Question

A marketing manager samples 150 people and finds that 87 of them have made a purchase on the internet within the past month. a. Estimate the proportion of people who have made a purchase on the internet within the past month, and find the uncertainty in the estimate. b. Estimate the number of people who must be sampled to reduce the uncertainty to 0.03.

Answer 1

Answer:

a) $\hat p = \frac{87}{150}= 0.58$

b) We assume for this case a confidence level of 95%

$n=\frac{\hat p (1-\hat p)}{(\frac{ME}{z})^2}$   (b)  

And replacing into equation (b) the values from part a we got:

$n=\frac{0.58(1-0.58)}{(\frac{0.03}{1.96})^2}=1039.793$  

And rounded up we have that n=1040

Step-by-step explanation:

Previous concepts

A confidence interval is "a range of values that’s likely to include a population value with a certain degree of confidence. It is often expressed a % whereby a population means lies between an upper and lower interval".  

The margin of error is the range of values below and above the sample statistic in a confidence interval.  

Normal distribution, is a "probability distribution that is symmetric about the mean, showing that data near the mean are more frequent in occurrence than data far from the mean".  

The population proportion have the following distribution

$p \sim N(p,\sqrt{\frac{p(1-p)}{n}})$

Solution to the problem

Part a

For this case the estimated proportion of people who have made a purchase on the internet within the past month is given by:

$\hat p = \frac{87}{150}= 0.58$

Part b

We assume for this case a confidence level of 95%

In order to find the critical value we need to take in count that we are finding the interval for a proportion, so on this case we need to use the z distribution. Since our interval is at 95% of confidence, our significance level would be given by $\alpha=1-0.95=0.05$ and $\alpha/2 =0.025$. And the critical value would be given by:

$t_{\alpha/2}=-1.96, t_{1-\alpha/2}=1.96$

The margin of error for the proportion interval is given by this formula:  

$ME=z_{\alpha/2}\sqrt{\frac{\hat p (1-\hat p)}{n}}$    (a)  

And on this case we have that $ME =\pm 0.03$ and we are interested in order to find the value of n, if we solve n from equation (a) we got:  

$n=\frac{\hat p (1-\hat p)}{(\frac{ME}{z})^2}$   (b)  

And replacing into equation (b) the values from part a we got:

$n=\frac{0.58(1-0.58)}{(\frac{0.03}{1.96})^2}=1039.793$  

And rounded up we have that n=1040