Sample Size Formula

Updated on April 4, 2024
Article byWallstreetmojo Team
Edited byWallstreetmojo Team
Reviewed byDheeraj Vaidya, CFA, FRM

Formula to Determine Sample Size of Population

The sample size formula helps calculate or determine the minimum sample size, which is required to know the adequate or correct proportion of the population, along with the confidence level and the margin of error.

The term “sample” refers to the portion of the population that enables us to draw inferences about the population. So, the sample size must be adequate to make meaningful inferences. In other words, it is the minimum size needed to estimate the true population proportion with the required margin of error and confidence level. As such, determining the appropriate sample size is one of the recurrent problems in statistical analysis. Its equation can derive using population size, the critical value of the normal distribution, sample proportion, and margin of error.

Sample Size n = N * [Z2 * p * (1-p)/e2] / [N – 1 + (Z2 * p * (1-p)/e2]
Sample-Size-Formula

You are free to use this image on your website, templates, etc, Please provide us with an attribution linkHow to Provide Attribution?Article Link to be Hyperlinked
For eg:
Source: Sample Size Formula (wallstreetmojo.com)

where,

  • N = Population size,
  • Z = Critical value of the normal distribution at the required confidence level,
  • p = Sample proportion,
  • e = Margin of error

Key Takeaways

  • The sample size formula determines the minimum sample size, which is a must to understand the adequate or correct proportion of the population, the confidence level, and the margin of error.
  • Understanding the appropriate sample size is essential since one may use it to validate research findings.
  • The equation can be obtained utilizing population size, the normal distribution critical value, sample proportion, and margin of error.
  • If the sample size is small, it will not create an appropriate outcome, while a sample that is too large will be both a money and time waste. Hence, one must consider a reasonable sample size for market research, healthcare, and education surveys.

How to Calculate Sample Size? (Step by Step)

  • Step 1: Firstly, determine the population size, which is the total number of distinct entities in your population, and it is denoted by N. [Note: In case the population size is very large but the exact number is not known, then use 100,000 because the sample size doesn’t change much for populations larger than that.]
  • Step 2: Next, determine the critical value of the normal distribution at the required confidence level. For example, the critical value at 95% confidence level is 1.96.
  • Step 3: Next, determine the sample proportion which can be used from previous survey results or be collected by running a small pilot survey. [Note: if unsure, one can always use 0.5 as a conservative approach, and it will give the largest possible sample size.]
  • Step 4: Next, determine the margin of error, the range in which the true population expects to lie. [Note: Smaller the margin of error, more is the precision and hence the exact answer.]
  • Step 5: Finally, the sample size equation can derive by using population size (Step 1), the critical value of the normal distribution at the required confidence level (Step 2), sample proportion (Step 3), and margin of error (Step 4) as shown below.
Sample size formula 1
Financial Modeling & Valuation Courses Bundle (25+ Hours Video Series)

–>> If you want to learn Financial Modeling & Valuation professionally , then do check this ​Financial Modeling & Valuation Course Bundle​ (25+ hours of video tutorials with step by step McDonald’s Financial Model). Unlock the art of financial modeling and valuation with a comprehensive course covering McDonald’s forecast methodologies, advanced valuation techniques, and financial statements.

Examples

You can download this Sample Size Formula Excel Template here – Sample Size Formula Excel Template

Example #1

Let us take the example of a retailer who is interested to know how many of their customers bought an item from them after viewing their website on a certain day. Given that their website has, on average, 10,000 views per day, determine the sample size of the customers that they have to monitor at a 95% confidence level with a 5% margin of error if:

  • They are uncertain of the current conversion rate.
  • They know from previous surveys that the conversion rate is 5%.

Given,

  • Population size, N = 10,000
  • Critical value at 95% confidence level, Z = 1.96
  •  Margin of error, e = 5% or 0.05

1 – Since the current conversion rate is unknown, let us assume p = 0.5

Sample size formula example 1

Therefore, one can calculate the sample size using the formula,

Sample size formula example 1.1jpg

= (10,000 * (1.96 2)*0.5*(1-0.5)/(0.05 2)/(10000 – 1+((1.96 2)* 0.5*(1-0.5)/(0.05 2))))

Sample size formula example 1.2jpg

Therefore, 370 customers will be adequate for deriving meaningful inferences.

2 – The current conversion rate is p = 5% or 0.05

Therefore, one can calculate the sample size using the above formula,

 example 2

= (10,000 * (1.96 2)*0.05*(1-0.05)/(0.05 2)/(10000 – 1+((1.96 2)* 0.05*(1-0.05)/(0.05 2))))

 example 2.1jpg

Therefore, a size of 72 customers will be adequate for deriving meaningful inferences in this case.

Example #2

Let us take the above example. Let us assume that the population size, i.e., daily website view, is between 100,000 and 120,000, but the exact value is unknown. However, the rest of the values are the same, with a conversion rate of 5%. Therefore, calculate the sample size for both 100,000 and 120,000.

Given,

  • Sample proportion, p = 0.05
  • Critical value at 95% confidence level, Z = 1.96
  •  Margin of error, e = 0.05
 example 3

Therefore, one can calculate the sample size for N = 100,000 as,

Sample size formula example 3.1jpg

= (100000 * (1.96 2)*0.05*(1-0.05)/(0.05 2)/(100000 – 1+((1.96 2)* 0.05*(1-0.05)/(0.05 2))))

Sample size equation example 3.2jpg

Therefore, one can calculate the sample size for N = 120,000 as,

example 3.3jpg

= (120000 * (1.96 2)*0.05*(1-0.05)/(0.05 2)/(120000 – 1+((1.96 2)* 0.05*(1-0.05)/(0.05 2))))

Sample size equation example 3.4jpg

Therefore, it proves that as the population size increases to be very large, it becomes irrelevant in the computation of the sample size.

Relevance and Uses

Sample size calculation is important to understand the concept of the appropriate sample size because one may use it to validate research findings. In case it is too small, it will not yield valid results, while a sample that is too large may be a waste of both money and time. Therefore, one should use a considerable sample size for market research, healthcare, and education surveys.

Frequently Asked Questions (FAQs)

What is the advantage of the sample size formula?

The sample size formula is an essential consideration for research. The larger sample sizes give correct mean values, analyze outliers that could alter the data in a smaller sample, and give a smaller error margin.

How to know if the sample size is adequate?

The ideal maximum sample size is 10% if it increases by less than 1,000. So, for example, if the population is 10,000, 10% will be 1,000.

Does sample size change the standard deviation?

As the sample size boosts the sampling distribution, it becomes nearer to the normal distribution. Meanwhile, the standard deviation of the sampling distribution alters in another way. In addition, the standard deviation reduces as n surges.

When to use Cochran’s sample size formula?

The Cochran formula helps to determine an ideal sample size given a desired precision level, appropriate confidence level, and the estimated proportion of the attribute in the population. It is considered appropriate in significant population conditions.

Recommended Articles

This article has been a guide to Sample Size Formula. Here we learn how to determine or calculate the adequate sample size or correct proportion of the population, along with practical examples and a downloadable Excel template. You can learn more about Excel modeling from the following articles: –

Reader Interactions

Comments

  1. Laila Megahed says

    Thank you so much for this great information

  2. Chawanangwa Msonda says

    This has been so helpful

  3. lamio says

    It is amazing templet!

  4. Khadka GIRI says

    Very good resources ever seen

Leave a Reply

Your email address will not be published. Required fields are marked *