Lecture 12
Lecture 12
→ There are many different samples of size 100 that can be taken from this population.
The sample mean is an estimate of the population mean. The sample mean is our
"best guess" or "best estimate" of the unknown population mean.
Standard Error of the Mean (the standard deviation of the sample means)
It is the population standard deviation divided by the square root of the sample size
𝜎𝜎
𝜎𝜎𝑥𝑥 = 𝜎𝜎 = population standard deviation 𝑛𝑛 = sample size
√𝑛𝑛
𝜎𝜎 𝜎𝜎 𝜎𝜎 1
For example, if 𝑛𝑛 = 1, 𝜎𝜎𝑥𝑥 = = 𝜎𝜎 if 𝑛𝑛 = 25, 𝜎𝜎𝑥𝑥 = = = 𝜎𝜎
√1 √25 5 5
The standard deviation of the sample means (or standard error) falls by the √𝑛𝑛
Shape
The Central Limit Theorem states that if the sample size is large (30 or more) the
distribution of the sample means will be approximately normally even when the
underlying population (from which the sample is taken) is not normal.
• If the population is symmetrical about the mean (e.g. uniform population) a sample
size of at least 15 is considered large enough.
• If the underlying population is normal, then the distribution of the sample means will
be normal for any sample size.
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Business Statistics Winter 2023
Probability Distribution
0.25
0
5 6 7 8 X
You randomly select two balls from the urn, calculate the mean of the two numbers and
do this many times. Below is a list of the 16 possible samples of size 2 you could get:
(5, 5) (5, 6) (5, 7) (5, 8) (6, 5) (6, 6) (6, 7) (6, 8)
The table below shows all possible sample means and their corresponding probabilities.
𝒙𝒙 Frequency 𝒑𝒑(𝒙𝒙)
5.0 1 0.0625
5.5 2 0.1250
6.0 3 0.1875
6.5 4 0.2500
7.0 3 0.1875
7.5 2 0.1250
8.0 1 0.0625
Total 16 1.00
0.25
0
5 5.5 6 6.5 7 7.5 8 𝑥𝑥
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Business Statistics Winter 2023
Inverse of NORM.DIST finds the value of X (or 𝑥𝑥 ) for any given probability
NORM.INV (probability, mean, standard_dev)
o X = value of 𝑥𝑥
o probability (in NORM.INV) is the area below X (at most)
o mean = population mean 𝜇𝜇
o standard_dev = population standard deviation
o true returns the probability of at most (the area below X) (true = 1)
o X = sample mean 𝑥𝑥
o probability (in NORM.INV) is the area below 𝑥𝑥 (at most)
o mean = population mean 𝜇𝜇
𝜎𝜎
o standard_dev = standard deviation of the sample means (standard error) =
√𝑛𝑛
o true returns the probability of at most (the area below 𝑥𝑥 ) (true = 1)
Ex 1: The distribution of the ages of first-year students at BCIT is highly skewed to the
right with a mean age of 22 years and a standard deviation of 2.8 years.
(a) Find the probability that a randomly selected student is less than 20.4 years.
(b) 49 first-year BCIT students are randomly selected and asked how old they are.
What is the mean and standard deviation of the distribution of sample means?
Describe the shape of the sampling distribution.
σ
𝜇𝜇𝑥𝑥 = 𝜇𝜇 = 𝜎𝜎𝑥𝑥 = =
√𝑛𝑛
In Excel:
X = sample mean = 20.4 Mean = population mean = 22 Standard_dev = 𝜎𝜎𝑥𝑥 = 0.4
P(𝑥𝑥 𝐚𝐚𝐚𝐚 𝐦𝐦𝐦𝐦𝐦𝐦𝐦𝐦 20.4) = NORM.DIST(X = 20.4, mean = 22, standard_dev = 0.4, true)
or = NORM.DIST(X = 20.4, mean = 22, standard_dev: Enter 2.8/SQRT(49), true)
(d) What does your answer from (c) tell you? Calculate the Z-score.
P(sample mean ≤ 20. 4 years when the population mean = 22 years) = 0.000032
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Business Statistics Winter 2023
Ex 2: You recently graduated from the BCIT Accounting program and just started
working at a CPA firm. Your boss claims that the average starting salary for an
accountant who just graduated is $50,000/year so he offers to pay you $50,000. The
standard deviation is $5,000/year and salaries are approximately normally distributed.
(a) What percentage of accountants earn at least $56,000/year just after graduating?
(b) Find the probability that a randomly selected accountant earns at least $56,000.
(c) You randomly select 14 accountants (recently graduated) and ask them how much
they earn. Find the probability of obtaining an average salary of at least $56,000.
𝜎𝜎 5000
𝜎𝜎𝑥𝑥 = = = 1336.306 (= standard_dev)
√𝑛𝑛 √14
(d) You got a sample mean of $56,000 from your random sample. Do you think the
high mean salary you observed was due to random fluctuations or do you think
your boss was lying when he said the average starting salary is $50,000?
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Business Statistics Winter 2023
𝒙𝒙 Total
Mean 𝜇𝜇 𝑛𝑛𝑛𝑛
𝜎𝜎
Standard Error √𝑛𝑛 𝜎𝜎
√𝑛𝑛
P(Total > 3200) = 1 − NORM.DIST(X = 3200, mean = 2720, standard_dev = 96, true)
𝑥𝑥 − 𝜇𝜇 𝑥𝑥 − 𝜇𝜇 𝜎𝜎
z= 𝜎𝜎
z= 𝜎𝜎 𝜎𝜎𝑥𝑥 = 𝜎𝜎𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 = √𝑛𝑛 𝜎𝜎
� 𝑛𝑛 √𝑛𝑛
√
NORM.DIST (X, mean, standard_dev, true) finds the probability below X (or 𝑥𝑥)
NORM.INV (probability, mean, standard_dev) returns X (𝑥𝑥 ) for any given probability
Lab Exercises
1. Brewers Association studies shows that the average Canadian adult drinks 90 litres
of beer per year. The number of litres of beer drank is highly skewed to the right with
a standard deviation of 48 litres. A random sample of 36 Canadian adults of legal
drinking age is taken.
(a) What is the mean and standard deviation of the distribution of sample means
(standard error)? Describe the shape.
(b) What is the probability of our sample having a mean greater than 100 litres?
(c) What is the probability of our sample having a mean less than 70 litres?
(d) Find the probability of our sample mean being within ten litres of the population
mean.
(e) Find the minimum sample mean consumption needed to be in the top 1% of all
samples.
2. WestJet is concerned about the amount of baggage its passengers are bringing on
the flight. A study last year of passenger bags revealed that the bags had a mean
weight of 18.2 kg and a standard deviation of 3.75 kg and that the weights are
approximately normally distributed.
(a) 1 out of every 40 bags should weigh more than what weight?
(b) Maximum bag weight limit is 23 kg. What percentage of bags exceed this weight?
(c) The baggage supervisor has his staff randomly select 9 bags and weigh them.
(i) What is the probability the sample mean weight will be less than 15 kg?
(ii) Find the probability the sample mean will be within 2 kg of the population mean?
(d) A small plane with 80 seats can handle up to 1,600 kg of checked baggage.
What is the probability that 80 passengers will check too much baggage for the
plane to handle?
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Business Statistics Winter 2023
3. An elevator company has conducted a study and determined the average adult
weight is 78 kg with a standard deviation of 14 kg. The distribution is approximately
normally distributed.
(b) They decide the elevator will have a capacity of 5 people and a maximum load of
575 kg. What is the probability that load will be exceeded if there are 5 people in
the elevator?
(c) The company also makes another elevator that can hold 10 people and has a
maximum capacity of 1,150 kg. Find the probability that 10 people will exceed
the maximum load.
Solutions
1. (a) 𝜇𝜇𝑥𝑥 = 90 litres 𝜎𝜎𝑥𝑥 = 8 litres, the distribution of the sample means is ~ Normal
(b) 0.10565 (c) 0.00621 (d) 0.7887 (e) 108.61 litres
2. (a) 25.55 kg (b) 10.03%) (c) (i) 0.0052 (ii) 0.8904 (d) 0.0000088 (almost never)
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