Chapter 9b 9b-1

North Seattle Community College Hypothesis Tests

of the Mean
BUS210
Hypothesis
Business Statistics Tests for µ

ασ Known
Known σ Unknown
Chapter 9b (z test) (t test)
Fundamentals of
Hypothesis Testing:
Critical Value p-Value
One-Sample Tests Approach Approach

BUS210: Business Statistics One-Sample Hypothesis Tests 9b-1 BUS210: Business Statistics One-Sample Hypothesis Tests 9b-2

Hypothesis Tests Hypothesis Tests

σ Unknown of the Mean
n  If the population std dev (σ) is unknown, then
Hypothesis
n  you use the sample standard deviation (s). Tests for µ
n  you use the t distribution instead of z.
n  you must assume the population you are ασ Known
Known α
σ Unknown
Unknown
sampling from has a normal distribution. (z test) (t test)

n  Otherwise, all other steps, concepts, and

conclusions are the same as σ known Critical Value p-Value
Approach Approach

BUS210: Business Statistics One-Sample Hypothesis Tests 9b-3 BUS210: Business Statistics One-Sample Hypothesis Tests 9b-4

Hypothesis Test of the Mean Hypothesis Test of the Mean

Critical Value Approach Critical Value Approach (continued)

Example: Two-tail test, σ unknown Example: Two-tail test, σ known

The average cost of a hotel room in New York is said Step 1. Develop the null and alternative hypotheses:
to be $168 per night. To determine if this is true, a
random sample of 25 hotels is taken which resulted H0: µ = $168 H1: µ ≠ $168
in a mean of $172.50 and a std dev of $15.40. Step 2. Specify the level of significance, α
and the sample size, n :
Test the appropriate hypotheses
Suppose that we choose
at α = 0.05.
α = 0.05 and n = 25
(Assume the population is normal) for this test

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NSCC – BUS210 One-Sample Hypothesis Tests

Chapter 9b 9b-2

Hypothesis Test of the Mean Hypothesis Test of the Mean

Critical Value Approach (continued) Critical Value Approach (continued)

Step 3. Compute the test statistic from the sample Step 5. Compare the test statistic (tSTAT) to the
data ( σ is unknown so we use t ) critical value (t0)

X ! µ 172.50 ! 168 4.50

t STAT = = = = 1.46 Reject Reject
s 5.40 3.08 Region of
n 25 Non-Rejection

Step 4. Convert significance level to the critical value.

t0 = 2.0639
For α = 0.05, α/2 = 0.025 (two-tailed test),

And df = n-1 = 24, so, t0 is ± 2.0639 Here, tSTAT= 1.46 < 2.0639, so the test
statistic is in the non-rejection region

BUS210: Business Statistics One-Sample Hypothesis Tests 9b-7 BUS210: Business Statistics One-Sample Hypothesis Tests 9b-8

Hypothesis Test of the Mean Hypothesis Tests

Critical Value Approach (continued) of the Mean
Step 6. Decide
“The test statistic

Hypothesis
Since 1.46 =tSTAT< t0 = 2.0639, then … is not in the tail”

Tests for µ
we do not reject H0 (the null hypothesis)

ασ Known
Known α
σ Unknown
Unknown
Step 7. Conclude (z test) (t test)
There is insufficient evidence that the true
mean cost of a hotel room is different than
Critical Value p-Value
$168 per night. Approach Approach

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Hypothesis Test of the Mean Hypothesis Test of the Mean

p-value Approach p-value Approach (continued)

n  For a t-test, Step 5. Compare the areas: p-value to α

the exact p-value is not available without a computer. 0.10 to 0.20 = p-value > α = 0.05
n  But…from the t-table we can get a range.
Step 6. Decide: We do not reject H0
Step 4. Convert tSTAT to a p-value:
Step 7. Conclude
For df=24, and using the t table
There is insufficient evidence
tSTAT = 1.46 lies between 1.318 and 1.711
that the true mean cost of a
So, p-value/2 must be between 0.05 and 0.10 hotel room is different than
therefore: p-value is between 0.10 and 0.20 $168 per night.

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NSCC – BUS210 One-Sample Hypothesis Tests

Chapter 9b 9b-3

Comparison of Hypothesis Test of the Mean

Two-Tail Test & Confidence Interval One Tail Tests
Using –
x = 172.5, s = 15.40 and n = 25, then n  In many cases, the alternative hypothesis
the 95% confidence interval is: focuses on a particular direction
15.4 15.4
172.5 ! (2.0639) to 172.5 + (2.0639)
25 25 This is a lower-tail test since the
H 0: µ ≥ 3
alternative hypothesis is focused on
H 1: µ < 3 the lower tail below the mean of 3
thus, CI = 166.14 ≤ µ ≤ 178.86

This interval does contain the hypothesized
mean (H0: µ = 168 ), so we
do not reject the null hypothesis at α = 0.05
BUS210: Business Statistics
One-Sample Hypothesis Tests 9b-13
H 0: µ ≤ 3 This is an upper-tail test since the
alternative hypothesis is focused on
H 1: µ > 3
the upper tail above the mean of 3
BUS210: Business Statistics One-Sample Hypothesis Tests 9b-14

Hypothesis Test of the Mean Hypothesis Test of the Mean

Lower Tail Tests Upper Tail Tests
n  There is only one critical value, since the rejection n  There is only one critical value, since the rejection
area is in only one tail area is in only one tail

H 0 : µ ! µ0 H 0 : µ ! µ0
This is a one-tailed test.

This is a one-tailed test.

H1: µ < µ0 H1: µ > µ0

(upper tail)
(lower tail)

Region of Region of
Non-Rejection Non-Rejection

Zstat Z0 Z0 Zstat

If Zstat or tstat falls in If Zstat or tstat falls in this If Zstat or tstat falls in this If Zstat or tstat falls in
this region, reject H0 region, do not reject H0 region, do not reject H0 this region, reject H0
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Hypothesis Test of the Mean Hypothesis Test of the Mean

Upper Tail Test Upper Tail Test (continued)

Example: One-tail test, σ unknown

Step 3. Collect the sample data and compute the
A phone industry manager thinks that cell phone bills test statistic. ( σ is unknown so we use t )
have increased, and are now over $52 per month.
Suppose a sample is taken with the following results:
We wish to test this claim. (Assume a normal population)
n = 25, –
x = 53.1, and s = 10
Step 1. Develop the null and alternative hypotheses. X !µ 53.1 ! 52 1.1
t STAT = = = = 0.55
H0: µ ≤ $52 H1: µ > $52 s n 10 25 2
Step 2. Specify the level of significance, α
Step 4. Determine the critical value.
and the sample size, n.
For α = 0.10 (don t divide by 2 since one-tailed test),
We choose α = 0.10 and n = 25
And df = n-1 = 24, so, t0 is ± 1.3178
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NSCC – BUS210 One-Sample Hypothesis Tests

Chapter 9b 9b-4

Hypothesis Test of the Mean Hypothesis Test of the Mean

Upper Tail Test (continued) Upper Tail Test (continued)

Step 5. Determine whether to reject H0 and state Step 5. Determine whether to reject H0 and state
your conclusion.
(cont d) your conclusion.
Reject H0
Since 0.55 = tstat < t0 = 1.3178, then …
α = 0.10 we do not reject H0 (the null hypothesis)

tstat= 0.55 and conclude:

t0=1.3178 There is insufficient evidence that
the mean monthly cost of a cell
Here, tstat = 0.55 < 1.3178, so the test phone is greater than $52.
statistic is in the non-rejection region

BUS210: Business Statistics One-Sample Hypothesis Tests 9b-19 BUS210: Business Statistics One-Sample Hypothesis Tests 9b-20

Hypothesis Test of Hypothesis Test of

Proportions Proportions
n  Population proportion (π):
Hypothesis
n  the part of the population that shares a characteristic
Tests for π
n  Sample proportion (p):
σ
σ Known
Known σσUnknown
Unknown n  the proportion of the sample sharing the same
(z test) (t test) characteristic as in the population
n  provides an estimate of π

n  within the sample, p = x/n (0 ≤ p ≤ 1)

Critical Value p-Value
n  sample distribution is nearly
Approach Approach n! " 5 & n(1# ! ) " 5
normal when n is large

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Hypothesis Test of Hypothesis Test of the Proportion

Proportions (continued) Critical Value Approach
Example: Two-tail test
n  Recall …
A marketing company claims that it has a response
n  Mean of sample proportions: µp = !
rate of 8% from its mailings. A random sample of 500
were surveyed with 25 responses. Test the appropriate
hypotheses at α = 0.05. (Assume the population is normal)
n  Standard deviation of " (1# " )
sample proportions: !p =
n
Check for normalcy:

Z-score for a given proportion: p!"

n π = (500)(.08) = 40 ü
ü
n 
z= n(1-π) = (500)(.92) = 460
#p

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NSCC – BUS210 One-Sample Hypothesis Tests

Chapter 9b 9b-5

Hypothesis Test of the Proportion Hypothesis Test of the Proportion

Critical Value Approach (continued) Critical Value Approach (continued)

Example: Two-tail test

Step 3. Compute the test statistic from the sample
Step 1. Develop the null and alternative hypotheses: data ( p = x/n = 25/500 = .05)

H0: π = 0.08 H1: π ≠ 0.08 p!" .05 ! .08

ZSTAT = = = !2.47
" (1! " ) .08(1! .08)
Step 2. Specify the level of significance, α n 500
and the sample size, n : Step 4. Convert significance level to the critical value.
We chose For α = 0.05, α/2 = 0.025 (two-tailed test),
α = 0.05 and n = 500
for this test so, Z0 = ± 1.96

BUS210: Business Statistics One-Sample Hypothesis Tests 9b-25 BUS210: Business Statistics One-Sample Hypothesis Tests 9b-26

Hypothesis Test of the Mean Hypothesis Test of the Mean

Critical Value Approach (continued) Critical Value Approach (continued)

Step 5. Compare the test statistic (ZSTAT) to the Step 6. Decide

critical value (Z0)
Since -2.47 = ZSTAT< Z0 = -1.96, then “If stat’s in the tail,

H0 must fail!”

Reject Reject
we reject H0 (the null hypothesis)
Region of
Non-Rejection Step 7. Conclude

Z0 = -Zα/2 = -1.96 There is sufficient evidence

that the true response rate of
Here, Zstat = -2.47 < -1.96, so the test mailings is different than 0.08.
statistic is in the rejection region

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Hypothesis Test of Hypothesis Test of the Proportion

Proportions p-value Approach
Example: Two-tail test
Hypothesis A marketing company claims that it has a response
Tests for π rate of 8% from its mailings. A random sample of 500
were surveyed with 25 responses. Test the appropriate
σ
σ Known
Known σσUnknown
Unknown hypotheses at α = 0.05. (Assume the population is normal)
(z test) (t test)
We still check for normalcy,
which is OK…and…
Critical Value p-Value
Approach Approach

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NSCC – BUS210 One-Sample Hypothesis Tests

Chapter 9b 9b-6

Hypothesis Test of the Proportion Hypothesis Test of the Proportion

p-value Approach (continued) p-value Approach (continued)

Step 1 thru Step 3. Step 5. Compare the areas:

These steps of the hypothesis test process are 0.0136 = p-value < α = 0.05
the same as the critical value approach, but …
If the p-value is low,

Step 6. Decide: We must reject H0 then H0 must go!

Step 4. Convert ZSTAT to a p-value:

Step 7. Conclude
P(ZSTAT < -2.47) = 0.0068
But…since this is an equality, we have two tails! There is sufficient evidence
So, p-value/2 = 0.0068 that the true response rate of
and: p-value = 2(0.0068) = 0.0136 mailings is different than 0.08.

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Potential Pitfalls and

Ethical Considerations
n  Use randomly collected data to reduce
selection biases Chapter 9
n  Do not use human subjects without informed
consent
n  Choose the level of significance, α, and the
type of test (one-tail or two-tail) before data
End Part B
collection
n  Report all pertinent findings including both
statistical significance and practical
importance

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NSCC – BUS210 One-Sample Hypothesis Tests