7.7: Margin of Error
The margin of error is also called the maximum error of an estimate. The margin of error is the maximum possible or expected difference between the observed sample parameter value and the actual population parameter value. For proportion, it is the maximum difference between the value of sample proportion obtained from the data and the true value of population proportion. As the true value of the population parameter is not known, the margin of error is calculated using the sample statistic. The margin of error is calculated at a pre-decided significance level, most commonly at 95%.
For the population parameters such as proportion, mean, or variance, the margin of error (denoted as E) is calculated differently. For the proportion, it utilizes the point estimate of proportion (sample proportion) and the sample size.
The margin of error also indicates the amount or magnitude of random sampling error in the sampling effort, the study, or the survey results. However, it should not be confused with the Type-I and Type-II errors. The margin of error is also NOT a measure of any sampling bias, measurement error, calculation error, experimental design error, or errors in the sampling or experimental methods followed during the study. E helps generate the appropriate confidence limits in estimating the population parameter. E is essential as the confidence limits are calculated using the E.