CONFIDENCE INTERVAL

CONFIDENCE INTERVAL
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A confidence interval is a type of interval estimate in statistics of a population parameter which is used to indicate the reliability of an estimate. It gives the percentage probability that the estimated range of possible values do in fact include the actual value being estimated (Cox & Hinkley, 1974). A confidence of interval is applied in business in estimating that a machine uses a specific unit of resources for each of the unit product created (Richards, 2013). Since the machine can not be expected to use precisely certain unit of resources per unit production, a confidence rage is created to give a range of possibilities. It can be predicted that 95% chance that the machine uses on average of resources per unit production. This implies that the actual amount of resources used outside the estimated range is 5%.
The reliability of market research is determined by the effect of confidence interval in business. Since marketing is an important function of an organization largely on estimating the level of future sales, a firm has to collect data from customers on past sales and other sources and statistically estimate the value of future sales (Richards, 2013). The confidence interva...