Business Statistics

Tenth Edition
Ken Black , Sanjeet Singh

Chapter 7

Sampling and Sampling Distributions

Business Statistics 10e by Ken Black, Sanjeet Singh
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Learning Objectives
1. Contrast sampling to census and differentiate among
different methods of sampling by assessing the
advantages associated with each.
2. Describe the distribution of a sample’s mean using the
central limit theorem, correcting for a finite population
if necessary.
3. Describe the distribution of a sample’s proportion using
the z formula for sample proportions.

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7.1 Sampling (1 of 16)
Reasons for Sampling
• The sample can save money
• The sample can save time
• For given resources, the sample can broaden the scope
of the study
• Because the research process is sometimes destructive,
the sample can save product
• If accessing the population is impossible, the sample is
the only option
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7.1 Sampling (2 of 16)
Reasons for Taking a Census
• Eliminate the possibility that by chance a randomly selected
sample may not be representative of the population
• For the safety of the consumer
• To benchmark data for future studies
Frame
• List, map, directory, or some other source used in the
sampling process to represent the population
• Also called the working population
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7.1 Sampling (3 of 16)
Frame
• Overregistered: contains units that are not in the target
population
• Underregistered: does not contain some units that are in the
target population

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7.1 Sampling (4 of 16)
Random Versus Nonrandom Sampling
• Random sampling: every unit of the population has the same
probability of being selected into the sample
• Nonrandom sampling: not every unit of the population has the
same probability of being selected into the sample
o Generally NOT an appropriate technique for gathering data for
statistical analysis
Simple Random Sampling
• Each unit in the frame is numbered from 1 to N (the size of the
population)
• A random number table or generator is used to select n items into
the sample
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7.1 Sampling (5 of 16)
Simple Random Sampling
Example: From the population frame of companies in Table 7.3, select a simple random
sample of six companies
• First, the companies were numbered from 1 to 30
TABLE 7.3: Numbered population of 30 Companies
01 Alaska Airlines 11 DuPont 21 Lubrizol
02 Alcoa 12 ExxonMobil 22 Mattel
03 Ashland 13 General Dynamics 23 Merck
04 Bank of America 14 General Electric 24 Microsoft
05 Boeing 15 General Mills 25 Occidental Petroleum
06 Chevron 16 Halliburton 26 JCPenney
07 Citigroup 17 IBM 27 Procter & Gamble
08 Clorox 18 Kellogg 28 Ryder
09 Delta Air Lines 19 Kroger 29 Sears
10 Disney 20 Lowe’s 30 Time Warner

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7.1 Sampling (6 of 16)
Example
• From the table of random numbers (Table 7.1), two-digit numbers
are selected, discarding any that are over 30
• In the table of random numbers, the first two digits are 91, which
is unusable
• The second two digits are 56, also unusable, as is 74, the next two
digits
• The fourth set of two digits is 25, which corresponds with
Occidental Petroleum

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7.1 Sampling (7 of 16)
TABLE 7.1: A Brief Table of Random Numbers

91567 42595 27958 30134 04024 86385 29880 99730

46503 18584 18845 49618 02304 51038 20655 58727
34914 63974 88720 82765 34476 17032 87589 40836
57491 16703 23167 49323 45021 33132 12544 41035
30405 83946 23792 14422 15059 45799 22716 19792
09983 74353 68668 30429 70735 25499 16631 35006
85900 07119 97336 71048 08178 77233 13916 47564

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7.1 Sampling (8 of 16)
Example
• Continue moving across the rows until 6 two-digit numbers are
selected
• Sample will be:
o (25) Occidental Petroleum
o (27) Procter & Gamble
o (01) Alaska Airlines
o (04) Bank of America
o (02) Alcoa
o (29) Sears

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7.1 Sampling (9 of 16)
Stratified Random Sampling
• Population is divided into nonoverlapping subpopulations (strata)
• Analyst selects a random sample from each
o Can reduce sampling error, because sample will more closely match the population
o More costly than a simple random sample
o Strata are usually chosen based on available information about the population
• Within each group, there should be homogeneity
• Between each group, there should be heterogeneity

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7.1 Sampling (10 of 16)
Stratified Random Sampling
• Proportionate stratified random sampling occurs when the
percentage of the sample taken from each stratum is proportionate to
the percentage that each stratum is within the whole population
o Example: suppose voters are being surveyed in Boston and the sample is
being stratified by religion as Catholic, Protestant, Jewish, and others
o If Boston’s population is 90% Catholic and if a sample of 1,000 voters is
taken, the sample would require inclusion of 900 Catholics to achieve
proportionate stratification
• Disproportionate stratified random sampling occurs when the
percentage of each stratum in the sample is different from the
percentage that each stratum is within the whole population

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7.1 Sampling (11 of 16)
Systematic Sampling
• Every kth item is selected to produce a sample of size n from a population of
size N
N
k
n
Example: A business analyst wanted to sample Texas manufacturers as part of a
management study.
• Wanted to sample 1,000 companies
• Frame – most recent edition of the Texas Manufacturers Register® which
listed 22,000 manufacturing companies in alphabetic order
 22, 000 
• The value of k is    22
 1, 000 
• Use random number table to choose the first element in the study
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7.1 Sampling (12 of 16)
Cluster (or Area) Sampling
• Dividing population into nonoverlapping areas
• Clusters that are internally heterogeneous
o Example: states, cities
• If clusters are too large, a second set of clusters can be taken from
the initial cluster (two-stage sampling)
• Advantages: convenience, cost
• Disadvantages: may be less efficient than simple random
sampling if the elements of the cluster are similar

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7.1 Sampling (13 of 16)
Nonrandom Sampling
• Any method that does not involve a random selection process
Convenience Sampling
• Selected for the convenience of the analyst
Judgment Sampling
• Chosen by the judgement of the analyst
o Since the probability of an element being selected cannot be
determined, cannot determine sampling error
o Can be biased due to systematic errors in judgment

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7.1 Sampling (14 of 16)
Quota Sampling
• Population subclasses, such as age or gender, are used
as strata
• Can be useful if no frame is available for the population
• Can be less costly
• Nonrandom, and thus probabilities cannot be calculated

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7.1 Sampling (15 of 16)
TABLE 7.4: Using Quota Sampling to Fill Quotas of Consumers by Age

Age Category Quota How Sample is Obtained

14–18 years old 70 Go to the nearest high school and survey willing
students as they leave school until you have surveyed
70 students
25–39 years old 30 Go to junior soccer matches and survey parents in the
stands until you have 30 surveys
Over 65 years old 40 Go to the activity center of a retirement community
and survey whomever will talk to you

Snowball Sampling
• Survey subjects are selected based on referral from other survey
respondents.
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7.1 Sampling (16 of 16)
Sampling Error
• Occurs when the sample is not representative of the population
Nonsampling Error
• All other errors other than sampling error
o Missing data
o Recording errors
o Measurement errors
o Input processing errors
o Analysis errors
o Response errors
o And many more!

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7.2 Sampling Distribution of Sample
Mean (1 of 12)
Suppose that a small, finite population contains only N = 8 numbers:
54 55 59 63 64 68 69 70
• Distribution of the population data:

• Suppose that all possible samples of size n = 2 are taken from this
population
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7.2 Sampling Distribution of Sample
Mean (1 of 12)
Population: (54, 54) (55, 54) (59, 54) (63, 54)

54 55 59 63 64 68 69 70 (54, 55) (55, 55) (59, 55) (63, 55)

(54, 59) (55, 59) (59, 59) (63, 59)
All possible samples of n = 2: (54, 63) (55, 63) (59, 63) (63, 63)
(54, 64) (55, 64) (59, 64) (63, 64)

• Then take the means of all of the samples

(54, 68) (55, 68) (59, 68) (63, 68)
(54, 69) (55, 69) (59, 69) (63, 69)
(54, 70) (55, 70) (59, 70) (63, 70)
(64, 54) (68, 54) (69, 54) (70, 54)
(64, 55) (68, 55) (69, 55) (70, 55)
(64, 59) (68, 59) (69, 59) (70, 59)
(64, 63) (68, 63) (69, 63) (70, 63)
(64, 64) (68, 64) (69, 64) (70, 64)
(64, 68) (68, 68) (69, 68) (70, 68)
(64, 69) (68, 69) (69, 69) (70, 69)
(64, 70) (68, 70) (69, 70) (70, 70)

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7.2 Sampling Distribution of Sample
Mean (1 of 12)
Means of the samples:
54 54.5 56.5 58.5 59 61 61.5 62
54.5 55 57 59 59.5 61.5 62 62.5
56.5 57 59 61 61.5 63.5 64 64.5
58.5 59 61 63 63.5 65.5 66 66.5
59 59.5 61.5 63.5 64 66 66.5 67
61 61.5 63.5 65.5 66 68 68.5 69
61.5 62 64 66 66.5 68.5 69 69.5
62 62.5 64.5 66.5 67 69 69.5 70

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7.2 Sampling Distribution of Sample Mean
(1 of 12)

Distribution of the means of the samples:

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7.2 Sampling Distribution of Sample Mean
(1 of 12)

Distribution of the mean of the samples looks different

from the original distribution:

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7.2 Sampling Distribution of Sample Mean
(1 of 12)

Similarly, the histogram of a Poisson distribution and its

samples are different:

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7.2 Sampling Distribution of Sample Mean
(1 of 12)

The Central Limit Theorem

• If random samples of size n are repeatedly drawn from a population that
has a mean of μ and a standard deviation of σ, the sample means, x ,
are approximately normally distributed for sufficiently large sample sizes
(n ≥ 30), regardless of the shape of the population distribution. If the
population is normally distributed, the sample means are normally
distributed for any size sample.
• It can be shown that the mean of the sample means is the population mean:
x  
• The standard deviation of the sample means (the standard error of the mean) is:

x 
n
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7.2 Sampling Distribution of Sample Mean
(1 of 12)

Figure 7.9 Shapes of the Distributions of Sample Means for Three Sample Sizes
Drawn from Four Different Population Distributions
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7.2 Sampling Distribution of Sample Mean
(1 of 12)
• If the sample size is greater than 30 or the population is normally distributed,
the sample means are normally distributed, and z scores can be used to
evaluate individual values x 
z

n
Example: Suppose the population mean expenditure per customer at a tire store is
$125 and the population standard deviation is $30. If a random sample of 40
customers is taken, what is the probability that the sample mean expenditure is
more than $133?
• Because the sample size is greater than 30, the central limit theorem can be
used, and the sample means are normally distributed
x  133  125
z   1.69
 30
n 40
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7.2 Sampling Distribution of Sample Mean
(1 of 12)
Example, continued:
• From the z distribution table, z = 1.69 gives a probability of .4545
• .5 −.4545 = .0455
• 4.55% of the time, a random sample of 40 customers from this population
would yield a sample mean expenditure of $133 or more when the population
mean is $125

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7.2 Sampling Distribution of Sample Mean
(1 of 12)
Sampling from a Finite Population
• In cases of a finite population, a statistical adjustment must be
made to the z formula for sample means
x 
z
 N n
n N 1
• A rough rule of thumb is to use the finite population correction
factor when n  .05
N
• The correction factor reduces the size of the standard error of the
mean, because when the sample is large relative to the population,
the sample mean is less likely to vary from the population mean
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7.2 Sampling Distribution of Sample Mean
(1 of 12)

TABLE 7.6: Finite Correction Factor for Some Sample Sizes

Population Size Sample Size Value of Correction Factor

2000 30(<5% N) .993
2000 500 .866
500 30 .971
500 200 .775
200 30 .924
200 75 .793

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7.3Sampling Distribution of Sample Proportion
(1 of 4)
The sample proportion is computed by dividing the frequency with
which a given characteristic occurs in the sample by the number of items
in the sample x
pˆ 
n
where x = the number of items in a sample that have the characteristic
n = the number of items in the sample
The central limit theorem applies to sample proportions in that the normal
distribution approximates the shape of the distribution of sample
proportions if n  p  5 and n  q  5 (p is the population proportion
and q = 1 − p)
• The mean of sample proportions is p (the population proportion)

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7.3Sampling Distribution of Sample Proportion
(1 of 4)
• The standard error of the proportion is

pq Where
n p = population proportion
• The z formula is q = 1− p
n = sample size
pˆ  p pˆ  sample proportion
z
pq
n

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7.3Sampling Distribution of Sample Proportion
(1 of 4)
Example: Suppose 60% of the electrical contractors in a region use
a particular brand of wire. What is the probability of taking a
random sample of size 120 from these electrical contractors and
finding that .50 or less use that brand of wire?
.50  .60
z  2.24
.60  .40
120
• The z distribution table gives a value of .4875
• .5 − .4875 = .0125

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7.3Sampling Distribution of Sample Proportion
(1 of 4)

There is only a 1.25% chance

of finding that 50% or less of a
sample of 120 contractors use a
given brand of wire if the
population proportion is .60

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Chapter Case: 3M
• The 3M company is a global innovation company with over 100,000 patents;
$31.7 billion in sales; and 91,000 employees. 3M has 27 business units
organized under five business groups: consumer, electronics & energy,
healthcare, industrial, and safety & graphics.
• 3M has 8500 researchers worldwide and its products are sold in nearly 200
countries. Included in 3M’s more widely known products are Scotch® Tape,
Post-it® Notes, and Ace™ bandages.
• 3M was born as a small-scale mining company in 1902 when the five
founders invested in harvesting a mineral known as corundum from a mine in
Minnesota on the shores of Lake Superior.
• Today, one-third of 3M’s sales come from products invented within the past
five years during which time over $8 billion has been invested in R&D and
related expenditures. According to company information sources, the global
3M team is committed to creating the technology and products that advance
every company, enhance every home, and improve every life.

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