Margin of Error

MARGIN OF ERROR
Problem 1
Nine hundred (900) high school freshmen were randomly selected for a national
survey. Among survey participants, the mean grade-point average (GPA) was 2.7, and
the standard deviation was 0.4. What is the margin of error, assuming a 95%
confidence level?
(A) 0.013
(B) 0.025
(C) 0.500
(D) 1.960
(E) None of the above.
Solution
The correct answer is (B). To compute the margin of error, we need to find the critical
value and the standard error of the mean. To find the critical value, we take the
following steps.
Compute alpha (): = 1 - (confidence level / 100) = 1 - 0.95 = 0.05
Find the critical probability (p*): p* = 1 - /2 = 1 - 0.05/2 = 0.975
Find the degrees of freedom (df): df = n - 1 = 900 -1 = 899
Find the critical value.
Find the critical value. Since we don't know the population standard deviation, we'll
express the critical value as a t statistic. For this problem, it will be the t statistic
having 899 degrees of freedom and a cumulative probability equal to 0.975. Using
the t Distribution Calculator, we find that the critical value is 1.96.
Next, we find the standard error of the mean, using the following equation:
SEx = s / sqrt( n ) = 0.4 / sqrt( 900 ) = 0.4 / 30 = 0.013
And finally, we compute the margin of error (ME).
ME = Critical value x Standard error = 1.96 * 0.013 = 0.025
This means we can be 95% confident that the mean grade point average in the
population is 2.7 plus or minus 0.025, since the margin of error is 0.025.
Note: The larger the sample size, the more closely the t distribution looks like the
normal distribution. For this problem, since the sample size is very large, we would
have found the same result with a z-score as we found with a t statistic. That is, the
critical value would still have been 1.96. The choice of t statistic versus z-score does
not make much practical difference when the sample size is very large.
Here,
zz (2)(2) = represents the critical value.
zz (n)(n) = represents the standard deviation.
Solved Examples
Question 1: A random sample of 30 students has an average yearly earnings of 2450
and a standard deviation of 587. Find the margin of error if c = 0.95?
Solution:
Given n=30, Standard Deviation= 587
z 22 = 1.96
by using the formula
E=z
( 2 )( n )
= 1.96 (58730)(58730)
= 210.06
= 210 approximately
The margin of error = 210
Question 2: An average monthly earning of 56 employees in a company is 4685 and
a standard deviation is 354. Find the margin of error if c= 0.95?
Solution:
Given n = 56, Standard Deviation= 354
z 22 = 1.96
by using the formula
E=z
= 1.96 (35456)(35456)
= 92.72
( 2 )( n )
= 93 approximately
STANDARD ERROR
The standard error is an estimate of the standard deviation of a statistic. This lesson
shows how to compute the standard error, based on sample data.
The standard error is important because it is used to compute other measures,
like confidence intervals and margins of error.
Population parameter
Sample statistic
N: Number of observations in the
n: Number of observations in the
population
sample
Ni: Number of observations in

population i
P: Proportion of successes in
population
Pi: Proportion of successes in
population i
: Population mean
ni: Number of observations in sample i
p: Proportion of successes in sample
pi: Proportion of successes in sample i

x: Sample estimate of population
mean
i: Mean of population i
xi: Sample estimate of i
: Population standard deviation
s: Sample estimate of
p: Standard deviation of p
SEp: Standard error of p
x: Standard deviation of x
SEx: Standard error of x
Confidence Interval
Statisticians use a confidence interval to express the degree of uncertainty associated
with a samplestatistic. A confidence interval is an interval estimate combined with a
probability statement.
For example, suppose a statistician conducted a survey and computed an interval
estimate, based on survey data. The statistician might use a confidence level to
describe uncertainty associated with the interval estimate. He/she might describe the
interval estimate as a "95% confidence interval". This means that if we used the same
sampling method to select different samples and computed an interval estimate for
each sample, we would expect the true population parameter to fall within the interval
estimates 95% of the time.
Confidence intervals are preferred to point estimates and to interval estimates,
because only confidence intervals indicate (a) the precision of the estimate and (b) the
uncertainty of the estimate.
Margin of Error
Statisticians use a confidence interval to describe the accuracy and uncertainty
associated with a particular sampling technique. The confidence level tells us the
uncertainty of a sampling method. The statistic and the margin of error make up for an
interval estimate that describes the accuracy of the method. The interval estimate of a
confidence interval is calculated by the sample statistic + margin of error. In a
confidence interval, the range of values in the sample statistic is called the margin of
error.
A confidence interval consists of three parts.
1. A confidence level
2. A statistic
3. A margin of error
Margin of Error Definition

The margin of error expresses the maximum expected difference between the true
population parameter and a sample estimate of that parameter. A smaller margin of
error indicates trustworthy results and a larger margin of error means the results are
not considered as accurate.The margin of error is the sampling error, in this case the
percentages that are reported were obtained from a sample and are being generalized
to the whole population. There always will be some margin error when sample
statistics are used to represent population parameters.
Margin of Error Formula
The formula of margin of error is used to calculate the margin of error of a sample
mean, provided that we have a sample from a population that is normally distributed
and know the population standard deviation.
Margin of error = Z (alpha/2) * standard error
where, standard error =
Survey Margin of Error

One goal of every survey is to learn certain information about a population of people.
The margin of error can be interpreted by making use of ideas from the laws of
probability or the laws of chance. Surveys are often conducted by starting out with a
list of all units in the population and choosing a sample. To be precise, the laws of
probability make it possible for us to calculate intervals of the form estimate (margin
of error). Such intervals are sometimes called 95 percent confidence intervals and
would be expected to contain the true value of the target quantity at least 95 percent
of the time.
How to Calculate Margin of Error?
Margin of error is the product of Critical value and the Standard deviation or standard
error of the statistic.
The critical value is an important term used to compute the margin of error. When one
of these conditions is satisfied, the critical value is to be expressed as t score or z
score. The Normal Distribution theorem guarantees that the sampling distribution of a
statistic will be normal or nearly normal, if any of the following conditions apply.
The sampling distribution is either symmetric or uni-modal without outliers if the
sample size is 15 or less.
The sampling distribution is moderately reoriented, unimodal, without outliers, and the
sample size is between 16 and 40.
The sample size is greater than 40, without outliers.
To find the critical value, follow these steps.
Compute alpha = 1 - (confidence level / 100)
Find the critical probability
To write the critical value as a z score, find the z score having a cumulative probability.
Margin of Error Example
Given below are some of the examples on Margin of Error.
Solved Example
Question: A random sample of 40 students has an average yearly earnings of 3120

and a standard deviation of 677. Find the margin of error if c = 0.95.
Solution:
We have n = 40, mu = 3120 and sigma = 677
Z (alpha/2) = 1.96
Margin of error = Z (alpha/2) * standard error
= 1.96 * 6774067740
= 209.83
= 210 approximately.

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MARGIN OF ERROR

by using the formula

by using the formula

N: Number of observations in the

n: Number of observations in the

Ni: Number of observations in

ni: Number of observations in sample i

p: Proportion of successes in sample

pi: Proportion of successes in sample i

xi: Sample estimate of i

: Population standard deviation

SEp: Standard error of p

SEx: Standard error of x

Margin of Error Definition

where, standard error =

Survey Margin of Error

Question: A random sample of 40 students has an average yearly earnings of 3120

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