Where Sample Mean

n -1 (degrees of freedom)
S= sample standard deviation
μ=unknown population mean

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Example: The environmental protection officer of a large industrial
plant sought to determine the mean daily amount of sulphur oxide
(pollutant) emitted by the plant. Because measurements costs were
high, only a random sample 10 days’ measurements were obtained:
These were, in tons per day,
8 7 10 15 11 5 8 6 13 12
Suppose emissions per day are normally distributed. Estimate μ, the
mean amount of sulphur oxides emitted per day using the confidence
interval with a confidence coefficient of 0.95.
Solution =
= =3.24
The confidence level is 95%. Therefore, = 1-C= 1-0.95= 0.05
and /2=0.025.

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Next, we have to calculate the degree of freedom for the observation;
which is given as ν=n-1= 10-1=9
Then calculate interval as .
in this specific situation means t0.025, 9 = 2.26
Therefore Interval can be calculated as:

=
Do you remember what a central limit theorem is?
 The Central limit theorem proves that as sample sizes increases the
distribution approaches normal distribution. In fact for n greater than
or equal to 30 statisticians use normal distribution. Hence, we can
use the Central limit theorem to construct interval estimate for a
mean when sample size is greater than or equal to 30.

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 Confidence interval estimate for
population proportion
If a random sample size (n) is selected from a population that has (p)
as a proportion of success, the sample proportion of sample is denoted
as , and . The formula is:

Then using as estimator of , we can calculate the interval estimate

as: P=

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Example: A random sample of 400 members of labour force in a five
state region showed that 32 were unemployed. Construct the 95%
confidence interval for the proportion unemployed in the region.
Solution = 0.08
With C of 95%, and
Z0.025 =1.96. Therefore, the interval estimate can be calculated as:

 Consequently, with 95% confidence, the population proportion to be

between 0.053 and 0.107 that is between 5.3% and 10.7%

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 Interval Estimation of the Difference
between two independent Mean
It is clear that the unbiased point estimate of the difference
between the mean of two populations is the difference between
two sample mean , where each sample is a random sample
taken from the respective target population.
Interval Estimation of - population normal, known
If the two parent populations are normal, then the sampling
distribution of the difference between two mean will be normally
distributed regardless of n (sample size).
And we can estimate (regardless of using the following
formula; given that & are known.

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 When and are not known, the standard error between two sample means is
estimated by the sample standard error of the difference between two sample
means, , and
The interval estimation takes the following form:
, given that the sample sizes are large.

Example: In a sex discrimination case, an employee alleged that a

large corporation paid men more than women for comparable work. Let
population 1 represent all male employees performing certain jobs and
population 2 represent all female employees performing
comparable jobs at the corporation.

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Independent samples are taken of males and females; the
sample means are and, and the sample standard deviations are
and. Construct a 95% confidence interval for. What do you
conclude from this?
Solution:
Male employees Female employees
males females C=
0.95

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Steps: I. Calculate the (sample) standard error of the difference
between two means

II. Compute = α = 1-C = 1- 0.95 = 0.05

α/2 = 0.05/2 = 0.025
III. Look up
IV. Construct the confidence interval

= 900 ±765.40
134.60 ≤ ≤ 1,665.40
We state with 95% confidence that the mean salary difference between
the male and female workers lies between Birr 134.60 and Birr 1665.40

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 Interval estimation of population
normal, unknown,
When the sample sizes are small, the population standard
deviations are unknown, and the population distributions are
normal, we use t-distribution to construct a confidence interval for
. Moreover, to use a t-distribution we have to assume that the
two variances (standard deviations) are equal.
To use a t-distribution for constructing confidence interval
for, we assume the following:
1. The population standard deviation and are not known.
2. The sample sizes are small ().
3. The populations are assumed to be approximately normally
distributed.
4. The two (unknown) population variances are equal.

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If the variance of the populations is known,

 The process of combing the results of two independent simple

random samples to provide one estimate of is referred to as
pooling.
The pooled estimator of variance,, denoted by is the weighted
average of the two sample variances,, with the degrees of
freedom associated with each sample being used as the weights.
The formula for the pooled estimator of is:

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 Where: = pooled estimate of the variance
= sample size drawn from population 1
= sample size drawn from population 2
= sample variance of the sample drawn from population 1
= sample variance of the sample drawn from population 2
n1+n2-2 = pooled degrees of freedom
Based on the assumption that the population standard deviations are
equal, the standard error of the difference between means is estimated
by the sample standard error of the difference between two sample
means,, according to the following equation:
=

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The confidence interval for when the common standard deviations
are not known is based on t-distribution, and is given by:

ν = pooled degrees of freedom (n1 + n2 – 2)

Example: Two manufacturing companies produce drill tips that are
used to cut holes in steel sheets. A customer wishing to know which
drill tips have the longer site purchases, independent samples of
drill tips from company 1 and drill tips from company 2. The mean
lives of the drill tips are minutes and minutes. The population
variances are unknown but assumed to be equal. The sample
variances are . Construct a 95% confidence interval for assuming
that the two populations are normally distributed.

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 Solution:
Company One Company Two
drill tips drill tips C = 0.95
minutes minutes
= 41 = 36
i. Calculate the sample standard error of the difference between
two means and the pooled degrees of freedom

= =
= 2.13

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 i. ν = n1 +n2 -2
= 20 + 15 -2 = 33
ii. Compute and look up
 α = 1-C = 1- 0.95 = 0.05, α/2 = 0.05/2 = 0.025
= = 2.04
iii. Construct the confidence interval


-10.34 ≤ ≤ -1.66
The 95% confidence interval is (-10.34 to –1.66). This interval
contains only negative values indicating that the drill tips made by
company 1 do not last as long on average, as those made by company 2.

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Confidence interval for the difference between
two population proportions
We know that the unbiased estimator of the difference between
the proportions of two populations is the difference between two
sample proportions
However, here are unknown, and we want to estimate by
respectively, and hence Z becomes:

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Where: = the sample proportion of success in the first sample
= the sample proportion of in the second sample
= 1-
= 1-
= sample size drawn from the first population
= sample size drawn from the second population
α=1–C
This formula holds true provided that

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Example: A TV executive is interested in determining if the
proportion of people who watch a late-night talk show is higher
with the regular host or a guest host. In a random sample of 400
people, 175 watch the show when the regular host is on. In an
independent random sample of 500 people, 185 watch the show
a guest host is on. Calculate a 95% confidence interval for .
What do you conclude?
Solution:
Regular host Guest Host
= 400 = 0.4375 = 500 = 0.37
X1 = 175 = 0.5625 X2 = 185 = 0.63
C = 0.95

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 i. Calculate the sample standard error of the diff. between two proportions

ii. Compute
α = 1-C = 1- 0.95 = 0.05, α/2 = 0.05/2 = 0.025
iii. Look up
iv. Construct the confidence interval

= 0.0675 ± 0.065
0.0025 ≤ ≤ 0.1325

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Determination of sample size
We have seen sampling and reason for sampling in sampling
distribution. One reason behind sampling is to reduce the cost of data
collection.
The size of the sample depends on three factors:
 How precise or narrow we want the interval estimate to be
 How confident we want to be that the interval estimate is correct
 How variable is the population being sampled
The higher the desired precision or level of confidence, the larger will
be the sample; also for a given precision and level of confidence, the
larger the population variability is, the larger will be the sample.

38
 y o u r
u f o r
k y o !!
Th a n i o n ! n
t e n t u c a
a t n y o
e s t i o
y q u ? ?
A n a s k ? 3 .
P T E R s
C H A e n t
d o f o m m
En v e c e a s e
u h a n p l
If y o e s ti o
su g g !!!
a n d w a r d
f o r 39
Sample Size for Estimating Population
Proportion
The confidence interval for p is
, Which shows that the interval extends from to so we can express this as:

The interval will be more precise or narrower the smaller the term that
follows. The term is called error and is indicated by e.

If we solve for n, we get the following formula:

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In fact we are trying here to determine how large our sample size
should be; so we do not have because the sample has not yet been
taken. Therefore, instead of, we need to use p and q. however, p and q
themselves are not known. Therefore, it is safer to take 0.5 for p which
yields the safer sample size. If the decision maker has some prior
information about the population proportion, that must be used instead
of 0.5. If the existing information leads to the belief that the population
proportion is between two values:
 If both values are on the same side of o.5, choose p as the value
closer to 0.5.
 If 0.5 is between the two values, use 0.5 as for p.

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Example: Suppose we want to estimate a population proportion to be with in
 0.04 and we want to a confidence coefficient of C= 0.90. How large should
the sample size we take be?
Solution: We are given confidence coefficient and error. The population
proportion that yields the safest sample size is 0.5. Therefore, it is possible to
calculate the sample size using the formula:

Next, we need to read Z value of /2, where  = 1- 0.9 = 0.1. Therefore, /2
= 0.05

Therefore,

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Sample Size for Estimating a Population
Mean
The confidence interval estimate of μ,
Can be rewritten as this can be expressed as .
Therefore,

From the above formula it is possible to derive for n, hence,

As can be seen from the above formula, there is direct relationship
between sample size and variation in the population. Therefore, the more
the variability the larger is the sample size. Variation of the population,
however, is neither known nor its estimate obtained prior to sampling.

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Hence, if there is historical evidence of the variance that can be used. But
most of the time neither the population variance nor the sample variance
are known. Hence we need to estimate it using the formula:

Example:
A sample is to be taken to estimate the mean salary of plumbers to be
within  500 with a confidence coefficient of 0.99. A Plumber’s union
official states that birr 40,000 and birr 26,000 would be unusual large and
small salaries for plumbers in the union. What should the sample size be?
Solution

It is possible to use formula and find sample size but we need to firs find
the σ.

 Therefore, Therefore 44
 y o u r
u f o r
k y o !!
Th a n i o n ! n
t e n t u c a
a t n y o
e s t i o
y q u ? ?
A n a s k ? 5 .
P T E R s
C H A e n t
d o f o m m
En v e c e a s e
u h a n p l
If y o e s ti o
su g g !!!
a n d w a r d
f o r 45