Testing of Hypothesis

PROCEDURE FOR SOLUTION

Rohit Vishal Kumar
For Circulation to Information Management (Second Semester) Students
Xavier Institute of Social Service
Ranchi, Jharkhand, India
February 8, 2007
1 Steps for Solution
1. Null Hypothesis: Set up the Null hypothesis H
0
. It must be noted that the null
hypothesis H
0
is always of = type.
2. Alternative Hypothesis: Set up the Alternative hypothesis H
1
from the problem
provided. The alternate hypothesis H
1
can either be of Not Equal (=), Less than
(<) or Greater than (>) type.
3. Determine Level of Signicance: Choose the appropriate level of signicance
() depending on the reliability of the estimates and permissible risk. This is to
be decided before the sample is drawn as because it is a key determininant of
the sample size to be selected.
Specify the level of signicance at which the testing needs to be done. The level
of signicance is usually provided in the problem. If the level of signicance is
not specied it is preferable to use 95% level rather than 99% because the null
hypothesis that is accepted at 95% level will necessarily be accepted at 99% level.
The alternative may not necessarily hold true a null hypothesis that is accepted
at 99% level may or may not be accepted at 95% level. It is wiser to err on the
side of caution.
4. Compute the Test Statistic: Specify the test statistic to be followed for testing.
Calculate the value of the test statistic using the problem given in the data. This
value is also termed as the observed value or the calculated value F
calc
.
5. Find the Tabulated Value of the Statistic: Find out the value of test statistic
from the distribution table provided. This value is also termed as tabulated value
or F
tab
. In the case of examinations - either the F
tab
will be provided with the
problem and / or you will be allowed to consult the tables. However the values of
Z statistic at 99% and 95% level may not always be provided. You should always
learn the value(s) of the Z statistic by heart.
1
6. Compare and Conclude: Compare F
calc
and F
tab
. If F
calc
F
tab
then accept H
0
else reject H
0
.
Based on the result of the comparison write down your conclusion. The conclusion
should always be written in probabilistic terms and NEVER in deterministic terms.
2 Common Test Statistics
2.1 Mean of the population has a specied value
0
Null Hypothesis (H
0
) : ( =
0
)
CASE A: Population standard deviation is known and is equal to
0
Z =

n(X
0
)

0
where n = sample size
X = sample mean
Sampling distribution : Standard Normal
CASE B: Population standard deviation is not known but sample is large (> 30)
Z =

n(X
0
)
s
where n = sample size
s = sample standard deviation
Sampling distribution : Standard Normal
CASE C: Population standard deviation is not known but sample is small ( 30)
t =

n(X
0
)

0
where n = sample size
X = sample mean
Sampling distribution : t distribution with (n-1) degrees of freedom. Also known as
Students T.
2.2 Mean of the two population are equal
Null Hypothesis (H
0
) : (
1
=
2
)
CASE A: Population are independent and their standard deviation are known and are
equal to
1
and
2
respectively
Z =
X
1
X
2

2
1
n
1
+

2
2
n
2
where n
1
n
2
= sample sizes
X
1
X
1
= sample means
2
Sampling distribution : Standard Normal
CASE B: Population are independent and their standard deviation are not known and
the sample is large (n
1
, n
2
> 30) respectively
Z =
X
1
X
2

S
2
1
n
1
+
S
2
2
n
2
where n
1
n
2
= sample sizes
X
1
X
1
= sample means
S
2
1
S
2
2
= sample standard deviations
Sampling distribution : Standard Normal
CASE C: Population are independent and their standard deviation are unknown but
equal; and the sample is small (n
1
, n
2
30) respectively
t =
X
1
X
2
S

1
n
1
+
1
n
2
where n
1
n
2
= sample sizes
X
1
X
1
= sample means
S
2
=
(n
1
1)S
2
1
+ (n
2
1)S
2
2
n
1
+n
2
2
(Pooled standard deviation)
Sampling distribution : t distribution with (n
1
+ n
2
2) degrees of freedom. This
distribution is also known as Fischers Non Paired T.
CASE D: Population are correlated and the sample is small (n
1
, n
2
30) respectively
t =

n U
S
U
where n
1
, n
2
= sample sizes
U = (X
1
X
2
)and U and S
U
are calculated w.r.t U
Sampling distribution : t distribution with (n1) degrees of freedom. This distribution
is also known as Fischers Paired T.
2.3 Standard deviation of a population has a specied value
0
Null Hypothesis (H
0
) : ( =
0
)
CASE A: Population mean is known and is equal to
0

2
=

n
i=1
(x
i

o
)
2

2
0
where n = sample size
3
Sampling distribution :
2
distribution with n degrees of freedom
CASE B: Population mean is unknown but the sample is large (N > 30)
Z =
s
0

0
/

(2n)
where n = sample size
where s = sample standard deviation
Sampling distribution : Standard Normal distribution
CASE C: Population mean is unknown but the sample is small (N 30)

2
=
(n 1)s
2

0
=

n
i=1
(X
i
X
2
)

0
where X = sample mean
where s = sample standard deviation
Sampling distribution :
2
distribution with (n 1) degrees of freedom
2.4 Standard deviation of two populations are equal
Null Hypothesis (H
0
) : (
0
=
1
)
CASE A: Population are independent and the sample size is large (n
1
, n
2
> 30)
Z =
S
1
S
2
S(

1
2n
1

1
2n
2
)
where S = standard deviation in the
Fischers T distribution
Sampling distribution : Standard Normal distribution
CASE B: Population are independent and the sample sizes are small(n
1
, n
2
30)
F =
S
2
1
S
2
2
where S
1
S
2
= are standard deviation of the
respective populations
Sampling distribution : F distribution with (n
1
1), (n
2
1) degrees of freedom
2.5 Population proportion of some attribute has a value p
0
Null Hypothesis (H
0
) : (p = p
0
)
4
CASE A: Population are independent and the sample size is large (n
1
, n
2
> 30)
Z =
p p
0

p
0
(1p
0
)
n
where n = sample size
where p = sample proportion
Sampling distribution : Standard Normal distribution
2.6 Population proportions of two populations are equal (p
0
= p
1
)
Null Hypothesis (H
0
) : (p
0
= p
1
)
CASE A: Population are independent and the sample size is large (n
1
, n
2
> 30)
Z =
p
1
p
2

p(1 p)(
1
n
1
+
1
n
2
)
where n
1
, n
2
= sample sizes
where p
1
, p
2
= sample proportions
p =
(n
1
p
1
+n
2
p
2
)
(n
1
+n
2
)
Sampling distribution : Standard Normal distribution
3 Things to Remember
All the Greek symbols always stand for parameters of population whereas all the
non-Greek symbols always stand for the parameters of the sample.
Sample standard deviation is calculated as follows:
S =

1
(n 1)
n

i=1
(x
i
x)
2
Alternative hypothesis of = type are always two tailed tests. In such a case both
sides of the distribution needs to be taken into account.
Alternative hypothesis of < or > are always one tailed test. In such a case only
one side of the distribution is taken into account.
Critical region or region of acceptance will be generally given in the question
paper. However critical regions of Z test may not be provided in the question
paper. The following values of Z distribution should always be remembered:
Z Values Two Tailed One Tailed
5% Level 1.960 1.645
1% Level 2.576 2.362
5% Level of signicance = 95% Condence Limit
1% Level of signicance = 99% Condence Limit
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If F
calc
value comes out as negative (-ve), then the negative sign is to be ignored
and only the absolute value(s) needs to be compared
4 A Solved Example
BeeTEL - a renowned television manufacturing company of India - is considering pur-
chasing picture tubes from independent producers; rather than manufacturing them
in-house. They maintain high quality standards; BeeTEL will not consider buying a TV
tube unless convinced that the average life expectancy of the tube is more than 500
hours. Elektra Tubes Ltd. - a potential supplier - has supplied 9 tubes for testing. The
tests provided the following data: Mean life of the tube = 600 hours and variance
2500 hours. Consider yourself to be in charge of recommending tube suppliers to the
top management. Based on the performance results of Elektra Tubes as a supplier of
picture tubes to BeeTEL?
Answer:
Null Hypothesis H
0
: ( = 500)
Alternative Hypothesis H
0
: ( > 500)
Data provided:
Sample size = n = 9
Mean = = 600 hours
Variance = 2500 hours
standard deviation =

2500 = 50 hours
Test statistic to be used:
t =

n(X
0
)

0
Sampling distribution : t distribution with (n-1) degrees of freedom.
Calculations:
t =

9(600 500)
50
= 6
T
tab
at 8 degrees of freedom and 99% Condence Level = 2.8965
Conclusions: As T
calc
> T
tab
we reject H
0
and may conclude that the mean life of
TV tubes supplied by Elektra Tubes Ltd. is greater than 500 hours. Therefore we may
recommend Elektra Tubes Ltd. as a potential TV tube supplier for BeeTEL Ltd.
5 Problems for Solution
Qn 1. In a sample of 1000 people in Maharashtra 540 are rice eaters and the rest are
wheat eaters. Can we assume that both rice and wheat are equally popular in the state.
Test the claim at 1% level of signicance. Hint: See Section 2.5, Z
calc
= 2.532
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Qn 2. Before an increase in excise duty on cigarettes, 800 persons out of a sample of
1000 were found to be smokers. After the increase in excise duties, 800 persons were
found to be smokers in a sample of 1200 people. Would you conclude that there has
been a signicant reduction in smoking habits of the people after the increase in excise
duty? Hint: See Section 2.6, Z
calc
= 6.842
Qn 3. An insurance agent claims that the average age of policy holders who insure
through him is less than the average for all agents which is 30.5 years. A random
sample of 100 policy holders who had insured through him gave the following age
distribution. Calculate the arithmetic mean and standard deviation of this distribution
and use these values to test his claim at 5% level of signicance. You are given that
Z(1.645) = 0.95 Hint: See Section 2.1, Z
calc
= -2.681
Age Last Birthday No of persons
16 20 12
21 25 22
26 30 20
31 35 30
36 40 16
Qn 4. In a survey of buying habits, 400 women shoppers are chosen at random in
a super market A located in a certain section of the city. Their average weekly food
expenditure is Rs. 250 with a standard deviation of Rs. 40. For 400 women shoppers
chosen at random in super market B the average weekly food expenditure is Rs. 220
with a standard deviation of Rs. 55. Test at 1%level of signicance whether the average
weekly food expenditure of the two population are equal? Would your conclusion
change if you test the above at 5% level? Hint: See Section 2.2, Z
calc
= 8.82
Qn 5. The following are the values in thousands of an inch obtained by two engineers in
10 successive measurement with the same micrometer. Is one engineer more consistent
than the other? Hint: the lower the dispersion; the better the consistency. Refer Section
2.4. F
calc
= 2.4
Engineer A Engineer B
503 502
505 497
497 492
505 498
495 499
502 495
499 497
493 496
510 498
501
Qn 6. A certain stimulus administered to each of the 12 patients resulted in the follow-
ing increase in blood pressure: 5, 2, 8, -1, 3, 0, -2, 1, 5, 0, 4 and 6. Can it be concluded
7
that the stimulus will, in general, be accompanied by an increase in blood pressure?
Hint: Use Paired T. t
calc
= 2.89
Qn 7. A survey conducted by an NGO on the daily wages in Rs. of unskilled workers
in two cities gave the following data. Test at 5% level the equality of variance of the
wages distributed in the cities. Given: F
12,15
0.95 = 0.025.
No. of Workers S.D. of Wages
City Sampled in the sample
Alipurduar 16 Rs. 25.00
Bankura 13 Rs. 32.00
Qn 8. In a year there are 956 births in town A, of which 52.5% were males. In town
A and B combined this proportion in a total of 1406 births was 0.496. Is there any
signicant difference in the proportion of male births in the two towns? Hint: Z
calc
=
3.368
This document can be obtained from:
Rohit Vishal Kumar
Reader
Department of Marketing
Xavier Institute of Social Service
P.O. Box No. 7, Purulia Road
Ranchi 834 001, Jharkhand, India
Phone: (91-651) 2200-873 Ext. 308
Email: rohitvishalkumar@yahoo.com
Final Print on: February 8, 2007
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