Reagan Russell is considering opening a multipurpose hardware and lawn store in Anytown, USA. Based on his knowledge of the industry, he believes that if the average household income is more than $ 35,000, the store will ultimately be successful. He was planning to attempt a census of the income levels in Anytown but has heard about sampling and is now considering using sampling to obtain the necessary information to make his decision.

a. What would you tell Russell about the advantages and disadvantages of sampling?
b. Russell is interested in knowing the advantages and disadvantages of statistical sampling. What would you tell him?
c. Russell has heard about sampling and nonsampling risk and is concerned about them.
1. Define sampling risk and nonsampling risk.
2. How can Russell 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 Russell decided to use an unrestricted random selection to obtain 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, Russell asked you whether he could just pick four or five streets and examine all of the households on those streets. What would you tell him?
f. Assume that Russell has set a 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 Russell? What advice would you give him?
g. Repeat (f) assuming that Russell found a sample estimate of $ 42,000 and a precision of $ 10,000.

  • CreatedOctober 27, 2014
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