Confidence Intervals
This lesson will focus on the importance and calculation of confidence intervals.
A point estimate can give us a rough idea of a population parameter. But there is a chance that it contains some errors. We need to take many samples to reduce these errors. But taking many samples is not feasible all the time. As in our example of Data Scientists, it might not be feasible to take many different samples of 100 data scientists. What do we do if we face such a situation? We make confidence intervals.
Confidence intervals
A confidence interval is a range of values above and below a point estimate that might contain the true value of a population parameter. The interval is associated with a confidence level. The bigger the confidence level, the wider the range of the interval. The confidence level is decided before calculating the confidence intervals. Confidence intervals are usually reported with point estimates to show how reliable the estimates are.
The intervals are calculated from samples which means for each sample, there will be a different interval. Commonly, a confidence level is used, which means there is a chance that the true population parameter lies in the range. Or in other words, if we take samples and calculate confidence intervals for each of the samples with confidence, the true population parameter will lie in of these intervals.
Calculating confidence intervals
We can calculate confidence intervals from point estimates. We add and subtract a margin of error to the point estimate to calculate both ...