BUSINESS STATISTICS AND

ANALYTICS IN DECISION MAKING

MODULE 5: HYPOTHESIS TESTING

BRMS Team
Decision Science Area
CMS Business School
Jain (Deemed-to-be University)

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AGENDA-Session 27
• Z Test (Large Sample Test for Single Population Mean)
• Z Test – Critical Values at various levels of significance
• Problem Solving

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Z Test (Large Sample Test for Single Population Mean)
• You might be wondering what is this single population mean.
• Well, we can conduct large and small sample tests for single or
double population mean/standard deviation/proportion.
• In single population test, we test if the sample we have selected
belong to the population under study. In other words, by
calculating the sample statistic, we check whether the selected
sample belong to the population we are studying.
• In this course, we learn about large sample test for single
population and comparison of two samples.
• First, let us begin with large sample or ‘z’ test.

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Z Test (Large Sample Test for Single Population Mean)

Step I: Identification of the null (H0) and alternative hypothesis

(H1)
i. H0: μ = μ0
H1: μ ≠ μ0 OR
ii. H0: μ = μ0 or H0: μ ≤ μ0
H1: μ > μ0 OR
iii. H0: μ = μ0 or H0: μ ≥ μ0
H1: μ < μ0
Step II: Specification of the level of significance
Let α be the level of significance. We use a two-tailed test if H1 as in (i) or
one-tailed test if H1 as in (ii) or (iii) bschool.cms.ac.in
Z Test (Large Sample Test for Single Population Mean)

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Z Test – Critical Values at various levels of significance

Level of Significance (α) 0.01 0.05 0.1

Critical values for one tail test ±2.33 ±1.645 ±1.28

Critical values for two tail test ±2.58 ±1.96 ±1.645

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Z Test – Example 1

A company manufacturing automobile tyres finds that tyre-life is

normally distributed with a mean of 40,000 km and standard
deviation of 3,000 km. It is believed that a change in the production
process will result in a better product and the company has
developed a new tyre. A sample of 100 new tyres has been selected.
The company has found that the mean life of these new tyres is
40,900 km. Can it be concluded that the new tyre is significantly
better than the old one, using the significance level of 0.01?

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Solution 1
•

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Z Test – Example 2

An administrator in charge of sales for a large concern claims that

sales people are averaging no more than 16 sales contracts per
week. As a check on his claim, 36 sales people are selected at
random and number of contracts made by each is recorded for a
randomly selected week. The mean and variance of 36 members
were 18 and 9 respectively. Does this evidence support the
administrator’s claim? Use α = 0.05

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Solution 2
•

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Z Test – Example 3

Suppose an airline claims that its flights are consistently on time

with an average delay of at most 15 minutes. Doubting the
consistency part of the claim, a disgruntled traveler calculates the
delays for his next 40 flights. The average delay for those 40 flights
is 22 minutes with a standard deviation of 15 minutes. Is the
traveler disputing the claim about the average?

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Solution 3
•

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Z Test – Example 4

The BSNL telephone company provides telephone service in

Bangalore. According to company’s records the average length of
calls placed through the company is 11.44 minutes. The company
wants to check if the mean length of the current calls is different
from 11.44 minutes. A sample of 150 such calls placed through this
company gave a mean length of 12.71 minutes with a S.D of 2.65
minutes. Can you conclude that the mean length of all current calls
is different from 11.44 minutes? Use α = 0.05

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Z Test – Example 5
A consumer group, concerned about the mean fat content of a
certain grade of steakburger submits to an independent laboratory
a random sample of 35 steakburgers for analysis. The percentage of
fat in each of the steakburgers is as follows: 21, 18, 19, 16, 18, 24,
22, 19, 24, 14, 18, 15, 22, 19, 20, 17, 19, 25, 23, 29, 15, 19, 16, 20, 17,
18, 15, 17, 23, 21, 18, 23, 13, 18, 19
The manufacturer claims that the mean fat content of this grade of
steakburger is less than 20%. Assuming percentage fat content to
be normally distributed with a standard deviation of 3, carry out an
appropriate hypothesis test in order to advise the consumer group
as to the validity of the manufacturer's claim.

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Z Test – Example 6

An insurance agent has claimed that the average age of policy

holders who insure through him is less than the average for all
agents, which is 35 years. A random sample of 40 policy holders
who have insured through him gave an average of 32 years with a
standard error of 2 years. Using level of significance of 0.05,
ascertain whether the insurance agent’s claim is justifiable.

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Z Test – Example 7

A Company is engaged in the packaging of a superior quality tea in

jars of 500g each. The company is of the view that as long as jars
contain 500g of tea the process is in control. The SD is 50g. A sample
of 225 jars is taken at random and the sample average is found to be
510g. Has the process gone out of control?

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Z Test – Example 8

An investor wishes to test whether the average daily return of a

stock is greater than 1%. A simple random sample of 50 returns is
calculated and has an average of 2% with a standard deviation of
the returns is 2.5%. Conduct a test to verify his assumption.

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Z Test – Example 9

Blood glucose levels for obese patients have a mean of 100 with a
SD of 15. A researcher thinks that a diet high in raw cornstarch will
have a positive or negative effect on blood glucose levels. A sample
of 60 patients who have tried the raw cornstarch diet have a mean
glucose level of 140. Test the hypothesis that the raw cornstarch
had an effect.

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Z Test – Example 10

A principal at a certain school claims that the students in his school

are above average intelligent. A random sample of 45 students' IQ
scores have a mean of 112. Is there sufficient evidence to support
the principal's claim? The mean population IQ is 100 with a SD of
15. IQ scores are normally distributed.

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Z Test – Example 11

A manufacturer of salad dressings uses machines to dispense liquid

ingredients into bottles that move along a filling line. The machine
that dispenses salad dressings is working properly when 8 ounces
are dispensed. Suppose that the average amount dispensed in a
particular sample of 35 bottles is 7.91 ounces with a variance of
0.03 ounces squared, σ2. Is there evidence that the machine should
be stopped and production wait for repairs? The lost production
from a shutdown is potentially so great that management feels that
the level of significance in the analysis should be 99%.

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Z Test – Example 11

The mean age of Jain University PG students in a previous term was

22.6 years old. An instructor thinks the mean age for online
students is older than 22.6. She randomly surveys 56 online
students and finds that the sample mean is 25.4 with a standard
deviation of 2.1. Conduct a hypothesis test at 0.05 level of
significance.

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