Inferences About the Difference Between Interval Estimation of m1 - m2:

Two Population Means: s 1 and s 2 Unknown s 1 and s 2 Unknown

 Interval Estimation of m 1 – m 2 When s 1 and s 2 are unknown, we will:
 Hypothesis Tests About m 1 – m 2 • use the sample standard deviations s1 and s2
as estimates of s 1 and s 2 , and
• replace za/2 with ta/2.

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Interval Estimation of m1 - m2: Interval Estimation of m1 - m2:

s 1 and s 2 Unknown
s 1 and s 2 Unknown

Pooled
Variance

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How to conclude about s 1 and s 2 Interval Estimation of m1 - m2:

Hypothesis test for two population Variances
s 1 and s 2 Unknown
 Interval Estimate

s12 s22
x1  x2  ta / 2 
n1 n2

Where the degrees of freedom for ta/2 are:

2
 s12 s22 
  
df   n1 n2 
2 2
1  s12  1  s22 
    
n1  1  n1  n2  1  n2 

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1
 Difference Between Two Population Means: Difference Between Two Population Means:
s 1 and s 2 Unknown s 1 and s 2 Unknown
 Example: Specific Motors  Example: Specific Motors
Specific Motors of Detroit has developed a new
Automobile known as the M car. 24 M cars and 28 J
cars (from Japan) were road tested to compare miles- Sample #1 Sample #2
per-gallon (mpg) performance. The sample statistics M Cars J Cars
are shown on the next slide. 24 cars 28 cars Sample Size
29.8 mpg 27.3 mpg Sample Mean
2.56 mpg 1.81 mpg Sample Std. Dev.

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Difference Between Two Population Means:

Point Estimate of m 1  m 2
s 1 and s 2 Unknown
 Example: Specific Motors Point estimate of m1  m2 = x1  x2
Let us develop a 90% confidence interval estimate = 29.8 - 27.3
of the difference between the mpg performances of
= 2.5 mpg
the two models of automobile.
Assume: s 1 and s 2 are not equal and, also not known where:
m1 = mean miles-per-gallon for the
population of M cars
m2 = mean miles-per-gallon for the
population of J cars

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Interval Estimation of m 1  m 2: Interval Estimation of m 1  m 2:

s 1 and s 2 Unknown s 1 and s 2 Unknown
The degrees of freedom for ta/2 are:
s12 s22 (2.56) 2 (1.81) 2
2 x1  x2  ta / 2   29.8  27.3  1.711 
 (2.56)2 (1.81)2  n1 n2 24 28
  
df   24 28 
 24.07  24 2.5 + 1.069 or 1.431 to 3.569 mpg
2 2
1  (2.56) 2  1  (1.81) 2 
    
24  1  24  28  1  28  We are 90% confident that the difference between
the miles-per-gallon performances of M cars and J cars
With a/2 = .05 and df = 24, ta/2 = 1.711 is 1.431 to 3.569 mpg.

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2
 Hypothesis Tests About m 1  m 2: Hypothesis Tests About m 1  m 2:
s 1 and s 2 Unknown s 1 and s 2 Unknown
 Hypotheses  Example: Specific Motors
Can we conclude, using a .05 level of significance,
H 0 : m1  m2  D0 H 0 : m1  m2  D0 H 0 : m1  m2  D0
that the miles-per-gallon (mpg) performance of M cars
H a : m1  m 2  D0 H a : m1  m2  D0 H a : m1  m2  D0
is greater than the miles-per-gallon performance of J
Left-tailed Right-tailed Two-tailed cars?
 Test Statistic

( x1  x2 )  D0
t
s12 s22

n1 n2

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Hypothesis Tests About m 1  m 2: Hypothesis Tests About m 1  m 2:

s 1 and s 2 Unknown s 1 and s 2 Unknown
 p –Value and Critical Value Approaches  p –Value and Critical Value Approaches
1. Develop the hypotheses. 2. Specify the level of significance. a = .05
H0: m1 - m2 < 0 
3. Compute the value of the test statistic.
Ha: m1 - m2 > 0
where: ( x1  x2 )  D0 (29.8  27.3)  0
m1 = mean mpg for the population of M cars t   4.003
2 2
s s (2.56) 2 (1.81)2
m2 = mean mpg for the population of J cars 1
 2

n1 n2 24 28

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Hypothesis Tests About m 1  m 2: Hypothesis Tests About m 1  m 2:

s 1 and s 2 Unknown s 1 and s 2 Unknown
 p –Value Approach  p –Value Approach
4. Compute the p –value. 5. Determine whether to reject H0.
The degrees of freedom for ta are: Because p–value < a = .05, we reject H0.
2
 (2.56) (1.81) 
2 2
We are at least 95% confident that the miles-per-
   gallon (mpg) performance of M cars is greater than
df   24 28 
 40.566  41
2 2 the miles-per-gallon performance of J cars?.
1  (2.56)2  1  (1.81) 2 
    
24  1  24  28  1  28 
Because t = 4.003 > t.05 = 1.683, the p–value < .05.
In fact, the p–value < .005.

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3
 Hypothesis Tests About m 1  m 2:
s 1 and s 2 Unknown
 Critical Value Approach
4. Determine the critical value and rejection rule.
For a = .05 and df = 41, t.05 = 1.683
Reject H0 if t > 1.683
5. Determine whether to reject H0.
Because 4.003 > 1.683, we reject H0.
We are at least 95% confident that the miles-per-
gallon (mpg) performance of M cars is greater than
the miles-per-gallon performance of J cars?.
Direct and Broker-Purchased Mutual Funds
Millions of investors buy mutual funds choosing from
thousands of possibilities. Some funds can be purchased
directly from banks or other financial institutions whereas
others must be purchased through brokers, who charge a fee
for this service. This raises the question, Can investors do
better by buying mutual funds directly than by purchasing
mutual funds through brokers? To help answer this
question, a group of researchers randomly sampled the
annual returns from mutual funds that can be acquired
directly and mutual funds that are bought through brokers
and recorded the net annual returns, which are the returns
on investment after deducting all relevant fees. These are
listed next.

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Data Which t-test

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Ex: Which major attracts higher salary Data

 In the last few years, a number of web-based companies

that offer job placement services have been created. The
manager of one such company wanted to investigate the
job offers recent MBAs were obtaining. In particular, she
wanted to know whether finance majors were being
offered higher salaries than marketing majors. In a
preliminary study she randomly sampled 50 recently
graduated MBAs, half of whom majored in finance and
half in marketing. From each she obtained the highest
salary offer (including benefits).These data are listed here.
Can we infer that finance majors obtain higher salary offers
than do marketing majors among MBAs?

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