Question

For the total population of a large a southern city, mean family income is
$34,000, with a standard deviation (for the population) of $5,000. Imagine
that your are taking a subsample of 200 city residents. What is the Z score for
$37,000 ?

Answer 1

Answer:

The Z score for $37,000 is 8.49.

Step-by-step explanation:

To solve this question, we need to understand the normal probability distribution and the central limit theorem.

Normal Probability Distribution:

Problems of normal distributions can be solved using the z-score formula.

In a set with mean $\mu$ and standard deviation $\sigma$, the z-score of a measure X is given by:

$Z = \frac{X - \mu}{\sigma}$

The Z-score measures how many standard deviations the measure is from the mean. After finding the Z-score, we look at the z-score table and find the p-value associated with this z-score. This p-value is the probability that the value of the measure is smaller than X, that is, the percentile of X. Subtracting 1 by the p-value, we get the probability that the value of the measure is greater than X.

Central Limit Theorem

The Central Limit Theorem estabilishes that, for a normally distributed random variable X, with mean $\mu$ and standard deviation $\sigma$, the sampling distribution of the sample means with size n can be approximated to a normal distribution with mean $\mu$ and standard deviation $s = \frac{\sigma}{\sqrt{n}}$.

For a skewed variable, the Central Limit Theorem can also be applied, as long as n is at least 30.

Mean family income is $34,000, with a standard deviation (for the population) of $5,000.

This means that $\mu = 34000, \sigma = 5000$

Subsample of 200 city residents.

This means that $n = 200, s = \frac{5000}{\sqrt{200}} = 353.55$

What is the Z score for $37,000 ?

This is Z when X = 37000. So

$Z = \frac{X - \mu}{\sigma}$

By the Central Limit Theorem

$Z = \frac{X - \mu}{s}$

$Z = \frac{37000 - 34000}{353.55}$

$Z = 8.49$

The Z score for $37,000 is 8.49.