Question

An economist, an expert in the study of sales and production of goods and services, is interested in studying the average amount of money people spend, each month, on entertainment. For example, he wants to know how much people spend, each month, going to the movies, attending a concert, etc. His assistant conducted a poll of 500 randomly selected people across the country. He found a 95% confidence interval: $72 to $198. From this confidence interval the assistant concluded that people spend an average of $200 a month on entertainment. Is this a reasonable conclusion and why

Answer 1

$200 is not part of the confidence interval, which means that this is not a reasonable conclusion, at the 100 - 95 = 5% level of significance.

Explanation:

95% confidence interval: $72 to $198.

This means that we are 95% sure that the true mean spending is between $72 and $198.

From this confidence interval the assistant concluded that people spend an average of $200 a month on entertainment. Is this a reasonable conclusion and why?

$200 is not part of the confidence interval, which means that this is not a reasonable conclusion, at the 100 - 95 = 5% level of significance.