Confidence Level

Definition

The confidence level is a statistical measure that represents the probability or likelihood that a population parameter, such as a mean or proportion, falls within a specified range or interval. It is a crucial concept in statistical inference and is used to quantify the reliability and precision of estimates derived from sample data.

5 Must Know Facts For Your Next Test

1. The most commonly used confidence levels are 90%, 95%, and 99%, with 95% being the standard in many fields.
2. A higher confidence level, such as 99%, indicates a greater degree of certainty that the true population parameter falls within the calculated interval, but also results in a wider interval.
3. The confidence level is directly related to the margin of error, as a higher confidence level typically leads to a larger margin of error.
4. Confidence intervals and hypothesis testing both rely on the concept of confidence level to quantify the reliability and precision of statistical inferences.
5. The choice of confidence level depends on the specific research question, the consequences of making an incorrect decision, and the desired level of precision in the estimation or hypothesis testing.

Review Questions

• Explain how the confidence level is used in the context of a single population mean using the normal distribution (topic 8.1).
  • In the context of a single population mean using the normal distribution (topic 8.1), the confidence level is used to construct a confidence interval for the unknown population mean. The confidence interval provides a range of values that is likely to contain the true population mean, with a specified level of confidence (e.g., 95%). The confidence level reflects the probability that the calculated confidence interval will include the true population mean, and it is used to determine the appropriate z-score or t-statistic for the calculation of the interval.
• Describe how the confidence level is applied in the confidence interval for home costs (topic 8.4).
  • In the confidence interval for home costs (topic 8.4), the confidence level is used to quantify the reliability and precision of the estimate of the true mean home cost in a population. The confidence interval provides a range of values that is likely to contain the true population mean home cost, with a specified level of confidence (e.g., 90% or 95%). The choice of confidence level reflects the desired level of certainty in the estimate and the trade-off between the width of the interval and the probability of capturing the true population mean.
• Analyze the role of the confidence level in hypothesis testing of a single mean and single proportion (topic 9.6).
  • In hypothesis testing of a single mean and single proportion (topic 9.6), the confidence level is used to determine the critical value(s) that define the rejection region of the test. The confidence level represents the probability of correctly rejecting the null hypothesis when it is false (the power of the test) or, conversely, the probability of not rejecting the null hypothesis when it is true (the significance level). The choice of confidence level reflects the balance between the risk of making a Type I error (rejecting the null hypothesis when it is true) and the risk of making a Type II error (failing to reject the null hypothesis when it is false).

Related terms

Margin of Error: The margin of error is the range of values above and below a sample statistic within which the true population parameter is expected to fall, given a specified confidence level.

Confidence Interval: A confidence interval is a range of values that is likely to contain an unknown population parameter, with a specified level of confidence.

Hypothesis Testing: Hypothesis testing is a statistical method used to determine whether a claim or hypothesis about a population parameter is supported by the sample data, at a specified confidence level.