Question

These questions come from MBA 5008

1. What is the difference between a point estimate and a confidence interval?

2. Is a point estimate alone is adequate?

3. Evaluating the effect of variability measurement (confidence interval) on the resulting estimates.

Answer 1

Before going to provide the solutions, first we should know the following definitions

Parameter: Any population charecterstic is called parameter.

Statistic: Any sample charecterstic is called statistic.

The main objective of the sampling is to estimate the parameter with the help of the statistic.

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1. When we estimate the unknown population parameter with a single value or expression, it is called point estimation.

Sometimes it is not possible to estimate the parameter with the single value, it that case we used to estimate the same parameter with range of values ( lower value and higer value) usually called confidence limits. This kind of estimation is called interval estimation.

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2. When we have 100% confidence about the zero error in estimating the parameter, then we prefer point estimation. otherwise we go for interval estimation.

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3. If we estimate the unknown population parameter with range of values called confidence limits, we use certain confidence level viz., 90% or 95% ( 95% is most preferred). It means supposte if construct 95% confidence interval, we try to estimate the parameter with range of values signifies that " popualtion parameter lies somewhere in the interval with the proability of 0.95. It means out of 100 confidence intervals constructed, 95 intervals contain the population parameter.

Thank you