mba 522 6 Confidence Interval for Armand

# mba 522 6 Confidence Interval for Armand - How Confidence...

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How Confidence Interval for Armand Problem was computed When you make a prediction of Y with the regression equation, you are really reporting what the average Y would be for a given value of X. To be able to use the estimated Y value with any confidence in decision making, you can calculate a confidence interval for it. For example, let's say we use a certain X value in a regression equation and we estimate Y-hat. A 95% CI for Y-hat gives us a range. That range says Y can be any number within that range (for that X). To compute CI, use equation 12.24, in conjunction with equation 12.23. Let’s see how the authors calculated the CI for Armand’s problem The authors applied Eq. 12.24 which has 2 terms in it: a) Y^ term b) a term which is multiplication of two values: a t value that must be looked up in a statistical table, and a S y^p term which is computed using Eq. 12.23 The first term is the predicted value of Y given a certain X value (denoted as Xp). Y-hat = 110 for Armand's Pizza problem when student population is 10 (i.e., 10,000)

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mba 522 6 Confidence Interval for Armand - How Confidence...

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