Skip to ContentGo to accessibility pageKeyboard shortcuts menu
OpenStax Logo
Introductory Business Statistics

7.4 Finite Population Correction Factor

Introductory Business Statistics7.4 Finite Population Correction Factor

We saw that the sample size has an important effect on the variance and thus the standard deviation of the sampling distribution. Also of interest is the proportion of the total population that has been sampled. We have assumed that the population is extremely large and that we have sampled a small part of the population. As the population becomes smaller and we sample a larger number of observations the sample observations are not independent of each other. To correct for the impact of this, the Finite Correction Factor can be used to adjust the variance of the sampling distribution. It is appropriate when more than 5% of the population is being sampled and the population has a known population size. There are cases when the population is known, and therefore the correction factor must be applied. The issue arises for both the sampling distribution of the means and the sampling distribution of proportions. The Finite Population Correction Factor for the variance of the means shown in the standardizing formula is:

Z= x¯ µ σ n · Nn N1 Z= x¯ µ σ n · Nn N1

and for the variance of proportions is:

σp' = p(1p) n × Nn N1 σp'= p(1p) n × Nn N1
7.2

The following examples show how to apply the factor. Sampling variances get adjusted using the above formula.

Example 7.1

It is learned that the population of White German Shepherds in the USA is 4,000 dogs, and the mean weight for German Shepherds is 75.45 pounds. It is also learned that the population standard deviation is 10.37 pounds.

Problem

If the sample size is 100 dogs, then find the probability that a sample will have a mean that differs from the true probability mean by less than 2 pounds.

Example 7.2

When a customer places an order with Rudy's On-Line Office Supplies, a computerized accounting information system (AIS) automatically checks to see if the customer has exceeded his or her credit limit. Past records indicate that the probability of customers exceeding their credit limit is .06.

Problem

Suppose that on a given day, 3,000 orders are placed in total. If we randomly select 360 orders, what is the probability that between 10 and 20 customers will exceed their credit limit?

Order a print copy

As an Amazon Associate we earn from qualifying purchases.

Citation/Attribution

This book may not be used in the training of large language models or otherwise be ingested into large language models or generative AI offerings without OpenStax's permission.

Want to cite, share, or modify this book? This book uses the Creative Commons Attribution License and you must attribute OpenStax.

Attribution information
  • If you are redistributing all or part of this book in a print format, then you must include on every physical page the following attribution:
    Access for free at https://openstax.org/books/introductory-business-statistics/pages/1-introduction
  • If you are redistributing all or part of this book in a digital format, then you must include on every digital page view the following attribution:
    Access for free at https://openstax.org/books/introductory-business-statistics/pages/1-introduction
Citation information

© Jun 23, 2022 OpenStax. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution License . The OpenStax name, OpenStax logo, OpenStax book covers, OpenStax CNX name, and OpenStax CNX logo are not subject to the Creative Commons license and may not be reproduced without the prior and express written consent of Rice University.