Definitions

Test Hypothesis :
1. Parameters : Statistical constant of population such as mean, standard
deviation & correlation coefficient
2. Statistic : Statistical constant for sample drawn from given population such
as mean, standard deviation ,correlation coefficient
3. Sampling Distribution : If different means are arranged according to frequencies,
Frequency distribution formed is sampling distribution
4. Standard Error : Standard deviation of sampling distribution of statistic is
known as standard error
5. Null Hypothesis : Null Hypothesis is hypothesis which is tested for all possible
rejection under assumption is true
6. Alternative Hypothesis : Any hypothesis which is complementary to null
In which rejection of null hypothesis implies acceptance
of alternative hypothesis
7. Test Statistic : after setting null hypothesis & alternative hypothesis test statistic
8. Errors in Hypothesis Testing :
(i) Type 1 error :
 Error of rejecting Null Hypothesis when it is true
 Denoted by (1-α)
 Occurs when null hypothesis is true, but difference of means is significant
& hypothesis is rejected
(ii) Type 2 error :
 Error of accepting Null Hypothesis when it is false
 Denoted by β
 Occurs when null hypothesis is false, but difference of means is
insignificant & hypothesis is accepted
9. Level of Significance : Maximum probability of making Type I error
10.Critical Region : Region of standard normal curve corresponding to predetermined
level of significance
11.Two Tailed Test : When test of hypothesis is rejected on both sides of standard
curve it is called Two Tailed Test
12.Confidence Limits : Limits within which hypothesis lie with specified probability

Critical Value (Zα) Level of Significance α

1% 5% 10%
Two tailed test | Zα | = 2.58 | Zα | = 1.96 | Zα | = 1.645
Right Tailed Test Zα = 2.33 Zα = 1.645 Zα = 1.28
Left tailed test Zα = -2.33 Zα = -1.645 Zα = 1.28
 Large Samples (n>30)
Single Proportion :
p = sample population
P = population proportion
1. Null Hypothesis : H0 : P = P0
2. Alternative Hypothesis : H1 : P ≠ P0
H1 : P < P0 (left tailed)
H1 : P > P0 (right tailed)
3. Level of significance : α (0.05)
𝒑−𝑷
4. Test Statistics : Z = where Q = 1-P)
𝑷𝑸
√
𝒏

5. Critical Value Zα
6. Decision : If |Z| < Zα : null hypothesis accepted
If |Z| > Zα : null hypothesis rejected

Difference of Proportions :
p1, p2 = sample population
P1, P2 = population proportion
1. Null Hypothesis : H0 : P1 = P2
No significant difference in 2 population proportions
Alternative Hypothesis : H1 : P1 ≠ P2
7. Level of significance : α (0.05)
𝒑−𝑷
8. Test Statistics : Z = where Q = 1-P)
𝑷𝑸
√
𝒏

9. Critical Value Zα
10.Decision : If |Z| < Zα : null hypothesis accepted
If |Z| > Zα : null hypothesis rejected