Statistics for Business and Economics (13e)

Statistics for
Slides by

Johnand Economics (13e)

Business
Loucks
Anderson, Sweeney, Williams, Camm, Cochran
St. Edward’s
© 2017 Cengage Learning
University

Slides by John Loucks

St. Edwards University

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 Statistics for Business and Economics (13e)

Chapter 7
Sampling and Sampling Distributions
• Selecting a Sample
• Point Estimation
• Introduction to Sampling Distributions
• Sampling Distribution of 𝑥ҧ
• Sampling Distribution of 𝑝ҧ
• Other Sampling Methods

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 Statistics for Business and Economics (13e)

Introduction
• An element is the entity on which data are collected.
• A population is a collection of all the elements of interest.
• A sample is a subset of the population.
• The sampled population is the population from which the sample is drawn.
• A frame is a list of the elements that the sample will be selected from.

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 Statistics for Business and Economics (13e)

Introduction
• The reason we select a sample is to collect data to answer a research question
about a population.
• The sample results provide only estimates of the values of the population
characteristics.
• The reason is simply that the sample contains only a portion of the
population.
• With proper sampling methods, the sample results can provide “good”
estimates of the population characteristics.

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 Statistics for Business and Economics (13e)

Selecting a Sample
• Sampling from a Finite Population
• Sampling from an Infinite Population

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 Statistics for Business and Economics (13e)

Sampling from a Finite Population

• Finite populations are often defined by lists such as:
• Organization membership roster
• Credit card account numbers
• Inventory product numbers
• A simple random sample of size n from a finite population of size N is a sample
selected such that each possible sample of size n has the same probability of
being selected.

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 Statistics for Business and Economics (13e)

Sampling from a Finite Population

• Replacing each sampled element before selecting subsequent elements is
called sampling with replacement. An element can appear in the sample
more than once.
• Sampling without replacement is the procedure used most often.

• In large sampling projects, computer-generated random numbers are often

used to automate the sample selection process.

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 Statistics for Business and Economics (13e)

Sampling from a Finite Population

• Example: St. Andrew’s College
St. Andrew’s College received 900 applications for admission in the
upcoming year from prospective students. The applicants were numbered,
from 1 to 900, as their applications arrived. The Director of Admissions
would like to select a simple random sample of 30 applicants.

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 Statistics for Business and Economics (13e)

Sampling from a Finite Population

• Example: St. Andrew’s College
Step 1: Assign a random number to each of the 900 applicants.
The random numbers generated by Excel’s RAND function
follow a uniform probability distribution between 0 and 1.

Step 2: Select the 30 applicants corresponding to the 30 smallest random

numbers.

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 Statistics for Business and Economics (13e)

Sampling from an Infinite Population

• Sometimes we want to select a sample, but find that it is not possible to obtain
a list of all elements in the population.
• As a result, we cannot construct a frame for the population.

• Hence we cannot use the random number selection procedure.

• Most often this situation occurs in the case of infinite population.

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 Statistics for Business and Economics (13e)

Sampling from an Infinite Population

• Populations are often generated by an ongoing process where there is no upper
limit on the number of units that can be generated.
• Some examples of on-going processes with infinite populations are:
• parts being manufactured on a production line
• transactions occurring at a bank
• telephone calls arriving at a technical help desk
• customers entering a store

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 Statistics for Business and Economics (13e)

Sampling from an Infinite Population

• In the case of an infinite population, we must select a random sample in order
to make valid statistical inferences about the population from which the
sample is taken.
• A random sample from an infinite population is a sample selected such that
the following conditions are satisfied.
• Each element selected comes from the population of interest.
• Each element is selected independently.

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 Statistics for Business and Economics (13e)

Point Estimation
• Point estimation is a form of statistical inference.
• In point estimation we use the data from the sample to compute a value of a
sample statistic that serves as an estimate of a population parameter.
• We refer to 𝑥ҧ as the point estimator of the population mean .
• s is the point estimator of the population standard deviation .
• 𝑝ҧ is the point estimator of the population proportion p.

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 Statistics for Business and Economics (13e)

Point Estimation
• Example: St. Andrew’s College
Recall that St. Andrew’s College received 900 applications from prospective
students. The application form contains a variety of information including the
individual’s Scholastic Aptitude Test (SAT) score and whether or not the
individual desires on-campus housing.
At a meeting in a few hours, the Director of Admissions would like to
announce the average SAT score and the proportion of applicants that want to
live on campus, for the population of 900 applicants.

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 Statistics for Business and Economics (13e)

Point Estimation
• Example: St. Andrew’s College
However, the necessary data on the applicants have not yet been
entered in the college’s computerized database. So, the Director decides to
estimate the values of the population parameters of interest based on sample
statistics. The sample of 30 applicants is selected using computer-generated
random numbers.

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 Statistics for Business and Economics (13e)

Point Estimation
• 𝑥ҧ as Point Estimator of 
σ 𝑥𝑖 50,520
𝑥ҧ = = = 1684
𝓃 30
• s as Point Estimator of 

σ(𝑥𝑖 − 𝑥)ҧ 2 2470.8

𝑠= = = 85.2
𝓃−1 29
• 𝑝ҧ as Point Estimator of p
𝑝ҧ = 20Τ30 = .67

Note: Different random numbers would have identified a different

sample which would have resulted in different point estimates.

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 Statistics for Business and Economics (13e)

Point Estimation
• Once all the data for the 900 applicants were entered in the database of the
college , the values of the population parameters of interest were calculated.
• Population Mean SAT Score
σ 𝑥𝑖
𝜇= = 1697
900
• Population Standard Deviation for SAT Score

σ(𝑥𝑖 −𝜇)2
𝜎= = 87.4
900
• Population proportion wanting On-Campus Housing
𝑝 = 648/900 = .72

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 Statistics for Business and Economics (13e)

Summary of Point Estimates

Obtained from a Simple Random Sample
Population Parameter Point Point
Parameter Value Estimator Estimate
 = Population mean 1697 𝑥ҧ = Sample mean 1684
SAT score SAT score
 = Population std. 87.4 s = Sample std. 85.2
deviation for deviation
SAT score for SAT score
p = Population pro- .72 𝑝ҧ = Sample pro- .67
portion wanting portion wanting
campus housing on campus housing

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 Statistics for Business and Economics (13e)

Practical Advice
• The target population is the population we want to make inferences about.

• The sampled population is the population from which the sample is actually
taken.
• Whenever a sample is used to make inferences about a population, we
should make sure that the targeted population and the sampled population
are in close agreement.

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑥ҧ
• Process of Statistical Inference

Population A simple random sample

Mean  of n elements is selected
is determined from the population.

The value of 𝑥ҧ is used to The sample data

make inferences about provide a value for
the value of . the sample mean 𝑥ҧ .

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑥ҧ
• The sampling distribution of 𝑥ҧ is the probability distribution of all possible
values of the sample mean 𝑥.ҧ
• Expected Value of 𝑥ҧ
E(𝑥)ҧ = 
where:  = the population mean
• When the expected value of the point estimator equals the population
parameter, we say the point estimator is unbiased.

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑥ҧ
• We will use the following notation to define the standard deviation of the
sampling distribution of 𝑥.ҧ

𝜎𝑥ҧ = the standard deviation of 𝑥ҧ

 = the standard deviation of the population
n = the sample size
N = the population size

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑥ҧ
• Standard Deviation of 𝑥ҧ
Finite Population Infinite Population

𝑁−𝑛 𝜎 𝜎
𝜎𝑥ҧ = 𝜎𝑥ҧ =
𝑁−1 𝑛 𝑛

• A finite population is treated as being infinite if n/N < .05.

• (𝑁 − 𝑛)/(𝑁 − 1) is the finite population correction factor.

• 𝜎𝑥ҧ is referred to as the standard error of the mean.

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑥ҧ
• When the population has a normal distribution, the sampling distribution
of 𝑥ҧ is normally distributed for any sample size.
• In most applications, the sampling distribution of 𝑥ҧ can be approximated
by a normal distribution whenever the sample is size 30 or more.
• In cases where the population is highly skewed or outliers are present,
samples of size 50 may be needed.

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑥ҧ
• The sampling distribution of 𝑥ҧ can be used to provide probability
information about how close the sample mean 𝑥ҧ is to the population
mean  .

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 Statistics for Business and Economics (13e)

Central Limit Theorem

• When the population from which we are selecting a random sample does
not have a normal distribution, the central limit theorem is helpful in
identifying the shape of the sampling distribution of 𝑥.ҧ

CENTRAL LIMIT THEOREM

In selecting random samples of size n from a
population, the sampling distribution of the sample
mean 𝑥ҧ can be approximated by a normal
distribution as the sample size becomes large.

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑥ҧ
• Example: St. Andrew’s College

Sampling
Distribution 𝜎 87.4
𝜎𝑥ҧ = = = 15.96
of 𝑥ҧ for 𝑛 30
SAT Scores

𝑥ҧ
𝐸 𝑥ҧ = 1697

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑥ҧ
• Example: St. Andrew’s College
• What is the probability that a simple random sample of 30 applicants will
provide an estimate of the population mean SAT score that is within +/-10
of the actual population mean  ?
• In other words, what is the probability that 𝑥ҧ will be between 1687 and
1707?

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑥ҧ
• Example: St. Andrew’s College
Step 1: Calculate the z-value at the upper endpoint of the interval.
z = (1707 - 1697)/15.96 = .63
Step 2: Find the area under the curve to the left of the upper endpoint.
P(z < .63) = .7357

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑥ҧ
• Example: St. Andrew’s College

Cumulative Probabilities for

the Standard Normal Distribution
z .00 .01 .02 .03 .04 .05 .06 .07 .08 .09
. . . . . . . . . . .
.5 .6915 .6950 .6985 .7019 .7054 .7088 .7123 .7157 .7190 .7224
.6 .7257 .7291 .7324 .7357 .7389 .7422 .7454 .7486 .7517 .7549
.7 .7580 .7611 .7642 .7673 .7704 .7734 .7764 .7794 .7823 .7852
.8 .7881 .7910 .7939 .7967 .7995 .8023 .8051 .8078 .8106 .8133
.9 .8159 .8186 .8212 .8238 .8264 .8289 .8315 .8340 .8365 .8389
. . . . . . . . . . .

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑥ҧ
• Example: St. Andrew’s College

Sampling Distribution
𝜎𝑥ҧ = 15.96 of 𝑥ҧ for SAT Scores

Area = .7357

𝑥ҧ
1697 1707

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑥ҧ
• Example: St. Andrew’s College
Step 3: Calculate the z-value at the lower endpoint of the interval.
z = (1687 - 1697)/15.96 = - .63

Step 4: Find the area under the curve to the left of the lower endpoint.
P(z < -.63) = .2643

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑥ҧ for SAT Scores

• Example: St. Andrew’s College

Sampling Distribution
𝜎𝑥ҧ = 15.96 of 𝑥ҧ for SAT Scores

Area = .2643

𝑥ҧ
1687 1697

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑥ҧ for SAT Scores

• Example: St. Andrew’s College
Step 5: Calculate the area under the curve between
the lower and upper endpoints of the interval.
P(-.63 < z < .63) = P(z < .63) - P(z < -.63)
= .7357 - .2643
= .4714
The probability that the estimate of population mean
SAT score will be between 1687 and 1707 is:

P(1687 < 𝑥ҧ < 1707) = .4714

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑥ҧ for SAT Scores

• Example: St. Andrew’s College

Sampling Distribution
of 𝑥ҧ for SAT Scores
𝜎𝑥ҧ = 15.96

Area = .4714

𝑥ҧ
1687 1697 1707

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 Statistics for Business and Economics (13e)

Relationship Between the Sample Size and the Sampling

Distribution of 𝑥ҧ
• Example: St. Andrew’s College
• Suppose we select a simple random sample of 100 applicants instead of the
30 originally considered.
• E(𝑥)ҧ = regardless of the sample size. In our example, E(𝑥)ҧ remains at 1697.

• Whenever the sample size is increased, the standard error of the mean 𝜎𝑥ҧ
is decreased. With the increase in the sample size to n = 100, the standard
error of the mean is decreased from 15.96 to:
𝑁−𝑛 𝜎 900−100 87.4
𝜎𝑥ҧ = = =.9433(8.74) = 8.2
𝑁−1 𝑛 900−1 100

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 Statistics for Business and Economics (13e)

Relationship Between the Sample Size and the Sampling

Distribution of 𝑥ҧ
• Example: St. Andrew’s College

With n = 100,
𝜎𝑥ҧ = 8.2 With n = 30,
𝜎𝑥ҧ = 15.96

𝑥ҧ
𝐸 𝑥ҧ = 1697

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 Statistics for Business and Economics (13e)

Relationship Between the Sample Size and the Sampling

Distribution of 𝑥ҧ
• Example: St. Andrew’s College
• Recall that when n = 30, P(1687 < 𝑥ҧ < 1707) = .4714.
• We follow the same steps to solve for P(1687 < 𝑥ҧ < 1707) when n = 100 as
we showed earlier when n = 30.
• Now, with n = 100, P(1687 < 𝑥ҧ < 1707) = .7776.
• Because the sampling distribution with n = 100 has a smaller standard error,
the values of 𝑥ҧ have less variability and tend to be closer to the population
mean than the values of 𝑥ҧ with n = 30.

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 Statistics for Business and Economics (13e)

Relationship Between the Sample Size

and the Sampling Distribution of 𝑥ҧ
• Example: St. Andrew’s College
Sampling Distribution
of 𝑥ҧ for SAT Scores

𝜎𝑥ҧ = 8.2
Area = .7776

𝑥ҧ
1687 1697 1707

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑝ҧ
• Making Inferences about a Population Proportion

Population A simple random sample

with proportion of n elements is selected
p=? from the population.

The value of 𝑝ҧ is used The sample data

to make inferences provide a value for the
about the value of p. sample proportion 𝑝ҧ .

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑝ҧ
• The sampling distribution of 𝑝ҧ is the probability distribution of all possible
values of the sample proportion 𝑝.ҧ
𝑝ҧ = x/n

• Expected Value of 𝑝ҧ
E(𝑝)ҧ = 𝑝

where: p = the population proportion

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑝ҧ
• Standard Deviation of 𝑝ҧ
Finite Population Infinite Population

𝑁 − 𝑛 𝑝(1 − 𝑝) 𝑝(1 − 𝑝)
𝜎𝑝ҧ = 𝜎𝑝ҧ =
𝑁−1 𝑛 𝑛

• 𝜎𝑝ҧ is referred to as the standard error of the proportion.

• (𝑁 − 𝑛)/(𝑁 − 1) is the finite population correction factor.

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑝ҧ
• The sampling distribution of 𝑝ҧ can be approximated by a normal
distribution whenever the sample size is large enough to satisfy the two
conditions:
np > 5 and n(1 – p) > 5
• When these conditions are satisfied, the probability distribution of x in the
sample proportion, 𝑝ҧ = x/n, can be approximated by a normal distribution
(because n is a constant).

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43
 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑝ҧ
• Example: St. Andrew’s College
Recall that 72% of the prospective students applying to St. Andrew’s
College desire on-campus housing.
What is the probability that a simple random sample of 30 applicants will
provide an estimate of the population proportion of applicant desiring on-
campus housing that is within plus or minus .05 of the actual population
proportion?

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑝ҧ
• Example: St. Andrew’s College
For our example, with n = 30 and p = .72, the normal distribution is an
acceptable approximation because:
np = 30(.72) = 21.6 > 5
and
n(1 - p) = 30(.28) = 8.4 > 5

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑝ҧ
• Example: St. Andrew’s College

Sampling
Distribution
of 𝑝ҧ
.72(1−.72)
𝜎𝑝ҧ = = .082
30

𝑝ҧ
𝐸 𝑝ҧ = .72

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otherwise on a password-protected website or school-approved learning management system for classroom use.
 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑝ҧ
• Example: St. Andrew’s College
Step 1: Calculate the z-value at the upper endpoint of the interval.
z = (.77 - .72)/.082 = .61
Step 2: Find the area under the curve to the left of the upper endpoint.
P(z < .61) = .7291

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑝ҧ
• Example: St. Andrew’s College
Cumulative Probabilities for
the Standard Normal Distribution
z .00 .01 .02 .03 .04 .05 .06 .07 .08 .09
. . . . . . . . . . .
.5 .6915 .6950 .6985 .7019 .7054 .7088 .7123 .7157 .7190 .7224
.6 .7257 .7291 .7324 .7357 .7389 .7422 .7454 .7486 .7517 .7549
.7 .7580 .7611 .7642 .7673 .7704 .7734 .7764 .7794 .7823 .7852
.8 .7881 .7910 .7939 .7967 .7995 .8023 .8051 .8078 .8106 .8133
.9 .8159 .8186 .8212 .8238 .8264 .8289 .8315 .8340 .8365 .8389
. . . . . . . . . . .

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑝ҧ
• Example: St. Andrew’s College

Sampling
Distribution
𝜎𝑝ҧ = .082 of 𝑝ҧ

Area = .7291

𝑝ҧ
.72 .77

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑝ҧ
• Example: St. Andrew’s College
Step 3: Calculate the z-value at the lower endpoint of the interval.
z = (.67 - .72)/.082 = - .61
Step 4: Find the area under the curve to the left of the lower endpoint.
P(z < -.61) = .2709

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑝ҧ
• Example: St. Andrew’s College

Sampling
Distribution
𝜎𝑝ҧ = .082 of 𝑝ҧ

Area = .2709

𝑝ҧ
.67 .72

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑝ҧ
• Example: St. Andrew’s College
Step 5: Calculate the area under the curve between the lower and upper
endpoints of the interval.
P(-.61 < z < .61) = P(z < .61) - P(z < -.61)
= .7291 - .2709
= .4582
The probability that the estimate of the population proportion of
applicants desiring on-campus housing is within plus or minus . 05
of the actual population proportion :
P(.67 < 𝑝ҧ < .77) = .4582

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 Statistics for Business and Economics (13e)

Sampling Distribution of 𝑝ҧ
• Example: St. Andrew’s College

Sampling
Distribution
of 𝑝ҧ

𝜎𝑝ҧ = .082 Area = .4582

𝑝ҧ
.67 .72 .77

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 Statistics for Business and Economics (13e)

Other Sampling Methods

• Stratified Random Sampling
• Cluster Sampling
• Systematic Sampling
• Convenience Sampling
• Judgment Sampling

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 Statistics for Business and Economics (13e)

Stratified Random Sampling

• The population is first divided into groups of elements called strata.
• Each element in the population belongs to one and only one stratum.
• Best results are obtained when the elements within each stratum are as
much alike as possible (i.e. a homogeneous group).

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 Statistics for Business and Economics (13e)

Stratified Random Sampling

• A simple random sample is taken from each stratum.
• Formulas are available for combining the stratum sample results into one
population parameter estimate.
• Advantage: If strata are homogeneous, this method provides results that is
as “precise” as simple random sampling but with a smaller total sample size.
• Example: The basis for forming the strata might be department, location,
age, industry type, and so on.

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 Statistics for Business and Economics (13e)

Cluster Sampling
• The population is first divided into separate groups of elements called
clusters.
• Ideally, each cluster is a representative small-scale version of the population
(i.e. heterogeneous group).
• A simple random sample of the clusters is then taken.
• All elements within each sampled (chosen) cluster form the sample.

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 Statistics for Business and Economics (13e)

Cluster Sampling
• Example: A primary application is area sampling, where clusters are city
blocks or other well-defined areas.
• Advantage: The close proximity of elements can be cost effective (i.e. many
sample observations can be obtained in a short time).
• Disadvantage: This method generally requires a larger total sample size than
simple or stratified random sampling.

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 Statistics for Business and Economics (13e)

Systematic Sampling
• If a sample size of n is desired from a population containing N elements, we
might sample one element for every N/n elements in the population.
• We randomly select one of the first N/n elements from the population list.
• We then select every N/nth element that follows in the population list.

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 Statistics for Business and Economics (13e)

Systematic Sampling
• This method has the properties of a simple random sample, especially if the
list of the population elements is a random ordering.
• Advantage: The sample usually will be easier to identify than it would be if
simple random sampling were used.
• Example: Selecting every 100th listing in a telephone book after the first
randomly selected listing.

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 Statistics for Business and Economics (13e)

Convenience Sampling
• It is a nonprobability sampling technique. Items are included in the sample
without known probabilities of being selected.
• The sample is identified primarily by convenience.
• Example: A professor conducting research might use student volunteers to
constitute a sample.

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 Statistics for Business and Economics (13e)

Convenience Sampling
• Advantage: Sample selection and data collection are relatively easy.
• Disadvantage: It is impossible to determine how representative of the
population the sample is.

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 Statistics for Business and Economics (13e)

Judgment Sampling
• The person most knowledgeable on the subject of the study selects elements
of the population that he or she feels are most representative of the
population.
• It is a nonprobability sampling technique.
• Example: A reporter might sample three or four senators, judging them as
reflecting the general opinion of the senate.

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 Statistics for Business and Economics (13e)

Judgment Sampling
• Advantage: It is a relatively easy way of selecting a sample.
• Disadvantage: The quality of the sample results depends on the judgment
of the person selecting the sample.

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 Statistics for Business and Economics (13e)

Recommendation
• It is recommended that probability sampling methods (simple random,
stratified, cluster, or systematic) be used.
• For these methods, formulas are available for evaluating the “goodness” of
the sample results in terms of the closeness of the results to the population
parameters being estimated.
• An evaluation of the goodness cannot be made with non-probability
(convenience or judgment) sampling methods.

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 Statistics for Business and Economics (13e)

End of Chapter 7

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