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Statistics

8.4 Confidence Interval (Home Costs)

Statistics8.4 Confidence Interval (Home Costs)

Stats Lab

Confidence Interval (Home Costs)

Student Learning Outcomes
  • The student will calculate the 90 percent confidence interval for the mean cost of a home in the area in which this school is located.
  • The student will interpret confidence intervals.
  • The student will determine the effects of changing conditions on the confidence interval.

Collect the Data Check the Real Estate section in your local newspaper. Record the sale prices for 35 randomly selected homes recently listed in the county.

Note

Many newspapers list them only one day per week. Also, we will assume that homes come up for sale randomly.

  1. Complete the following table:
    __________ __________ __________ __________ __________
    __________ __________ __________ __________ __________
    __________ __________ __________ __________ __________
    __________ __________ __________ __________ __________
    __________ __________ __________ __________ __________
    __________ __________ __________ __________ __________
    __________ __________ __________ __________ __________
    Table 8.5
Describe the Data
  1. Compute the following:
    1. x ¯ x ¯ = _____
    2. s x s x = _____
    3. n = _____
  2. In words, define the random variable X ¯ X ¯ .
  3. State the estimated distribution to use. Use both words and symbols.
Find the Confidence interval
  1. Calculate the confidence interval and the error bound.
    1. Confidence interval: _____
    2. Error Bound: _____
  2. How much area is in both tails (combined)? α = _____
  3. How much area is in each tail? α 2 α 2 = _____
  4. Fill in the blanks on the graph with the area in each section. Then, fill in the number line with the upper and lower limits of the confidence interval and the sample mean.
    Normal distribution curve with two vertical upward lines from the x-axis to the curve. The confidence interval is between these two lines. The residual areas are on either side.
    Figure 8.7
  5. Some students think that a 90 percent confidence interval contains 90 percent of the data. Use the list of data on the first page and count how many of the data values lie within the confidence interval. What percentage is this? Is this percentage close to 90 percent? Explain why this percentage should or should not be close to 90 percent.
Describe the Confidence Interval
  1. In two to three complete sentences, explain what a confidence interval means (in general), as if you were talking to someone who has not taken statistics.
  2. In one to two complete sentences, explain what this confidence interval means for this particular study.
Use the Data to Construct Confidence Intervals
  1. Using the given information, construct a confidence interval for each confidence level given.
    Confidence Level EBM/Error Bound Confidence Interval
    50%
    80%
    95%
    99%
    Table 8.6
  2. What happens to the EBM as the confidence level increases? Does the width of the confidence interval increase or decrease? Explain why this happens.
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