Central Limit Theorem

This unit we are using simulation models to investigate the behaviour of critical performance variables, such as profit, in the presence of uncertainty. We use statistical analysis, primarily sample means and standard deviations, to investigate the properties of the simulated value. Underlying our ability to use statistical analysis techniques on the simulated values is the Central Limit Theorem.

Why is the Central Limit Theorem so important to statistical analysis? How does the Central Limit Theorem help us when we are testing hypotheses about sample means? Reflect on what happens to the shape of a graph when the number of samples increases and number of data in each sample increases – i.e., how does an increase in sample affect the distribution mean and standard deviation?







Sample Solution