Problem:
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 to do:
a. What would you tell Reagan about the advantages and disadvantages of sampling?
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 nonsampling risk and is concerned about these risks.
1. Define sampling and nonsampling risk.
2. How can Reagan control his exposure to sampling and nonsampling risk?
3. What are some possible examples of sampling and nonsampling 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.