Statistical Inference

Introduction

1
 STATISTICAL INFERENCE
• Statistical inference is the process of reaching
conclusions about characteristics of an entire
population using data from a subset, or sample, of
that Population.

• The process of making guesses about the truth

about a population parameter from a sample
statistic.
• To Draw the conclusion about the population
parameter by using sample information.

2
 Sample statistics
n
 x
ˆ = X n = i =1
n
n

 (x i − X n )2
ˆ 2 = s 2 = i =1
n −1
Truth (not *hat notation ^ is often used to indicate
“estimate”
observable)
Sample
Population (observation)
parameters
N N

x  (x i −  )2
= i =1
2 = i =1 Make guesses about
N N
the whole
population

3
 Estimation…
• There are two types of inference:
estimation and hypothesis testing;
estimation is introduced first.

• The objective of estimation is to determine

the approximate value of a population
parameter on the basis of a sample
statistic.

• E.g., the sample mean ( ) is employed

to estimate the population mean ( ).
4
 Estimation…
• The objective of estimation is to determine the
approximate value of a population parameter
on the basis of a sample statistic.

• There are two types of estimators:

• Point Estimator

• Interval Estimator

5
 Point Estimator…
• A point estimator draws inferences about a
population by estimating the value of an
unknown parameter using a single value or
point.

• We saw earlier that point probabilities in

continuous distributions were virtually zero.
Likewise, we’d expect that the point estimator
gets closer to the parameter value with an
increased sample size, but point estimators don’t
reflect the effects of larger sample sizes. Hence
we will employ the interval estimator to
estimate population parameters…
6
 Interval Estimator…

• An interval estimator draws inferences about a

population by estimating the value of an
unknown parameter using an interval.

• That is we say (with some ___% certainty) that

the population parameter of interest is between
some lower and upper bounds.

7
 Point & Interval Estimation…
• For example, suppose we want to estimate the
mean summer income of a class of business
students. For n=25 students,
• is calculated to be 400 $/week.

• point estimate interval estimate

• An alternative statement is:

• The mean income is between 380 and 420 $/week.

10.8
Testing of Hypothesis
• A procedure which enables us to decide on the basis of
information obtained from the sample taken from the
population whether to reject or don’t reject any
specified statement or hypothesis regarding the value of
the population parameter in a statistical problem is
known as testing of hypothesis.
• Is a procedure to determine the whether or not an
assumption about some parameter of a population
supported by the sample information.

9
Hypothesis Testing

H1

10
Left-tailed Test:- Average Marks
at Least 45
H0: µ  45
H1: µ < 45
Points Left

Reject H0 Fail to reject H0

Values that
differ significantly
from 45 45
11
Right-tailed Test: Average Marks
at most 45
H0: µ  45
H1: µ > 45
Points Right

Fail to reject H0 Reject H0

Values that
differ significantly
45 from 45
12
Two-tailed Test Average Marks
equal to 45
H0: µ = 45  is divided equally between
the two tails of the critical

H1: µ  45
region

Means less than or greater

than

Reject H0 Fail to reject H0 Reject H0

45

Values that differ significantly from 45 13

 Type I and Type II Errors
True State of Nature
The null ( H 0 ) The null ( H 0 )
hypothesis is hypothesis is
true false

Correct
We decide to
Decision
reject the Type I error
No Error

Decision

null hypothesis
1-

Correct
We don't
Decision Type II error
reject the
null hypothesis
No Error 
1-

14
Significance Level
Probability of committing a Type-I error is called the
level of significance, denoted by α . By α =5% we mean
that there are 5 chances in 100 of incorrectly rejecting a
true null hypothesis. To put it in another way we say that
we are 95% confident in making the correct decision.
Level of Confidence
The probability of not committing a Type-I error, (1- α ), is
called the level of confidence, or confidence co-efficient.

Power of a Test
The probability of not committing a Type-II error, (1-β), is
called the power of the test. 15
 Test Statistic
• A statistic on which the decision of rejecting or
don’t rejecting the null hypothesis is based is called
a test statistic

• In testing of hypothesis the sampling distribution of

the test statistic is based on the assumption that
the null hypothesis is true.

16
Decision Rule Critical Value

• Critical region/Rejection
region
Critical region is that part of the sampling
distribution of a statistic for which the HO is
rejected. A null hypothesis is rejected if the
value of test- statistic is not consistent with
the HO. CR is associated with H1. AR RR

• Non-rejection Region
Non-rejection region is that part of the sampling
distribution of a statistic for which the HO is
not rejected.
Critical Values:
The values that separate Rejection and Non-
rejection regions are called Critical values

17
Conclusion:-
Reject Ho if the calculated value of test
statistic falls in the rejection region
otherwise don’t reject Ho

18
The Basic Problem ?
Now suppose that our sample statistic reveals a mark of
88 percent. This value is relatively close to 90 percent,
but is it close enough for us to don’t reject the hypothesis?
Whether we don’t reject or reject the hypothesis, we can’t
be absolutely certain that our decision is correct;
therefore, we will have to learn to deal with uncertainty in
our decision making.

19
 General Procedure for Hypothesis Testing
Step-1:- Formulate the null and alternative hypotheses
Step-2:- Decide upon a significance level,
Step-3:- Choose an appropriate test statistic
Step-4:- Calculation
Step-5:- Determine the Critical Region (CR). The
location of the CR depends upon the form of alternative
hypothesis.
• If >, choose the right tail as the CR
• If <, choose the left tail as the CR
• If ≠ , choose a two-tailed CR
Step-6:-Conclusion: Reject null hypothesis if the
computed value of test Statistic falls in the CR,
otherwise don’t reject null hypothesis and then state the
20
decision in managerial terms
 Testing of hypothesis

• About Single population mean

μ
• About difference between population means
μ1 – μ2
• About Single population proportion
P
• About difference between population
proportions P1- P2
• About several proportions
• About several means

21
 Z-TABLE
Level of Significance
Z(0.05)=1.64

0.005 0.01 0.025 0.05 0.1

2.58 2.33 1.96 1.64 1.28

22
PERCENTAGE POINT OF STUDENT'S t-DISTRIBUTION

Alpha
d.f. 0.250 0.100 0.050 0.025 0.0125 0.005
1 1.000 3.078 6.314 12.706 31.821 63.657
2 0.816 1.886 2.920 4.303 6.965 9.925
3 0.765 1.638 2.353 3.182 4.541 5.841
4 0.741 1.533 2.132 2.776 3.747 4.604
5 0.727 1.476 2.015 2.571 3.365 4.032
6 0.718 1.440 1.943 2.447 3.143 3.707
7 0.711 1.415 1.895 2.365 2.998 3.499
8 0.706 1.397 1.860 2.306 2.896 3.355
9 0.703 1.383 1.833 2.262 2.821 3.250
10 0.700 1.372 1.812 2.228 2.764 3.169
11 0.697 1.363 1.796 2.201 2.718 3.106
12 0.695 1.356 1.782 2.179 2.681 3.055
13 0.694 1.350 1.771 2.160 2.650 3.012
14 0.692 1.345 1.761 2.145 2.624 2.977
15 0.691 1.341 1.753 2.131 2.602 2.947
16 0.690 1.337 1.746 2.120 2.583 2.921
17 0.689 1.333 1.740 2.110 2.567 2.898 23
18 0.688 1.330 1.734 2.101 2.552 2.878
 5 PERCENT POINTS OF F DISTRIBUTION

V1

V2 1 2 3 4 5 6 12 24
1 161.448 199.500 215.707 224.583 230.162 233.986 243.906 249.052
2 18.513 19.000 19.164 19.247 19.296 19.330 19.413 19.454
3 10.128 9.552 9.277 9.117 9.013 8.941 8.745 8.639
4 7.709 6.944 6.591 6.388 6.256 6.163 5.912 5.774
5 6.608 5.786 5.409 5.192 5.050 4.950 4.678 4.527
6 5.987 5.143 4.757 4.534 4.387 4.284 4.000 3.841
7 5.591 4.737 4.347 4.120 3.972 3.866 3.575 3.410
8 5.318 4.459 4.066 3.838 3.687 3.581 3.284 3.115
9 5.117 4.256 3.863 3.633 3.482 3.374 3.073 2.900
10 4.965 4.103 3.708 3.478 3.326 3.217 2.913 2.737
11 4.844 3.982 3.587 3.357 3.204 3.095 2.788 2.609
12 4.747 3.885 3.490 3.259 3.106 2.996 2.687 2.505
13 4.667 3.806 3.411 3.179 3.025 2.915 2.604 2.420
14 4.600 3.739 3.344 3.112 2.958 2.848 2.534 2.349
15 4.543 3.682 3.287 3.056 2.901 2.790 2.475 2.288
16 4.494 3.634 3.239 3.007 2.852 2.741 2.425 2.235
17 4.451 3.592 3.197 2.965 2.810 2.699 2.381 2.190
18 4.414 3.555 3.160 2.928 2.773 2.661 2.342 2.150
19 4.381 3.522 3.127 2.895 2.740 2.628 2.308 2.114
20 4.351 3.493 3.098 2.866 2.711 2.599 2.278 2.082
21 4.325 3.467 3.072 2.840 2.685 2.573 2.250 2.054
22 4.301 3.443 3.049 2.817 2.661 2.549 2.226 2.028
23 4.279 3.422 3.028 2.796 2.640 2.528 2.204 2.005
24 4.260 3.403 3.009 2.776 2.621 2.508 2.183 1.984
25 4.242 3.385 2.991 2.759 2.603 2.490 2.165 1.964
26 4.225 3.369 2.975 2.743 2.587 2.474 2.148 1.946
27 4.210 3.354 2.960 2.728 2.572 2.459 2.132 1.930
28 4.196 3.340 2.947 2.714 2.558 2.445 2.118 1.915
29 4.183 3.328 2.934 2.701 2.545 2.432 2.104 1.901
30 4.171 3.316 2.922 2.690 2.534 2.421 2.092 1.887
40 4.085 3.232 2.839 2.606 2.449 2.336 2.003 1.793
60 4.001 3.150 2.758 2.525 2.368 2.254 1.917 1.700
120 3.920 3.072 2.680 2.447 2.290 2.175 1.834 1.608

24

Denominator degrees of freedom

Numerator degrees of freedom
 Statistical Inference
Testing of Hypothesis
For single population

25
 Test Statistic
Population Variance

 2

Unknown Unknown
Known
n>30 n<30

Z-test Z-test t-test

26
EXAMPLE:- It is claimed that the average marks of the B.Sc
students of A section in MATH-101 course is more than 45 with
standard deviation is 2 marks. To test this claim a random
sample of 25 students was selected and recorded their marks in
MATH-101. Would you agree with the claim if the random
sample showed an average of 50 marks?

POPULATION Step 1:- Construction of hypotheses

 > 45 Ho :   45
H1:  > 45
  45
Step 2:- Level of significance
 = 5%

Step-3:- Test Statistic Step-4:-Calculation

z = X − zCal =
50 − 45
= 12.50
2 2 2

n 25
 27
Step-5 Critical Region:-

z  z
z  z0.05
z  1.645
Step-6
Conclusion: Since zcal = 12.50 fall in the Rejection Region so we
reject H 0

zcal = 12.50
Acceptance Region ztab = 1.645 Rejection
Region

-5 -4 -3 -2 -1 0 1 2 3 4 5

4
EXAMPLE:- It is claimed that the average marks of the B.Sc
students of A section in MATH-101 course is more than 45. To
test this claim a random sample of 49 students were selected
and recorded their marks in MATH-101. Would you agree with
the claim if the random sample showed an average of 50 marks
and a standard deviation of 2 marks?

POPULATION Step 1:- Construction of hypotheses

 > 45 Ho :   45
H1:  > 45
  45
Step 2:- Level of significance
 = 5%

Step-3:- Test Statistic Step-4:-Calculation

z = X − zCal =
50 − 45
= 17.50
s2 2 2
n 49
29
Step-5 Critical Region:-

z  z
z  z0.05
z  1.645
Step-6
Conclusion: Since zcal = 17.50 fall in the Rejection Region so we reject
H0
zcal = 17.50
Acceptance Region ztab = 1.645 Rejection
Region

-5 -4 -3 -2 -1 0 1 2 3 4 5

6
EXAMPLE:- It is claimed that the average marks of the B.Sc
students of A section in MATH-101 course is more than 45. To
test this claim a random sample of 49 students were selected
and recorded their marks in MATH-101. Would you agree with
the claim if the random sample showed an average of 50 marks
and a standard deviation of 2 marks?

POPULATION Step 1:- Construction of hypotheses

  45 Ho :   45
H1:  > 45
 > 45
Step 2:- Level of significance
 = 5%

Step−3:− Test Statistic Step−4:−Calculation

50 − 45
𝑋ሜ − 𝜇 𝑡𝐶𝑎𝑙 = = 17.50
𝑡= 2
𝑆
49
𝑛
31
Step-5 Critical Region:-

t  t ( n −1) d . f
t  t0.05(24 d .f)
t  1.711
Step-6
Conclusion: Since tcal = 17.50 fall in the Rejection Region so we reject
H0
tcal = 17.50
Acceptance Region ttab = 1.711 Rejection
Region

-5 -4 -3 -2 -1 0 1 2 3 4 5

8
EXAMPLE:- It is claimed that the average marks of the B.Sc
students of B section in MATH-101 course is less than 45. To
test this claim a random sample of 25 students was selected
and recorded their marks in MATH-101. Would you agree with
the claim if the random sample showed an average of 40 marks
and a standard deviation of 2 marks?
Step 1:- Construction of hypotheses
POPULATION Ho :  ≥ 45
 < 45 H1:  < 45
 ≥ 45 Step 2:- Level of significance
 = 5%
Step-3:- Test Statistic

t= X − 
Step-4:-Calculation
s2
40 − 45
n tCal = = −12.50
2
2
25
33
Step-5 Critical Region:-
t  −t ( n −1)d . f
t  −t0.05( 24)d . f
t  −1.711
Step-6
Conclusion: Since t
cal
= −12.50 fall in the Rejection Region so we reject
H0

tcal = −12.50
Rejection ttab = −1.711 Acceptance Region
Region

-5 -4 -3 -2 -1 0 1 2 3 4 5

10
EXAMPLE:- It is claimed that the average marks of the B.Sc
students of C section in MATH-101 course is equal to 45. To
test this claim a random sample of 25 students was selected
and recorded their marks in MATH-101. Would you agree with
the claim if the random sample showed an average of 50
marks and a standard deviation of 2 marks?

POPULATION Step 1:- Construction of hypotheses

 = 45 Ho :  = 45
 ≠ 45 H1:  ≠ 45

Step 2:- Level of significance

 = 5%=0.05
Step-3:- Test Statistic
Step-4:-Calculation
t = X − 50 − 45
s2 tCal = = 12.50
2
n 2
25
35
Step-5 Critical Region:-
t  t t  −t
2 ( n −1)d . f 2(
n −1) d . f

t  t0.025( 24)d . f t  −t0.025( 24)d . f

Step-6
t  2.064 t  −2.064
Conclusion: Since tcal = 12.50 fall in the Rejection Region so we reject
H0

tcal = 12.50
Rejection ttab = −2.064 Acceptance ttab = 2.064 Rejection
Region Region Region

-5 -4 -3 -2 -1 0 1 2 3 4 5

12
EXAMPLE:- It is claimed that an automobile is driven on the
average more than 12,000 miles per year. To test this claim a
random sample of 100 automobiles owners are asked to keep
a record of the miles they travel. Would you agree with the
claim if the random sample showed an average of 12500
miles and a standard deviation of 2400 miles?
Construction of hypotheses
POPULATION Ho :   12000
 > 12000 H1:  > 12000
  12000 Level of significance
 = 5%
Step-3:- Test Statistic Step-4:-Calculation

t= X −  tCal =
12500 −12000
= 2.08
2
s2 2400
n 100

37
Step-5 Critical Region:-
t  t ( n −1)d . f
t  t0.05(99)d . f
t  1.66
Step-6
Conclusion: Since tcal = 2.08 fall in the Rejection Region so we reject
H0
tcal = 2.08
Acceptance Region Rejection
ttab = 1.66 Region

-5 -4 -3 -2 -1 0 1 2 3 4 5

14
EXAMPLE:- It has been found from experience that the mean
breaking strength of a particular brand of thread is 9.63N.
Recently a sample of 36 pieces of thread showed a mean
breaking strength of 8.93N and standard deviation of 1.40N.
Can we conclude that the thread has become inferior?
Construction of hypotheses
POPULATION Ho :   9.63
H1:  < 9.63
 < 9.63
  9.63 Level of significance
 = 5%

Step-3:- Test Statistic Step-4:-Calculation

t = X − tCal =
8.93 − 9.63
2
= −3.0
s2 1.40
n 36

39
Step-5 Critical Region:-
t  −t ( n −1)d . f
t  −t0.05(35)d . f
t  −1.690
Step-6
Conclusion: Since tcal = −3.00 fall in the Rejection Region so we reject
H0

tcal = −3.00
ttab = −1.690 Acceptance Region
Rejection Region

-5 -4 -3 -2 -1 0 1 2 3 4 5

16
EXAMPLE:- The mean lifetime of bulbs produced by a
company has in past been 1120 hours. A sample of 9
electric light bulbs recently chosen from a supply of
newly produced battery showed a mean lifetime of 1170
hours with a standard deviation of 120 hours. Test that
mean lifetime of the bulbs has not changed
Step-1 Construction of hypotheses
POPULATION Ho:  = 1120
H1:   1120
 =1120
  1120 Step-2. Level of significance
 = 5%

Step-3:- Test Statistic Step-4:-Calculation

t = X − tCal =
1170 −1120
2
= 1.25
s2 120
n 9

41
Step-5 Critical Region:-
t  t t  −t
2 ( n −1)d . f 2(
n −1) d . f

t  t0.025(8)d . f t  −t0.025(8)d . f

Step-6
t  2.306 t  −2.306
Conclusion: Since tcal = 1.25 does not fall in the Rejection Region so
we do not reject H 0

tcal = 1.25
Rejection ttab = −2.064 Acceptance ttab = 2.064 Rejection
Region Region Region

-5 -4 -3 -2 -1 0 1 2 3 4 5

18
EXAMPLE:- Workers at a production facility are required to assemble a certain part in 2.3
minutes in order to meet production criteria. The assembly rate per part is assumed to be
normally distributed. Six workers are selected at random and time in assembling is recorded.
The assembly times (in minutes) for the six workers are as follows. The manager wants to
determine that the mean assembling time is according to production criteria.

Worker 1 2 3 4 5 6 TOTAL
Time 2 2.4 1.7 1.9 2.8 1.8 12.6
2
(X-X) 0.01 0.09 0.16 0.04 0.49 0.09 0.88
X =
 X = 12.6 = 2.1 S =
2  ( X − X ) 2 0.88
= = 0.176
n 6 n −1 5

POPULATION
Step.1. Construction of hypotheses Ho:  ≥ 2.3
 ≥ 2.3
H1:  < 2.3
 < 2.3
Step.2. Level of significance
 = 5%
Step-3:- Test Statistic Step-4:-Calculation

t = X − tCal =
2.1 − 2.3
= −1.17
s2 0.176
n 6
43
Step-5 Critical Region:-
t  −t ( n −1)d . f
t  −t0.05(5)d . f
t  −2.015
Step-6
Conclusion: Since t
cal
= −1.16 does not fall in the Rejection Region so
we don,t reject H 0

tcal = −1.17
ttab = −2.015
Rejection Region Acceptance Region

-5 -4 -3 -2 -1 0 1 2 3 4 5

20
 Interval Estimation
If Population variance known then C.I
 

2
−
X  Z  /2  
 n 
 
If Population variance Unknown then C.I
−   2

X  t  / 2( n −1) d . f  S 
 n 
  21
Example:- A researcher wishes to estimate the average amount of money
that a student from university spends for food per day. A random sample of
36 students is selected and the sample mean is found to be Rs 45.suppose
that population standard deviation of Rs.3. Estimate 90 % confidence limits
for the average amount of money that the students from the university
spend on food per day.
 

2
−
X  Z  /2  
 n 
 2
 
45 Z  3 
0.05)
 36 
 

45(1.645)(0.5)
Width of C.I
45 0.82
45.82- 44.18
1.64 45-0.82, 45+0.82
46
( 44.18 , 45.82)
 Example:- A researcher wishes to estimate the average marks of the
students in Math-101 course of A section. A random sample of 25
students is selected and the sample mean is found to be 50 with standard
deviation 2. Estimate 90 % confidence Interval for the Average Marks.

−  2
X  t  / 2( n −1) d . f  S 
 n 
 
  2

50 t 0.05( 24)  2 

 25 
 

50(1.711)(0.4)
Width of C.I
50.684- 49.316 50 0.684
1.368 50-0.684, 50+0.684
47
( 49.316 , 50.684)
Example:- A researcher wishes to estimate the average marks of the
students in Math-101 course of A section. A random sample of 25
students is selected and the sample mean is found to be 50 with
standard deviation of 2. Estimate 95 % confidence Interval for the
Average Marks.
−  2
X  t  /2( n −1) d . f  S 

 n 
 
 2
50 t 
0.025(24) 
2 
 25 

 
50(2.064)(0.4)
Width of C.I
50.826- 49.174 50 0.826
1.652
50-0.826, 50+0.826
48
( 49.174 , 50.826)
Example:- A researcher wishes to estimate the average amount of money
that a student from university spends for food per day. A random sample of
36 students is selected and the sample mean is found to be Rs 45 with
standard deviation of Rs.3. Estimate 95 % confidence limits for the
average amount of money that the students from the university spend on
food per day.
−  2 
X  t  / 2( n −1) d . f  S 
 n 
 
 2 
45 t 0.05(35)  3 
 36 
 

45(1.69)(0.5)
Width of C.I
45 0.84
45.84- 44.16
1.68 45-0.84, 45+0.84
49
( 44.16 , 45.84)
Example:-The following data represents the daily milk production of a
random sample of 10 cows from a particular breed
12,15,11,13,16,19,15,16,18,15. Construct 95% C.I for the average milk
production of all the cows of that particular breed.

  2
−
 S 
X  t  / 2 ( n −1) 
 n 

 

 22.89 
15 t .025(9)  
 10 
15 (2.262)*(1.51)
Width of C.I
18.42- 11.58 15 3.42
6.84 15-3.42, 15+3.42
( 11.58 , 18.42) 50