Economics Faculty

MBA Department
3rd Semester

Hypothesis Development

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By: Najibullah Arshad 5/27/2023
 Hypothesis

A hypothesis is an assumption or an idea about a phenomenon, relationship or situation,

the reality or truth of which we do not know.
It is an statement logically formed an opinion on the basis of relationships between two or
more variables.
An opinion is made on the basis of theoretical network.
For example:
• Customer oriented companies can make more business than production oriented
companies.
• Advertisements with child artists attract more audience than those with adults.

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 Hypothesis

• Good hypothesis
- Must be adequate for its purpose
- Must be testable
- Must be better than its rivals
• Can be:
- Directional
- Non-directional

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Hypothesis

• Once identify the important variables then establish the relationships among the
through logical reasoning in the theoretical framework.
• Test the relationship validity
• Get some reliable information about the existing relationship.
• Get some test results and ideas to solve the problem.

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Hypothesis

Types:
• Null-hypothesis
• Alternative hypothesis

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• Null Hypothesis
➢ Says that there is no statistical significant relationship between the two variables.
•Example

If one plant is fed club soda for one month and another plant is fed plain water, there
will be no difference in growth between the two plants.

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Alternative Hypothesis:
The hypothesis used in hypothesis testing that
is contrary testing to the null hypothesis.
Example:

If one plant is fed club soda for one month and

another plant is fed plain water, the plant that is
fed club soda will grow better than the plant
that is fed plain water.

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A general Procedure for Hypothesis Testing

Step 1: Formulate the Hypothesis

• A null hypothesis is a statement of the status quo, one of no difference or no effect. If

the null hypothesis is not rejected, no changes will be made.
• An alternative hypothesis is one in which some difference or effect is expected.
Accepting the alternative hypothesis will lead to changes in opinion or actions.
• The null hypothesis refers to a specified value of the population parameter (e.g., µ, σ,
ത
π), not a sample statistic (e.g. 𝑋).

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• A null hypothesis may be rejected, but it can never be accepted based on a single test.
It classical hypothesis testing, there is no way to determine whether the null
hypothesis is true.
• It marketing research, the null hypothesis is formulated in such a way that its
rejection leads to the acceptance of the desired conclusion. The alternative
hypothesis represents the conclusion for which evidence is sought.

H0 : π ≤ 0.40
H1 : π ˃ 0.40

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 Step 2: Select an Appropriate Test

▪ The test statistic measures how close the sample has come to the null hypothesis
▪ The test statistic often follows a well-known distribution, such as the normal, t, or chi-square
distribution.
▪ In our example, the z statistic, which follows the standard normal distribution, would be
appropriate.
𝑝 −π
where z=
σ𝑝

π(1−π)
σ𝑝 =
𝑛

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 Type І Error

• Type I error occurs when the sample results lead to the rejection of the null hypothesis when
it is in fact true.
▪ The probability of type I error (α) is also called the level of significance.
- Rejecting a true null hypothesis when it should NOT be rejected
- Considered a serious type of error
- The probability of Type I Error is α
- It is also called level of significance of the test

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 Type II Error
• Type II error occurs when, based on the sample results, the null hypothesis is
not rejected when it is in fact false.
• The probability of type II error is denoted by β.
• Unlike α, which is specified by the researcher, the magnitude of β depends on the
actual value of the population parameter (proportion).
- Fail to reject a false null hypothesis that should have been rejected.
- The probability of Type II Error is β

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Thank You

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