When is the finite population multiplier expected to be approximately equal to one?

Question

Prepp Team · Accepted Answer

Understanding the Finite Population Multiplier in Statistics

In statistics, when you take a sample from a population, you often use the standard error to measure the variability of your sample statistic (like the sample mean) relative to the population parameter. When the sample size (n) is small compared to the population size (N), and you are sampling with replacement or from a very large population, the standard error calculation is straightforward.

However, when you are sampling without replacement from a relatively small population, the standard error needs to be adjusted. This adjustment is done using the finite population multiplier, sometimes also called the finite population correction factor (FPC).

What is the Finite Population Multiplier?

The formula for the finite population multiplier (FPC) is:

\begin{equation*}\text{FPC} = \sqrt{\frac{N-n}{N-1}}\end{equation*}

Where:

N is the population size.
n is the sample size.

This multiplier is applied to the standard error formula. For example, the standard error of the mean becomes:

\begin{equation*}\text{Standard Error (adjusted)} = \text{Standard Error (unadjusted)} \times \sqrt{\frac{N-n}{N-1}}\end{equation*}

When is the Finite Population Multiplier Approximately One?

The question asks when the finite population multiplier is expected to be approximately equal to one. Let's look at the formula again:

\begin{equation*}\sqrt{\frac{N-n}{N-1}}\end{equation*}

For this expression to be close to 1, the fraction inside the square root, $\frac{N-n}{N-1}$, must be close to 1.

The fraction $\frac{N-n}{N-1}$ is close to 1 when the sample size (n) is very small compared to the population size (N).

Consider the numerator $(N-n)$ and the denominator $(N-1)$. If $n$ is much smaller than $N$, then $N-n$ is very close to $N$, and $N-1$ is also very close to $N$. Therefore, $\frac{N-n}{N-1}$ will be close to $\frac{N}{N} = 1$.

The Rule of Thumb: N ≥ 20n

Statisticians use a rule of thumb to determine when the finite population multiplier is close enough to 1 that it can be ignored (i.e., considered approximately equal to 1). A commonly accepted rule is that the FPC can be ignored when the population size (N) is at least 20 times the sample size (n).

This means when $\text{N} \ge 20\text{n}$.

Let's test this with an example:

Suppose $N = 1000$ and $n = 50$. Here, $N = 20n$.

FPC = $\sqrt{\frac{1000-50}{1000-1}} = \sqrt{\frac{950}{999}} \approx \sqrt{0.95095} \approx 0.975$. This is quite close to 1.

If $N = 1000$ and $n = 100$. Here, $N = 10n$.

FPC = $\sqrt{\frac{1000-100}{1000-1}} = \sqrt{\frac{900}{999}} \approx \sqrt{0.9009} \approx 0.949$. This is less close to 1.

When $N \ge 20n$, the fraction $\frac{n}{N}$ is less than or equal to $\frac{1}{20} = 0.05$. When the sampling fraction $\frac{n}{N}$ is 5% or less, the effect of sampling without replacement on the standard error is generally considered negligible, and the FPC is close to 1.

Analyzing the Options

The question provides several conditions related to the relationship between N and n:

$\text{N} \ge 20\text{n}$
$\text{N} \ge 30\text{n}$
$\text{N} \ge 10\text{n}$
$\text{N} \ge 40\text{n}$

These options represent different rules of thumb for when the finite population multiplier can be considered close to 1. As discussed, the most commonly accepted threshold for ignoring the FPC and considering it approximately 1 is when the population size is at least 20 times the sample size, or when the sampling fraction ($\frac{n}{N}$) is 5% or less. This corresponds to the condition $\text{N} \ge 20\text{n}$.

Conclusion

The finite population multiplier is approximately equal to one when the sample size (n) is small relative to the population size (N), specifically when the population size is at least 20 times the sample size ($\text{N} \ge 20\text{n}$). This condition ensures that removing sampled items without replacement does not significantly affect the remaining population's variability, making the standard error calculation similar to sampling with replacement or from an infinite population.

Revision Table: Finite Population Multiplier Key Points

Concept	Description	Formula/Condition
Finite Population Multiplier (FPC)	Adjusts standard error when sampling without replacement from a finite population.	$\sqrt{\frac{N-n}{N-1}}$
Purpose of FPC	Reduces the standard error because removing elements changes the population slightly.	Applied as a multiplier to unadjusted standard error.
When FPC $\approx$ 1	When sample size (n) is small compared to population size (N).	Common rule of thumb: $\text{N} \ge 20\text{n}$ (or $\frac{n}{N} \le 0.05$)
When FPC is Significant	When sample size (n) is a large fraction of population size (N).	When $\frac{n}{N} > 0.05$ (e.g., when $\text{N} < 20\text{n}$)

Additional Information: Sampling Methods

The concept of the finite population multiplier is relevant when using specific sampling methods:

Simple Random Sampling Without Replacement (SRSWOR): This is the primary context where the FPC is used. Once an element is selected for the sample, it is not returned to the population, so it cannot be selected again.
Simple Random Sampling With Replacement (SRSWR): In this method, selected elements are returned to the population before the next selection. The population composition doesn't change with each draw, so the finite population multiplier is not needed; it is implicitly 1 because the 'effective' population size remains infinite relative to the sample size.

For most practical purposes, when sampling from very large populations (like the entire population of a country for a poll), the population size (N) is so much larger than the sample size (n) that the ratio $\frac{n}{N}$ is always very small (much less than 5%). In such cases, the FPC is very close to 1, and the distinction between sampling with and without replacement becomes negligible in terms of standard error calculation.