Reference no: EM132422117

Problem: As part of its 20th anniversary, a company held a party to celebrate. In an informal survey, a local newspaper reporter asked 100 of the attendees about their income. The reporter computed the mean income of the 100 attendees to be $205,652. In the article published by the local newspaper, the reporter was quoted as stating, "The members of the company are paid quite well. Last year, they had a mean income of $205,652!"

Part A: What is a statistical advantage of using the median of the reported incomes, rather than the mean, as the estimate of the typical income?

Part B: The reporter's manager felt the individuals who attended the party may be different from the company as a whole. A more detailed survey of the company was planned to determine a better estimate of income. The staff developed two methods based on the available funds to carry out the survey.

Method 1: Send out an e-mail to all 5,365 members of the company and ask them to fill out an online form. The staff estimates that at least 750 members will respond.

Method 2: Select a simple random sample of the employees and directly contact the selected individuals by phone. Follow up to ensure all responses are obtained. Because method 2 requires more time than method 1, the staff estimates only 400 employees can be contacted using method 2.

Which of the two methods would you select for estimating the average yearly income of all 5,365 employees of the company? Explain your reasoning by comparing the two methods and by describing the effect of each method on the estimate.