Currently serving the Southeast region, B&K Real Estate is a company selling homes and has recently expanded to cover the Northeast states. B&K realtors have moved to prepare their southern agents to expand their reach to the northeast. With this respect that B&K realtors have proposed an analysis of the northeast region home listing prices to furnish their agents with information about the mean listing price at a 95% confidence level. The analysis comes in two packages relative to the sample size. Charges on the analysis depend on the sample size, in this case, two samples of 100 and 1000. A larger sample dictates a smaller margin of error, though it comes at a higher cost as compared to the smaller sample. This report contains an analysis of both samples recommending the best possible sample size to be put into use.
There lies a correlation between the margin of error, sample size, and confidence level. For the fixed sample sizes, there is a margin of error that varies with the confidence level, in addition, for a fixed confidence level, the margin of error also varies inversely with the sample sizes (Schulz, 2011). A higher confidence level means a smaller margin of error for a given sample size. With this respect, larger samples provide smaller margins of error for a specific confidence level.
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B&K Realtors choose a choice of the survey with a more accurate analysis of what they need to know on how to enter the new market. The confidence level stands at 95% for both sample sizes. The sample size of 100 has a margin of error of $25,000 but at a low-cost service of $2,000. The other sample size of 1,000 comes with more service charges of $10,000 but reduces the margin of error to $8,000. B&K faces a tradeoff, either saving on analysis service charge but getting a more skewed analysis of their market or spending more on the analysis but getting a more accurate analysis of their new market. For the first option, they will spend $8,000 less now but face the risk of losing $17,000 more in the future. They will spend the $8,000 more now but save on the $17,000 in the future. The second option is the better choice.
After a critical analysis of the costs tradeoff faced by B&K Realtors while analyzing their new northeast market, this report fronts the option of having a more accurate market analysis at a higher cost now and but saving more costs in the future by using the smaller margin of error. A smaller margin of error in the market analysis means B&K is better positioned to predict patterns in their sector correctly and, therefore, leverage that in securing more markets in the future.
References
Schulz E. (2011.) " Confidence Intervals: Confidence Level, Sample Size, and Margin of Error "
http://demonstrations.wolfram.com/ConfidenceIntervalsConfidenceLevelSampleSizeAndMarginOfError/. Wolfram Demonstrations Project
