Estimating the population mean from the confidence interval requires the margin of error.
It is calculated using the z value when the population standard deviation is known, the sample size is more than 30, and the population is normally distributed.
In a realistic situation, the population distribution can be assumed to be normal, but the population standard deviation remains unknown.
So, the margin of error is calculated differently using the following equation.
Here, the critical value is calculated using the t distribution, and a sample standard deviation is utilized.
The critical t value— tα/2 —is not constant as it changes with the sample size.
It is generally greater than the z value, which may generate a wider range of values used for the population mean estimation.
Use of t distribution requires samples at least approximately normally distributed and sample size to be more than 30.
Here, the sample mean remains the best point estimate, but the confidence interval provides a reliable estimate of the true value of the population mean.
In practice, we rarely know the population standard deviation. In the past, when the sample size was large, this did not present a problem to statisticians. They used the sample standard deviation s as an estimate for σ and proceeded as before to calculate a confidence interval with close enough results. However, statisticians ran into problems when the sample size was small. A small sample size caused inaccuracies in the confidence interval.
William S. Gosset (1876–1937) of the Guinness brewery in Dublin, Ireland ran into this problem. His experiments with hops and barley produced very few samples. Just replacing σ with s did not produce accurate results when he tried to calculate a confidence interval. He realized that he could not use a normal distribution for the calculation; he found that the actual distribution depends on the sample size. This problem led him to "discover" what is called the Student's t distribution. The name comes from the fact that Gosset wrote under the pen name "Student."
Up until the mid-1970s, some statisticians used the normal distribution approximation for large sample sizes and used the Student's t distribution only for sample sizes of at most 30. With graphing calculators and computers, the practice now is to use the Student's t distribution whenever s is used as an estimate for σ.
If you draw a simple random sample of size n from a population that has an approximately normal distribution with mean μ and unknown population standard deviation σ and calculate the t score using the sample SD.
Properties of the Student's t Distribution
Calculators and computers can easily calculate any Student's t probabilities. A probability table for the Student's t distribution can also be used. The table gives t scores that correspond to the confidence level (column) and degrees of freedom (row). When using a t table, note that some tables are formatted to show the confidence level in the column headings, while the column headings in some tables may show only corresponding area in one or both tails.
A Student's t table gives t scores given the degrees of freedom and the right-tailed probability. The table is very limited. Calculators and computers can easily calculate any Student's t-probabilities.
The notation for the Student's t distribution (using T as the random variable) is:
If the population standard deviation is not known, the error bound for a population mean is calculated using sample SD.
This text is adapted from Openstax, Introductory Statistics, Section 8.2 A single population mean using Student’s t distribution.