Example 2

Example 2: In a study of household incomes in a small town of 1000 households, one might conceivably obtain the income of every household. However, it is probably very expensive and time consuming to do this.  Therefore, a better approach might be to obtain the data from a portion of the households (let’s say 125 households). In this scenario, the incomes of the 1000 households are referred to as the population and the incomes of the randomly selected 125 households are referred to as a sample.

In this household incomes example, is the average (mean) income of all 1000 households a parameter or statistic?  Is the average (mean) income of the 125 households a parameter or a statistic? (Answer: The average (or mean) of the 1000 households is a parameter, whereas the average (mean) income of the 125 households is a statistic.