Business Decision Making II

Inference About Means and Proportions

with Two Populations

Dr. Nguyen Ngoc Phan

Dr. Nguyen Ngoc Phan Inference About Means and Proportions

Difference Between Two Means: σ1, σ2 Known

Letting µ1 and µ2 denote the mean of population 1 and 2

respectively. We will focus on inferences about the difference
between the means: µ1 − µ2 .
To make an inference about this difference, we select a sample
of n1 units from population 1 and a sample of n2 units from
population 2.
Denote by x̄1 and x̄2 the sample means of the two samples,
respectively.
In this section, we assume that the two population standard
deviations, σ1 and σ2 , are known.

Dr. Nguyen Ngoc Phan Inference About Means and Proportions

The point estimator of the difference between the two
population means is
x̄1 − x̄2
The standard error of x̄1 − x̄2 is
s
σ12 σ22
σx̄1 −x̄2 = +
n1 n2

If both populations have a normal distribution, or if the sample

sizes are large enough, the sampling distribution of x̄1 − x̄2 will
have a normal distribution with mean given by µ1 − µ2 .

Dr. Nguyen Ngoc Phan Inference About Means and Proportions

Interval estimate of µ1 − µ2 : σ1 and σ2 known
s
σ12 σ22
x̄1 − x̄2 ± zα/2 +
n1 n2
where 1 − α is the confidence coefficient.

Example: Problems 1 and 4, page 449.

Dr. Nguyen Ngoc Phan Inference About Means and Proportions

Let us consider hypothesis tests about the difference between
two population means. Using D0 to denote the hypothesized
difference between µ1 and µ2 , the three forms for a hypothesis
test are as follows:
1 H0 : µ1 − µ2 ≥ D0 Ha : µ1 − µ2 < D0
2 H0 : µ1 − µ2 ≤ D0 Ha : µ1 − µ2 > D0
3 H0 : µ1 − µ2 = D0 Ha : µ1 − µ2 6= D0

Dr. Nguyen Ngoc Phan Inference About Means and Proportions

The steps for conducting hypothesis tests are applicable here.
Test statistic for hypothesis test about µ1 − µ2
x̄1 − x̄2 − D0
z= s
σ12 σ22
+
n1 n2

The p–value is calculated as usual using the standard normal

distribution.
Example: Problems 2, 3 and 8, page 450.
Homework: Problems 5 and 7, page 450.

Dr. Nguyen Ngoc Phan Inference About Means and Proportions

Difference Between Two Means: σ1, σ2 Unknown

We extend the discussion of inferences about the difference

between two population means to the case when the two
population standard deviations, σ1 and σ2 , are unknown.
In this case, we will use the sample standard deviations, s1 and
s2 , to estimate the unknown population standard deviations.
When we use the sample standard deviations, the interval
estimation and hypothesis testing procedures will be based on
the t distribution rather than the standard normal distribution.

Dr. Nguyen Ngoc Phan Inference About Means and Proportions

Interval estimate of µ1 − µ2 : σ1 and σ2 unknown
s
s12 s22
x̄1 − x̄2 ± tα/2 +
n1 n2
where 1 − α is the confidence coefficient.

Dr. Nguyen Ngoc Phan Inference About Means and Proportions

To use the t distribution as an approximation, we can evaluate
the degrees of freedom for tα/2 by the following formula:
Degrees of freedom for t distribution
 2 2
s1 s22
+
n1 n2
df =  2 2  2 2
1 s1 1 s2
+
n1 − 1 n1 n2 − 1 n1
We round the non–integer degrees of freedom down to provide
a larger t–value and a more conservative interval estimate.

Example: Problems 9, 11 and 12, page 457.

Dr. Nguyen Ngoc Phan Inference About Means and Proportions

Let us now consider hypothesis tests about the difference
between the means of two populations when the population
standard deviations σ1 and σ2 are unknown.
Letting D0 denote the hypothesized difference between µ1 and
µ2 . The test statistic t is calculated by the formula below, and
follows the t distribution.

Test statistic about µ1 − µ2 : σ1 and σ2 unknown

x̄1 − x̄2 − D0
t= s
s12 s22
+
n1 n2

Example: Problems 10 and 16, page 459.

Homework: Problems 14 and 17, page 459.

Dr. Nguyen Ngoc Phan Inference About Means and Proportions

Inferences About µ1 − µ2: Matched Samples

Suppose employees at a manufacturing company can use two

different methods to perform a production task. To maximize
production output, the company wants to identify the method
with the smaller population mean completion time.
Let µ1 and µ2 denote the population mean completion time
for production method 1 and 2, respectively.
The null and alternative hypotheses are

H 0 : µ1 − µ2 = 0 Ha : µ1 − µ2 6= 0.

If H0 is rejected, the method providing the smaller mean

completion time would be recommended.

Dr. Nguyen Ngoc Phan Inference About Means and Proportions

In choosing the sampling procedure that will be used to collect
production time data and test the hypotheses, we prefer the
matched sample method.
Matched sample design
One random sample of workers is selected. Each worker first
uses one method and then uses the other method. The order
of the two methods is assigned randomly to the workers, with
some workers performing method 1 first and others performing
method 2 first. Each worker provides a pair of data values,
one value for method 1 and another value for method 2.

Dr. Nguyen Ngoc Phan Inference About Means and Proportions

Let µd be the mean of the difference in values for the
population of workers. With this notation

H0 : µ d = 0 Ha : µd 6= 0.

The sample mean and the sample standard deviation are

s
P
di
P ¯2
(di − d)
d¯ = sd = .
n n−1

With the small sample of n, we need to make the assumption

that the population of differences has a normal distribution, so
that we may use the t distribution for hypothesis testing and
interval estimation procedures.

Dr. Nguyen Ngoc Phan Inference About Means and Proportions

Test statistic involving matched samples
d¯ − µd
t = sd
√
n
The test statistic has a t distribution with n − 1 degrees of
freedom.

Example: Problems 19 and 26, page 463.

Homework: Problems 23 and 25, page 464.

Dr. Nguyen Ngoc Phan Inference About Means and Proportions

Inferences About p1 − p2

Letting p1 and p2 denote the proportion for population 1 and

2, respectively. We consider inferences about the difference
between the two population proportions: p1 − p2 .
We select two independent random samples consisting of n1
units from population 1 and n2 units from population 2.
Let p̄1 and p̄2 be the sample proportion for a random sample
from population 1 and 2, respectively.
The difference between the two population proportions is given
by p1 − p2 , the point estimator is given by

p̄1 − p̄2 .

Dr. Nguyen Ngoc Phan Inference About Means and Proportions

Mean and Standard Error of p̄1 − p̄2

E (p̄1 − p̄2 ) = p1 − p2
s
p1 (1 − p1 ) p2 (1 − p2 )
σp̄1 −p̄2 = +
n1 n2

If

n1 p̄1 ≥ 5, n1 (1 − p̄1 ) ≥ 5, n2 p̄2 ≥ 5, n2 (1 − p̄2 ) ≥ 5.

The sampling distribution of p̄1 − p̄2 can be approximated by a

normal distribution.

Dr. Nguyen Ngoc Phan Inference About Means and Proportions

Interval estimate of p̄1 − p̄2
s
p̄1 (1 − p̄1 ) p̄2 (1 − p̄2 )
p̄1 − p̄2 ± zα/2 +
n1 n2
where 1 − α is the confidence coefficient.

Example: Problems 28 and 30, page 469.

Dr. Nguyen Ngoc Phan Inference About Means and Proportions

We now consider hypothesis tests about p1 − p2 . We focus on
tests involving no difference between the two population
proportions. In this case, the three forms for a hypothesis test
are as follows:
1 H0 : p1 − p2 ≥ 0 Ha : p1 − p2 < 0
2 H0 : p1 − p2 ≤ 0 Ha : p1 − p2 > 0
3 H0 : p1 − p2 = 0 Ha : p1 − p2 6= 0.

Dr. Nguyen Ngoc Phan Inference About Means and Proportions

Under the assumption H0 is true as an equality, p1 = p2 = p.
In this case,
s s  
p(1 − p) p(1 − p) 1 1
σp̄1 −p̄2 = + = p(1 − p) +
n1 n2 n1 n2

With p unknown, we estimate p by the pooled estimator

n1 p̄1 + n2 p̄2
p̄ =
n1 + n2

Dr. Nguyen Ngoc Phan Inference About Means and Proportions

Test statistic for p1 − p2
p̄1 − p̄2
z=s  
1 1
p̄(1 − p̄) +
n1 n2

We then use the standard normal distribution to evaluate the

p–value.
Example: Problems 29 and 34, page 470.
Homework: Problems 32 and 36, page 470.

Dr. Nguyen Ngoc Phan Inference About Means and Proportions