Confidence Intervals and How They Affect Business Decision


In this paper, the main area of focus is on the calculation and the interpretation of the confidence intervals of a population’s wages affected by the controllable factors. Some of these controllable factors include education, geographical location, job industry, and marital status. In addition, some of the factors considered being of considerable influence on the population’s wages that are non-controllable includes age, gender, and diversity. In addition, the effect of the confidence interval for the business will be will be discussed. Towards the end, it will be particularly valuable to discuss on whether the earlier stated conclusion should be changed or not.


Confidence interval refers to a range of values computed from sample data to enable the parameter being tested occur within the range of a probability specified. In this case, the specified probability is based on a 95% confidence level. For an individual to be able to calculate the confidence interval, he or she has to apply statistical skills of calculation and interpretation of the calculated data. In this case, the population tested is large and diverse. Clear calculation and interpretation of the effect of controllable and some of the uncontrollable factors have been done.

Calculating Confidence interval (C.I) values

Where P is sample proportion

Z is the standard normal value for the degree of confidence selected

n is the sample size

The Z value calculated at 95% level is 1.68; therefore, the Confidence interval for those earning $10,000 or below can then be calculated.

The Confidence interval for those earning wages between $10,000 and 40,000 is 6444

From the calculated value, we are 95% confident that the people earning wages of $10,000 or below are between the probabilities of 0.003186 and 0.0032944. At the same level of confidence, people with wages between $10,000 $ 40,000 lie between the probability of 0.01291 and 0.01304.

Effect of confidence intervals on business decision

Some of the effects of confidence interval on the decisions made by a business include; number of employees both male and female, the employees geographical location selection, experience of the workers, education level, and age of workers to be employed. All this factors can affect the performance of a business either negatively or negatively thus needs critical decision making.

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