ESTIMATION OF PARAMETERS Illustrative Example:

1. To estimate the average amount of damages claimed

in fires of medium-sized apartment complexes in 2014, a
Recall:
consumer organization sampled the files of a large
A parameter is a descriptive population measure. It is a
insurance company to come up with the following
measure of the characteristics of the entire population (a
amounts (in million pesos) for 10 claims: 121, 55, 63,
mass of all the units under consideration that share
12, 8, 141, 42, 51, 66, 103. What is the estimated
common characteristics) based on all the elements within
average amount of fire damage claim in 2014?
that population.
∑𝑥𝑖 121+55+63+12+8+141+42+51+66+103
Statistic is the number that describes the sample. E[x̅] = = = 66.2
n 10
Statistic is a characteristic of a population or sample
 The estimated average amount of fire damage claim
group. You can use sample statistic to draw certain
in 2014 is 66.2.
conclusions about the entire population.
Discussion:
Quiz I
Statistical inference is the process of using sample
statistics to draw conclusions about true population 1.
parameters.
The inferences that they will make are subject to
uncertainty which means that they are not 100% sure of
the inferences or conclusions they’ll make about the
population or its parameters, based on the statistics
generated from the random sample. Thus, they opt to 2. The head of the Philippine University observes a
estimate. decline on the alcoholic expenditures of learners
from a monthly expenditure of PHP 350 in the
Sample situation that applies Statistical Inference: previous year. To check on this, he randomly
1. Scores of the grade 11 students in NAT exam. selected 10 PU learners who drink alcoholic
- Inferential statistics is applicable. Randomly select beverages and asked for the amount, in pesos,
grade 11 students in particular school as sample to know that they usually spent on alcoholic beverages in
the score of the NAT examination. a month. It is known that the usual amount spent
2. Mr. A wants to open a coffee shop in Liloan. He on alcoholic beverages by learners who drink
wants to know the coffee preferences of Liloanons and alcoholic beverages follows the normal
which flavor such as macchiato, mocha, Americano, distribution with standard deviation of PHP 10.
latte, he will offer. The data collected are: 400, 235, 200, 250, 200,
- Inferential statistics is applicable. Mr. A can randomly 300, 500, 430, 420, and 220. Estimate the true
select Liloanons and ask if they prefer macchiato, average amount spent on alcoholic beverages by
mocha, Americano or latte. learners who drink alcoholic beverages.
Estimation refers to the computation of a statistic from
sample data which yield a value that is an approximation 3. A survey of 30 emergency room patients found
of an unknown true parameter value. The statistic itself that the average waiting time for treatment was
is called an estimator. The value/s of the estimator is 174.3 minutes. Assuming that the population
called the estimate/s. standard deviation is 46.5 minutes. Find the best
point estimate of the population mean.
2. Interval Estimator refers to a range of numerical
values within which we can expect to find the true
parameter value to fall within.
Assumptions for Finding a Confidence
Interval for the Population Mean

1. The sample is a random sample.

2. Either n≥30 (Central Limit Theorem is
Accuracy is a measure of closeness of the estimates to applied) or the population is normally
the true value while precision is a measure of closeness distributed if n<30.
of the estimates to each other.
Why is 30 a good sample size?
A sample size of 30 is fairly common across statistics. A
KINDS OF ESTIMATOR
sample size of 30 often increases the confidence interval of
1. Point Estimator refers to a single value of the your population data set enough to warrant assertions against
estimate of the unknown parameter. For example, if the your findings. The higher your sample size, the more likely the
sample mean is 10, then, the value of 10 is called the sample will be representative of your population set.
estimate of the population mean.
Solving Interval Estimator
Point Estimator of a Population Mean 1. When the population variance of standard deviation is
Let X1, …, Xn denote a sample from a known.
population which the mean μ is unknown. The
sample mean x̅ can be used as an estimator of
μ. In symbols, E[x̅] = μ.
Formula: length of confidence interval when the population
variance and standard deviation is unknown.
μ=

where: x̅ = sample mean (Lc) = 2

= tabulated z-value
σ = population standard deviation
n = no. of sample/ sample size The t-distribution

Terms to note: A t-distribution is a probability distribution of

1. Confidence interval - In statistics, this refers to the standardized variable t using the sample standard
probability that a population parameter will fall between deviation of sample taken from a normal population. A
a set of values for a certain proportion of times. t- value is a standardized variable using the formula:
Confidence intervals measure the degree of uncertainty
or certainty in a sampling method. They can take any
number of probability limits, with the most common
being a 95% or 99% confidence level.
2. Narrowness of the interval – This pertains to a small
width in relation to the length of the confidence interval.
3. Length of Confidence Interval - refers to the absolute
difference between the upper confidence limit and the Properties of the t-distribution:
lower confidence limit. 1. Has a mean of 0 and variances greater than 1, but this
variance approaches to 1 as the sample size gets larger.
length of confidence interval when the population 2. Like the normal distribution, it is symmetrical about
variance and standard deviation is known. the mean.
3. It is less peaked in the center and has higher tails as
compared to the normal distribution.
(Lc) = 2
4. As sample size increases, the t-distribution becomes
Commonly Used Confidence Coefficient close to standard normal distribution.
5. Used when sample size is small (n<30) and/or when
Significance Confidence z- tabulated population standard deviation is not known.
Level Coefficient value 6. Determined by degrees of freedom----- no. of values
0.10 0.90 1.645 involved in calculation that has the freedom to vary.
0.05 0.95 1.960
0.01 0.99 2.576 df = n-1 ; n= sample size

Relationship of Confidence Coefficient and Interval Estimate

➢ The width of the interval estimate represents the

accuracy of the estimate. The narrower the
interval, the more accurate the interval is.
➢ The larger is the variability of population from
which the simple random sample was drawn will
result to larger maximum allowable deviation and Illustrative Examples:
consequently, wider confidence interval estimate.
➢ Larger sample size will lead to smaller allowable 1. A sample of 30 tuna showed that they swim an
deviation and narrower confidence interval average of 8.6kph with a population standard
estimate. deviation of 1.6kph.
➢ Higher confidence interval coefficient (1-α)% a. Find the 95% confidence interval of the
means lower value of α, thus higher tabular value population mean.
Zα/2 which leads to larger maximum allowable b. Find the length of confidence interval
deviation and consequently, wider confidence
interval estimate. 2. The average hemoglobin reading for a sample of
2. When the population variance of standard deviation is 20 CTU teachers was 16grams per 100mL, with
unknown. a sample standard deviation of 2grams.
a. Find the 95% confidence interval of the
Formula: population mean.
b. Find the length of confidence interval.
μ=
where: x̅ = sample mean
= tabulated t-value
s = sample standard deviation
n = no. of sample/ sample size
 QUIZ II QUIZ II
Directions. Solve the following problems. Directions. Solve the following problems.

1. A survey of 30 emergency room patients found 1. A survey of 30 emergency room patients found
that the average waiting time for treatment was that the average waiting time for treatment was
174.3 minutes. Assuming that the population 174.3 minutes. Assuming that the population
standard deviation is 46.5 minutes. Find: standard deviation is 46.5 minutes. Find:
a. the best point estimate of the mean. a. the best point estimate of the mean.
b. the 95% confidence interval of the population b. the 95% confidence interval of the population
mean. mean.
c. the 99% confidence interval of the population c. the 99% confidence interval of the population
mean. mean.

2. The head of the Philippine University (PU) 2. The head of the Philippine University (PU)
observes a decline on the alcoholic expenditures observes a decline on the alcoholic expenditures
of learners from a monthly expenditure of PHP of learners from a monthly expenditure of PHP
350 in the previous year. To check on this, he 350 in the previous year. To check on this, he
randomly selected 10 PU learners who drink randomly selected 10 PU learners who drink
alcoholic beverages and asked for the amount, in alcoholic beverages and asked for the amount, in
pesos, that they usually spent on alcoholic pesos, that they usually spent on alcoholic
beverages in a month. It is known that the usual beverages in a month. It is known that the usual
amount spent on alcoholic beverages by learners amount spent on alcoholic beverages by learners
who drink alcoholic beverages follows the who drink alcoholic beverages follows the
normal distribution with standard deviation of normal distribution with standard deviation of
PHP 10. The data collected are: 400, 235, 200, PHP 10. The data collected are: 400, 235, 200,
250, 200, 300, 500, 430, 420, and 220. Find: 250, 200, 300, 500, 430, 420, and 220. Find:
a. the estimate of the true average amount d. the estimate of the true average amount
spent on alcoholic beverages by learners spent on alcoholic beverages by learners
who drink alcoholic beverages. who drink alcoholic beverages.
b. the 95% confidence interval for the true e. the 95% confidence interval for the true
mean amount spent by the learners on mean amount spent by the learners on
alcoholic beverages. alcoholic beverages.
c. length of the confidence interval. f. length of the confidence interval.

3. The Municipal Planning Officer of Los Baños 3. The Municipal Planning Officer of Los Baños
wants to determine if the average wage of wants to determine if the average wage of
labourers per hour in the municipality is below labourers per hour in the municipality is below
PHP 320. A random sample of 40 labourers in PHP 320. A random sample of 40 labourers in
the municipality yielded a mean of PHP 300 per the municipality yielded a mean of PHP 300 per
hour with a sample standard deviation of PHP 50 hour with a sample standard deviation of PHP 50
per hour. Using this information, construct a per hour. Using this information, construct a
95% confidence interval estimate of the true 95% confidence interval estimate of the true
average wage rate per hour of labourers in the average wage rate per hour of labourers in the
Municipality of Los Baños. Find the length of Municipality of Los Baños. Find the length of
confidence interval. confidence interval.