Session:7 The Central Limit Theorem

Key Terms

Introductory Business Statistics | Leadership Development – Micro-Learning Session

Rice University 2020 | Michael Laverty, Colorado State University Global Chris Littel, North Carolina State University| https://openstax.org/details/books/introductory-business-statistics

Average
a number that describes the central tendency of the data; there are a number of specialized averages, including the arithmetic mean, weighted mean, median, mode, and geometric mean.
Central Limit Theorem
Given a random variable with known mean μ and known standard deviation, σ, we are sampling with size n, and we are interested in two new RVs: the sample mean, X

. If the size (n) of the sample is sufficiently large, then X

 ~ N(μσn

). If the size (n) of the sample is sufficiently large, then the distribution of the sample means will approximate a normal distributions regardless of the shape of the population. The mean of the sample means will equal the population mean. The standard deviation of the distribution of the sample means, σn

, is called the standard error of the mean.

Finite Population Correction Factor
adjusts the variance of the sampling distribution if the population is known and more than 5% of the population is being sampled.
Mean
a number that measures the central tendency; a common name for mean is “average.” The term “mean” is a shortened form of “arithmetic mean.” By definition, the mean for a sample (denoted by x

) is x¯ = Sum of all values in the sampleNumber of values in the sample

¯ = Sum of all values in the sampleNumber of values in the sample, and the mean for a population (denoted by μ) is μ = Sum of all values in the populationNumber of values in the population

 = Sum of all values in the populationNumber of values in the population.

Normal Distribution
a continuous random variable with pdf f(x) = 1σ2π e(x  μ)22σ2

() = 12 (  )222, where μ is the mean of the distribution and σ is the standard deviation.; notation: X ~ N(μσ). If μ = 0 and σ = 1, the random variable, Z, is called the standard normal distribution.

Sampling Distribution
Given simple random samples of size n from a given population with a measured characteristic such as mean, proportion, or standard deviation for each sample, the probability distribution of all the measured characteristics is called a sampling distribution.
Standard Error of the Mean
the standard deviation of the distribution of the sample means, or σn

.

Standard Error of the Proportion
the standard deviation of the sampling distribution of proportions

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