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E.54 Basic Sampling: Comprehensive. Reagan is considering opening a multipurpose hardware and lawn store in Anytown, USA. Based on his knowledge of the industry, he feels that if the average household income is greater than \$35,000, the store will ultimately be successful. He was planning on attempting a census of the income levels in Anytown, USA, but has heard about sampling and is now considering using sampling to provide him with the necessary information to make his decision.

Required:
b. Reagan is interested in knowing the advantages and disadvantages of statistical sampling. What would you tell him?
c. Reagan has heard about sampling and non-sampling risk and is concerned about these risks.
1. Define sampling and non-sampling risk.
2. How can Reagan control his exposure to sampling and non-sampling risk?
3. What are some possible examples of sampling and non-sampling risk in this situation?
d. Assume that Reagan decided to use unrestricted random selection to select a sample of households for examination.

If he determined a sample size of 100 households, describe how he could select the sample from the city's property tax rolls.
e. Instead of unrestricted random selection, Reagan asked you why he couldn't just pick four or five streets and examine all of the households residing on those streets. What would you tell him?
f. Assume that Reagan has set a desired sampling risk of 10 percent and found a sample estimate of \$39,000 with a precision of \$3,000. How would you explain the results to Reagan? What advice would you give to him?
g. Repeat (f) assuming that Reagan found a sample estimate of \$42,000 and a precision of \$10,000.

#### Solution Preview

E.54 Basic Sampling: Comprehensive. Reagan is considering opening a multipurpose hardware and lawn store in Anytown, USA. Based on his knowledge of the industry, he feels that if the average household income is greater than \$35,000, the store will ultimately be successful. He was planning on attempting a census of the income levels in Anytown, USA, but has heard about sampling and is now considering using sampling to provide him with the necessary information to make his decision.

Required:

The major advantage of sampling is low cost and efficiency. We can make conclusions about the average household salary with a small fraction of population and with small fraction of cost and time in collecting data.

The major disadvantage is related to level of accuracy and effectiveness. The conclusions drawn from a sample about a population is never 100% correct. We can be sure say 95% or 99% but can never be 100%.

b. Reagan is interested in knowing the advantages and disadvantages of statistical sampling. What would you tell him?

The major advantage of statistical sampling is we can control the sampling risk ...

#### Solution Summary

This problem discusses various aspects of basic sampling. The concepts discussed include advantages and disadvantages of sampling, advantages and disadvantages of statistical sampling, sampling risks and non-sampling risk. The problem then discusses how we can select random sample and the problems with non-random sampling. This solution is 792 words.

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