Estimation is the process by which population characteristics are estimated from characteristics of the sample studies with desired degree of precision.
• In business statistics, estimation is all about using data to make informed guesses about a larger population.
There are many situations in our daily life where we make estimates.
→ Imagine you run a store and want to know the average amount customers spend. You can’t survey everyone who might ever shop there, so you collect data from a sample group of customers (let’s say the next 100 people who come through the door). By analyzing this sample data, you can estimate what the average spend is likely to be for all your customers.
→ When crossing a road, we estimate the speed of vehicle that is approaching, the distance between us and that vehicle and our own speed. By analyzing this sample data, we decide whether to wait, walk or run.
Estimators and Estimates:
In business statistics, estimators and estimates are two sides of the same coin, working together to help you make informed guesses about a larger population.
Here’s a breakdown:
→ Estimators:
An estimator is a statistical method or formula used to calculate an approximation or estimate of a population parameter based on sample data.
.• In simpler terms, an estimator is a rule or a formula applied to sample data to provide an educated guess or estimate about an unknown parameter of the entire population.
→ Estimates:
An estimate is the specific value obtained from applying an estimator to the sample data.
• It is the numerical result or the calculated approximation for the population parameter.
