# 10.1 Confidence interval, single population mean, population standard

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Confidence Intervals: Confidence Interval, Single Population Mean, Population Standard Deviation Known, Normal is part of the collection col10555 written by Barbara Illowsky and Susan Dean with contributions from Roberta Bloom.

## Calculating the confidence interval

To construct a confidence interval for a single unknown population mean $\mu$ , where the population standard deviation is known, we need $\overline{x}$ as an estimate for $\mu$ and we need the margin of error. Here, the margin of error is called the error bound for a population mean (abbreviated EBM ). The sample mean $\overline{x}$ is the point estimate of the unknown population mean $\mu$

## The confidence interval estimate will have the form:

• (point estimate - error bound, point estimate + error bound) or, in symbols, $\left(\overline{x}-\mathrm{EBM},\overline{x}+\mathrm{EBM}\right)$

The margin of error depends on the confidence level (abbreviated CL ). The confidence level is often considered the probability that the calculated confidence interval estimate will contain the true population parameter. However, it is more accurate to state that the confidence level is the percent of confidence intervals that contain the true population parameter when repeated samples are taken. Most often, it is the choice of the person constructing the confidence interval to choose aconfidence level of 90% or higher because that person wants to be reasonably certain of his or her conclusions.

There is another probability called alpha ( $\alpha$ ). $\alpha$ is related to the confidence level CL. $\alpha$ is the probability that the interval does not contain the unknown population parameter.
Mathematically, $\alpha$ + CL = 1.

• Suppose we have collected data from a sample. We know the sample mean but we do not know the mean for the entire population.
• The sample mean is 7 and the error bound for the mean is 2.5.

$\overline{x}=$ 7 and $\text{EBM}=$ 2.5.

The confidence interval is $\left(7-2.5,7+2.5\right)$ ; calculating the values gives $\left(4.5,9.5\right)$ .

If the confidence level (CL) is 95%, then we say that "We estimate with 95% confidence that the true value of the population mean is between 4.5 and 9.5."

A confidence interval for a population mean with a known standard deviation is based on the fact that the sample means follow an approximately normaldistribution. Suppose that our sample has a mean of $\overline{x}=10$ and we have constructed the 90% confidence interval (5, 15)where $\text{EBM}=5$ .

To get a 90% confidence interval, we must include the central 90% of the probability of the normal distribution. If we include the central 90%, we leave out a total of $\alpha$ = 10% in both tails, or 5% in each tail, of the normal distribution.

To capture the central 90%, we must go out 1.645 "standard deviations" on either side of the calculated sample mean. 1.645 is the z-score from a Standard Normalprobability distribution that puts an area of 0.90 in the center, an area of 0.05 in the far left tail, and an area of 0.05 in the far right tail.

It is important that the "standard deviation" used must be appropriate for the parameter we are estimating. So in this section, we need to use the standard deviation that applies to sample means, which is $\frac{\sigma }{\sqrt{n}}$ . $\frac{\sigma }{\sqrt{n}}$ is commonly called the "standard error of the mean" in order to clearly distinguish the standard deviation for a mean from the population standard deviation $\sigma$ .

what is scarcity
what are some the problems of scarcity
Wireko
The economic problem of sacrtiy only be solved if there is an economic efficiency
Shoaib
inflation
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Okwori
Scarcity is an economic good that is limited in supply.
tomi
inflation
Spark
Rise in gernal price level from previous year
Shoaib
who is the father of economics
Chris
adam smith father of modern economics alfred Marshall father of micro economics john Maynard Keynes father of macro economics
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Esther
Adam smith is the father of classical economics.
yusuf
david recardo
Tariku
Shoaib
The economic field existed because of the limited resources and unlimited human wants. why is it so?
state the law of diminish return
Abobarin
the law of diminishing returns states that every additional increase in the variable factor of production, keeping other factors fixed, will eventually reach a point were returns will diminish with every successive unit of factor added.
Hamna
who is the father of Ethiopian Economics?
Tariku
the system of economics
what is economics system
molos
is an arrangement for managing the relatively scarce resources in a particular place and at a particular time
Samuel
but also allocate resources equally ?
Furkan
economic is the study of what
Abba
Economics is a science which studies humam behaviour as a relationship between ends and scarce means which have alternate uses
Samuel
what is the law of equilibrium.
The law of equilibrium states that when the demand of a commodity is equal to the supply
Stanley
what is demand curve
demand carve is a graphical representation of the relationship between the price of the or the service and the quantity demanded for a given period of time
Is the graphical representation of demand schedule. Also it has negative slope
Abubakary
The law of equilibrium is state that the quantity demand are equal to quantity supply.
Abubakary
sometimes demand exceeds supply or vice versa .In the first situation prices tend to rise therefore supply and demand meet the balance point called as equilibrium .
Furkan
the point of intersection mathematically but this is just an assumption that all other variables remain equal
Deleon
when there is excess supply and demand it means there is forces acting upon the equilibrium and prices should be decreased or increased appropriately
Deleon
The law of equilibrium states that ceteris paribus, at a certain two variables will be equal to each other.
Sessay
scarcity is the wants and desire of people of goods and services with limited resources and purchasing power to get it all
The difference between cyclical unemployment and structural unemployment
Cyclical unemployment .it has to do with an increase in the quantity of good demanded or there is over production which result in fall in prices. Industries will be affected it will now causes retrenchment of workers in the industries while structural unemployment arises as a result of slight change
In the industrial structure of a countries workers wil now be retren
Will now be retrenched as a result of economic recession... That is the little i knw....
what is the condition of a consumer behaviour in the equilibrium under the theory of consumer behaviour
what is equilibrium
Sahr
A point where quantity demand & supply meets called equilibrium
Hasham
a state is said to be equilibrium when there is no tendency of movement.
Nibedita
Pls @Nibedita am confused
Prince
The state of balance achieved by an end user of products that refers to the amount of goods and services they can purchase given their present level of income and the current level of prices. Consumer equilibrium allows a consumer to obtain the most satisfaction possible from their income.
Okwori
where is the calculations?
what are the two conditions for aconsumer to be in the equilibrium under the theory of consumer behaviour in
Sahr
Economic equilibrium is a condition or state in which economic forces are balanced. In effect, economic variables remain unchanged from their equilibrium values in the absence of external influences. Economic equilibrium may also be defined as the point at which supply equals demand for a product,
vinay
Hello there, let's make a time to chat about econimics and its issues.
it's true
hie Sir /Madam l need help when it comes to Economics lm doing it for the first time
Thembelani
So, share your problems that you have in terms of economis and we will discuss on it.
DA
Basic Economic problems
Thembelani
what is the Basic Economic problem
Thembelani
what is the Basic Economic problem
scarcity
Rhaiymornd
a bit of explanation please its my first year doing Economics
Thembelani
rare, limited. economic agents eg You dube, the govt & the business entities wants to maximise their utility/satisfaction but because limited resource or scarcity of such resources they are unable to satisfy their needs.
ian
thank u Sir , l understand what you are saying now
Thembelani
limited resources; you wanna take the most benefits from the minimum resource.
DA
if u ar a fresher, eco has to 2 fundamental parts "micro & macro". micro(small) this is were the economc agents ar discussd, economc systms, dmand & supply, typs of market systms etc and the macro (big) part the elucidates the functns of central bank, typs of employmnt, functns of money & int trade.
ian
there is an old adage that says "a picture is worth a thousand words" economics is full of graphing so it requires on the side of the student to master the art of keeping information in form graphs.
ian
oky Sir
Thembelani
scarcity becomes the fundamental problem of economics because of limited resources, when we take an individual, he or she has many wants, thus unlimited wants but can never satisfy all but only few.
Rhaiymornd
now when we take a firm, a firm maybe willing to produce two or more product into the market but due to limited resources they only produce one. the same way if we take the government, he or she maybe willing to bring development either through infrastructures,
Rhaiymornd
that is when consumer decision making rule comes in
Olusegun
choice arises as a result of scarcity of resources
Olusegun
so if we look through, the individual, firm and government, their wants are unlimited but due limited resources, all of their wants cannot be satisfy. therefore scarcity can be term as limited in supply of resources. scarcity is not lack of resources but insufficient resources
Rhaiymornd
there is a marriage with the following; scarcity, factors of production, opportunity cost curve (occ) or (ppc, ppf, tc) production possibility curve productn possibility frontier transformation curve. The OCC, PPC, PPF & TC explains the decisions made by householders, firms & the govt.
ian
opportunity cost also arises as a result of firm willing to produce a particular commodity but resources use in satisfying or producing such output is limited
Olusegun
wat ar those decisions? the most important is WHY nations economise tht is if they hav abundancy of factors of productn eg land, labour & entreprise? now since all of us have unlimited needs against few resourcs PPC, PPF, TC, OCC walks in to make wise allocatn of resources.
ian
how do those decisions made? eg by economic agents; a. Household (You) - if u have R10 & wish to buy a book & a pen & realise that both commodities seĺl at the same price which of the two (2) can u buy (necesity) and which one can u forgo (not all tht important).
ian
b. firms - they allocat mo resourcs to all thoz commoditz tht they think will yield mo profit. c. Govt - if the govt SA was to come in yo area which 1 would u think they can consider first tht can benefit the majority & the minority. So instead of building football stadium they construct a hospital.
ian
if the SA govt had enough resources they would have built both the stadium and the hospital but because of scarce in terms of resources they had to forgo the construction the stadium to build a hospital which is necessary for the majority to benefit.
ian
Opportunity cost well broken down..
Andres
opportunity cost means the lose of other alternatives when the alternative is chosen
is the benefits that you loose by not selecting a certain alternative.
EDWINY
individual wants maybe unlimited, but means to satisfy them are limited there one has to forgo some alternative in order to acquire other alternative and it must according priority, that is when scale of preference set in for individuals to make choice
Rhaiymornd
hello everyone
Aliyu
Next best alternative forgiven
Shoaib
demand is the amount of goods and services that consumer is willing and able to purchase at a particular prices over given period of time
yep
Abraham
what's demand?
What customers want the most...
Abraham
not only what customers wants, want is just mere desire but demand is backed by purchasing power, ability and willingness
Rhaiymornd
thanks
Abraham
What's opportunity cost?
Abraham
what are the differences between demand and supply
who is called lender of the last resort
Hi
Linda
hlw
Karishma
Central bank
Majeed
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Majeed
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Majeed
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Karishma
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Chandra
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Majeed
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Chandra
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Majeed
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Abigail
Yesss
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Doctor
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Abigail
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Sessay
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Doctor
split the price effect into income effect and substitution effect
Karishma
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Abigail
Hi
Godwin
hi
Hey, I am new here. Hope, discussion on Economics will clear our concepts more.
yasir
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Abigail
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Karishma
how to consumer equlibrium through ic
Karishma
consumer equilibrium demand equals supply
Kenneth
the consumer is in equilibrium when the indifference curve is tangential to the budget line. or when the BL and IC intersect
Sessay
reasons indifference curve slopes downwards?
Kenneth
fine Abby any good,
Doctor
ur lost
Doctor
hey. im new year. economics teacher how we can discuss some thing interesting.
EDWINY
which one
Doctor
what do u understand the concept of poverty cycle.
EDWINY
hey
Ebong
I'm New here
Ebong
hi
ian
just new here guy's and also an Economics fresher of Kogi State University Anyigba
nelson
wxup
Ayegba
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Amara
, Dennis Weissman Associates, LLC Laboratory Economics is the monthly business newsletter that gets behind the headlines and press releases.
Ayegba
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Emmanuel
Difference between extinct and extici spicies
While the American heart association suggests that meditation might be used in conjunction with more traditional treatments as a way to manage hypertension
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