Confidence intervals help estimate population means using sample data. They provide a range of likely values for the true population average, accounting for sampling variability and uncertainty.
For large samples or known population standard deviations, we use z-distributions. With small samples or unknown standard deviations, t-distributions are applied. Understanding sample size requirements and interpreting results are crucial for accurate business insights.
Confidence Intervals for Population Means
Confidence intervals with z-distribution
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Used when sample size is large (n≥30) or population is normally distributed and population standard deviation (σ) is known
Confidence interval formula: xˉ±zα/2⋅nσ
xˉ represents
zα/2 represents critical value from standard
α represents significance level and 1−α represents (95%, 99%)