Quantitative Methods

Student Notes

Note
This document contains the important points discussed in the pre-recorded courseware. It will help in revising the
important concepts related to Quantitative Methods course.

This Student Note is authorized for use only by Birla Institute of Technology and Science (BITS) - Pilani students. Copying or
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 Quantitative Methods

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Student Notes 7.2: Comparing Means of Two Populations

Testing Means – Case 1: σ1 and σ2 Known
It is rare that σ1 and σ2 are known.
Point Estimate of Difference of Means: ̅ ̅2
X1 -X
̅1 -X
X ̅ 2 is an unbaised estimator since E(X
̅1 -X
̅ 2)= μ1 − μ2.

σ2 σ2
Standard Error of Difference of Means: √n1 + n2
1 2

If n1 and n2 ≥ 30 or X1 and X2 are Normal:

̅ 1 -X
(X ̅ 2 ) −(μ1 −μ2 )
Sampling Distribution: ~ N(0, 1)
σ 2σ 2
√ 1+ 2
n1 n2

Example: AHT of Shifts in the First Month

Management informed Kumar that Shift 1 had better supervisors compared to Shift 2.
He felt that this would be reflected in the AHTs. The tab “Known Variances” in AHT.xls
has sample data of AHTs for each shift for the 1st month. The sample statistics appear
below.
Shift 1 Shift 2
Sample Size 30 Operators 45 Operators
Sample Mean 42.4000 s 38.6444 s
The supervisors informed him that the standard deviation for the Shift 1 and Shift 2
were 5.5 s and 6.5 s respectively. Kumar felt it was reasonable to work with these
estimates.
Kumar realized that both teams are well below the 1st SLA. But can we conclude at α
= 1%, that Shift 1 is doing better than Shift 2 for this SLA?
Summary Report: The Critical Value Approach
1. The Hypothesis: H0: µ1 – µ2 ≤ 0 & H1: µ1 – µ2 > 0. (Right-Tail Test)
̅1 = 42.4, X
2. Data: n1 = 30, n2 = 45, X ̅ 2 = 38.6444, σ1 = 5.5, σ2 = 6.5, α = 1%.
̅ 1 -X
(X ̅ 2 ) −(μ1 −μ2 ) ̅ 1 -X
(X ̅2)
3. As n1 and n2 >= 30, sampling distribution is = ~ N(0, 1).
1.3954
σ2 σ2
√ 1+ 2
n1 n2

4. Test Statistic: (42.4-38.6444) / 1.3954 = 2.69

5. The critical value = 2.33, since P(z > 2.33)= 1%.
̅1 -X
Test is right tailed so the the critical region is (X ̅ 2 ) ≥ 2.33.

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 Quantitative Methods

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6. Since the test statistic is falling in the critical region, we reject H0.
There is sufficient statistical evidence to infer that the average AHT for entire Shift 1
is greater than the average AHT for the entire Shift 2.
Summary Report: The p-value Approach
1. The Hypothesis: H0: µ1 – µ2 ≤ 0 & H1: µ1 – µ2 > 0. (Right-Tail Test).
̅1 = 42.4, X
2. Data: n1 = 30, n2 = 45, X ̅ 2 = 38.6444, σ1 = 5.5, σ2 = 6.5, α = 1%.

̅ 1 -X
(X ̅ 2 ) −(μ1 −μ2 ) ̅ 1 -X
(X ̅2 )
3. As n1 & n2 >= 30, sampling distribution is = ~ N(0, 1)
1.3954
σ2 σ2
√ 1+ 2
n1 n2

4. Test Statistic: (42.4-38.6444) / 1.3954 = 2.69

5. p-value = P(Z > 2.69) = 0.0036
6. Since p-value ≤ 0.01, we reject H0.
There is sufficient statistical evidence to infer that the average AHT for entire Shift 1
is greater than the average AHT for the entire Shift 2.
Testing Means – Case 2: σ1 and σ2 unknown but thought to be equal

Example: AHT of Shifts in the Third Month

Three months have passed since Kumar joined. He wants to know whether Shift 2
has caught up with Shift 1 with regard to AHT. Kumar realizes that the earlier standard
deviations may not be applicable. He also believes that because of the
standardization of processes that have been implemented, the variances may be

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 Quantitative Methods

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equal. The tab “Unknown Variances” in AHT.xls has sample data of AHTs for each
shift for the 3rd month. The sample statistics appear below.
Shift 1 Shift 2
n 17 Operators 34 Operators
̅
X 41.8824 s 51.5882 s
s2 27.9853 s2 24.4314 s2
Test at 99% confidence level whether Shift 2 has caught up with Shift 1.
The Excel Output:
Generation of Output: Data  Data Analysis  t-Test: Two-Sample Assuming Equal
variances

The Summary Report: P-value Approach

Assumptions:
1. The variance in the AHTs of
the operators in Shift 1 is the
same as the variance in AHTs of
the operators in Shift 2.
2. The AHTs for shift 1 is normally
distributed.
Let μ1 be the population mean of the
AHTs for operators in Shift 1
Let μ2 be the population mean of the
AHTs for operators in Shift 2
H0: μ1 – μ2 = 0 & H1: μ1 – μ2 ≠ 0
Two Tail test
Test Statistic = -6.46
p-value = 0.00
Since p-value ≤  = 1%, Reject H0

Testing Means – Case 3: σ1 and σ2 unknown but thought to be unequal

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 Quantitative Methods

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Example: AHT of Shifts in the Third Month

Kumar was surprised that Shift 2 was in fact doing better than Shift 1. He wondered
whether his assumption that the variances are equal may be wrong. He decided to
test the same hypothesis taking variances to be unknown but not equal. The tab
“Unknown Variances” in AHT.xls has sample data of AHTs for each shift for the 3rd
month. The sample statistics appear below. Shift 1 Shift 2
n 17 Operators 34 Operators
̅
X 41.8824 s 51.5882 s
s2 27.9853 s2 24.4314 s2
Test at 1% significance level whether Shift 2 has caught up with Shft 1.
The Excel Output:
Generation of Output: Data  Data Analysis  t-Test: Two-Sample Assuming
Unequal variances

The Summary Report

Assumptions:
1. The variance in the AHTs of the operators
in Shift 1 and Shift 2 are unequal
2. The AHTs for the 1st shift is normally
distributed
Let μ1 be the population mean of the AHTs
for operators in Shift 1
Let μ2 be the population mean of the AHTs
for operators in Shift 2
H0: μ1 – μ2 = 0 & H1: μ1 – μ2 ≠ 0
Two Tail test
Test Statistic = -6.31
p-value = 0.00
Since p-value ≤  = 1%, Reject H0
Here no pooled variance.
Testing Means – Case 4: Matched Samples

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 Quantitative Methods

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Example: AHT of Shift 2 in the Third Month

The tests have shown that Shift 2 has done exceedingly well. They have met the SLA
of 50 seconds while Shift 1 has regressed. Kumar wanted to understand the efficacy
of his interventions by identifying operators in Shift 2 who were common in the samples
from the 1st and 3rd months. The tab “Matched Samples Shift 2” in AHT.xls has the
sample data that Kumar wants. The sample statistics appear below.
Month 1 Month 3 Difference
n 18 Operators 18 Operators 18 Observations
̅
X 39.3889 s 53.1111 s 13.7222 s
s2 46.0163 s2 25.6340 s2 17.7418 s2
Has Shift 2 has significantly improved in the 3rd month. Test at 1% significance level.
Extract of the Data:

The Excel Outputs

Generation of Output: Data  Data Analysis  t-Test: Paired Two Sample for Means
Data  Data Analysis  Descriptive Statistics

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 Quantitative Methods

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Here  t-Test: Paired Two Sample for Means is same as t-test for one sample.

The Summary Report:

Assumption: The AHTs fare normally distributed
Let μ1 be the mean of the AHTs for Shift 2 operators in 1st month
Let μ3 be the mean of the AHTs for Shift 2 operators in 3rd month
H0: μ3 – μ1 ≤ 0 & H1: μ3 – μ1 > 0 (Right Tailed test)
Test Statistic = 13.8217
p-value = 0.00
Since p-value ≤  = 1%, Reject H0.
Learning Outcome:
Testing Means – σ1 and σ2 known: Sampling Distribution, Illustration, and Summary
Report.
Testing Means – σ1 and σ2 unknown but thought to be equal: Sampling Distribution,
Illustration, and Summary Report.
Testing Means – σ1 and σ2 unknown but thought to be unequal: Sampling Distribution,
Illustration, and Summary Report.
Testing Means – Matched Samples: Sampling Distribution, Illustration, And Summary
Report.
Questions to consider:
Q1. How to test means of two populations when variances are known?
Q2. How to test means of two populations when variances are unknown and are
equal?
Q3. How to test means of two populations when variances are unknown and are
unequal?
Q4. How to test means of two populations when samples are matched?

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