Question

The average price of an item is $42 with a standard deviation of $3

Answer 1

The mean price goes between $ 41.16 and $ 42.84, so a value of $ 48 is unusually high.

Since the average price of an item is $ 42 with a standard deviation of $ 3, to find a 98% confidence interval about the mean, and determine if a value of X = 48 is unusually high or if it is normal, the following calculations should be done:

• (((42 - 3) + (42 + 3)) / 2) x 0.98 = X
• ((39 + 45) / 2) x 0.98 = X
• 42 x 0.98 = X
• 41.16 = X

• (((42 - 3) + (42 + 3)) / 2) x 1.02 = X
• ((39 + 45) / 2) x 1.02 = X
• 42 x 1.02 = X
• 42.84 = X

Therefore, as the mean price goes between $ 41.16 and $ 42.84, a value of $ 48 is unusually high.

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