LCT10 - Introduction to Business Statistics Lecture 10 The...

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1 Introduction to Business Statistics Lecture 10 The Concept of Confidence Interval Background: Samples are taken when it is impossible, impractical or too expensive to obtain complete data on a relevant population. The sample provides useful information about a population, but the information is imperfect. Example: Suppose you ask 100 potential customers how much they will spend on a proposed new product next year. From the 100 responses you obtain a sample average of $250. You could make the following inference:
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2 Consider the following statements: My best estimate of average sales per potential customer is $250; Average sales per potential customer will be between $210 and $290 with 95% confidence; Average sales per potential customer will be greater than the break even amount of $210 at a 2.5% level of significance. The first statement concerns a point estimator ; the second statement an interval estimator ; the third statement is about hypothesis testing .
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3 Some Basic Concepts: Two methods of statistical inference: Estimation and Hypotheses Testing. Point estimator: A rule that tells us how to calculate a single number based on sample data. It is the best guess of the value of a parameter. Interval estimator: A rule that calculates a pair of numbers based on sample data between which we have some confidence that the parameter will lie.
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LCT10 - Introduction to Business Statistics Lecture 10 The...

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