6-1 Discussion: Confidence Intervals

The B&K Real Estate Company sells homes and is currently serving the Southeast region. The Northeast has been added to the company’s coverage. The B&K realtors are excited to now cover the entire East Coast and are working to prepare their southern agents to expand their reach to the Northeast.

B&K has hired your company to analyze the Northeast home listing prices in order to give information to their agents about the mean listing price at 95% confidence. Three analysis packages are offered by your company: One based off 100 listings; one on 1,000 listings; and one on 4,000 listings. Due to an extra cost associated with data collection, the company may charge you more for the package containing 4,000 listings that for the one with 100.

Discuss

Although the Bronze program has a smaller sample, it may appear less expensive at first. However, this increases error margins and makes results more unpredictable. [$285,500 to $334,500] Only 100 properties were surveyed. This would be a waste of time for a market that is not in your locality. Even though the margins of error are smaller, it is recommended that you start with a Silver package first to determine the accuracy before moving onto a Gold package.

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