Chapter Three

Hypothesis Testing

.
1
 Introduction
• Hypotheses is the assumptions we make about the values of population
parameters.
➢ it states the predictions about what research will find.
• Hypothesis testing is a procedure based on sample evidence and probability
theory to determine whether the hypothesis is a reasonable statement.
➢ it is a decision making process for evaluating claim/ statement about
population parameter.

2
 Count….
• In hypotheses testing we begin by making a tentative assumption about a
population parameter called the null hypothesis (Ho).
• It is the assumption we wish to test and also it initially assumed to be true.
• Ho states that there is no difference b/n value of parameters & specific value.
• Null in this sense means nothing is new, or there in no new value or standard.
• Then define another hypothesis, called the alternative hypothesis (Ha), which is the
opposite of what is stated in the null hypothesis.
• It specifies all possible values of the population parameter that are not specified in
the null hypothesis.
• Ha states that there is difference b/n value of parameters & specific value.
➢ The hypothesis testing procedure involves using data from a sample to test the two
competing statements indicated by Ho and Ha. 3
 Example
1. The manager of a hotel has stated that the mean guest bill for a weekend is Birr 400 or less.
A member of the hotel’s accounting staff has noticed that the total charges for guest bills
have been increasing in recent months. The accountant will use a sample of weekend guest
bills to test the manager’s claim. State the null and alternative hypotheses
2. Production workers at XY Company have been trained in their jobs by using two different
training programs. The company training director would like to know whether there is a
difference in mean productivity for workers trained in the two programs. Develop the null
and alternative hypotheses.
3. The manager at a drugstore claims that the company’s employees are honest. However,
there have been many shortages from the cash register lately. Specify the null and
alternative hypothesis 4
 Solution
1. Ho: μ  Birr 400
Ha:   Birr 400

2. Ho: 1 = 2 or 1 - 2 = 0
Ha: 1  2 1 - 2  0

3. Ho: Employees are honest

Ha: Employees are dishonest
5
 Types of errors
In hypothesis testing sample evidence is used to test the Ho.
There are four possible outcomes of any hypothesis test, two of which are correct and two
of which are incorrect. The incorrect ones are called type I and Type II errors.
Type I Error
• is committed when a true null hypothesis is rejected.
• The possibility of committing a Type I error is represented by Alpha (), or the level of
significance. And it also referred to as the amount of risk taken in an experiment.
▪ It represents the proportion of the area of the curve occupied by the rejection region.
▪The most commonly used values of  are 0.01, 0.05 and 0.10.
The larger the area of the rejection region, the greater is the risk of committing Type I
error. 6
 Type II Error
• It is committed by failing to reject a false null hypothesis. OR,
accepting a null hypothesis when it is false.
• The probability of committing a Type II error is represented by beta ().
❖ Alpha () is determined before the experiment, however, Beta is
computed using alpha, the hypothesized parameter, and various
theoretical alternatives to the null hypothesis.

7
 Null Hypothesis State of Nature

Decision Ho True Ho False

Accept Ho Correct Decision Type II Error
Reject Ho Type I Error Correct Decision

There is a trade off between alpha and beta (Type I and Type II errors).
The probability of making one type of error can be reduced only if we are
willing to increase the probability of making the other type of error.
It means that the smaller  is the larger will be , and the larger  in the
smaller  will be.
8
 Type of Tests

Based on the form of the null and alternative hypotheses, there are two types of tests:
one sided (one tailed) tests and two-sided (two tailed) tests. one tailed tests can be
right tailed or left tailed test.

(1) Ho: = (2) Ho:    (3) Ho:   

Ha:  Ha:    Ha:   

  
Two tailed test Right tailed test Left tailed test

9
Two – Tailed test
➢A two tailed test of a hypothesis will reject the Ho, if the sample statistic is
significantly higher than or lower than a hypothesized population parameter.
➢There are two rejection regions.
➢It is appropriate when the null hypothesis is equal to some specified value
and the alternative hypothesis is different from some specified value
Example: Ho:  =  and Ha:  
➢The dividing point between the region where the null hypothesis is rejected
and accepted is called critical value.
10
One Tailed test
oThe alternative hypothesis is directional.
oIt can be, a right tailed / upper tailed test OR a left tailed / lower tailed test.

➢ Aright tailed test will reject the Ho, if the sample statistic is significantly
higher than the hypothesized population parameter.

➢ A left tailed test will reject the Ho, if the sample statistic is significantly
lower than the hypothesized population parameter.

11
 STEPS IN HYPOTHESIS TESTING
1. Determine the null and alternative hypotheses.
E.g. Ho:  =  Ha:   
2. Select the test statistic that will be used to decide whether or not to reject the Ho
E.g. Z – distribution, t – distribution, F- distribution, x2 – distribution
3. Select the level of significance to determine the critical values and develop the rejection rule
that indicates the values of the test statistic that will lead to the rejection of Ho.
E.g.  = 0.05 Z025 = 1.96  Reject Ho if /Sample Z/  1.96
4. Collect the sample data, and compute the value the test statistic.
Test statistic is a random variable whose value is used to determine whether we reject the Ho.
E.g. Sample Z=2.0
5. Compare the value of the test statistic to the critical value(s) and make the decision (either
reject Ho or accept HO /do not reject). 12
 Hypothesis Test about A Population Mean: Population - Normal, 𝝈 - Known
In hypothesis testing if the population is normal and standard deviation is known, we
use Z-Value to test the hypothesis; regardless of the sample size, n. It is also
applicable when n  30 regardless of the population distribution.

Example
1. Matador-Addis Tyre Share Company claims that its tires have a mean life of
35,000 miles. A random sample of 36 of these tires is tested if the sample mean in
33,000 miles. Assume that the population standard deviation is 3000 miles and the
lives of tires are approximately normally distributed. Test the share company’s
claim using a 5% level of significance.
13
 Solution 1
1. Ho:  = 35,000 miles
Ha:  ≠ 35,000 miles
2. Z – Distribution, two tailed test
3.  = 0.05 /2 = 0.025, Z0.025 = ± 1.96 Reject Ho if /Sample Z/ > 1.96
4. 𝑋 = 33,000 miles  = 3,000 miles n = 36 tires Sample Z =?

33,000−35,000
𝑍33,000 = 3,000 = −4.00
ൗ 36

5. Reject Ho because /-4.00/ > 1.96

14
 Example 2 & 3
2. A Teachers’ union is on strike for higher wages. The union claims that the mean salary for
teachers is at most Birr 8,400 per year. The legislator does not want to reject the union’s
claim, however, unless the evidence is very strong against it. Assume that salaries follow a
normal distribution and the population standard deviation is known to be Birr 3000. A
random sample of 64 teachers is obtained, and the sample mean is Birr, 9,400. Test if the
state legislator accepts the unions’ claim or not at 1% significance level.
3. A fertilizer company claims that the use of its product will result in a yield of at least 35
quintals of wheat per hectare, on average, Application at the fertilizer to a randomly selected
36 sample hectares resulted in a yield of 34quintals per hectare. Assume the population
standard deviation is 5 quintals and yields per hectare are normally distributed. Test the
company’s claim at 1% level of significance. 15
 Solution 2 & 3
2.
1. Ho:  ≤ Birr 8,400 3. 1. Ho:  ≥ 35 quintals
Ha:   Birr 8,400 Ha:   35 quintals
2. Z – distribution, Right – tailed test 2. Z – distribution, left – tailed test
3.  = 0.01, Z = Z0.01 = 2.33 3.  = 0.01 Z= Z0.01 = 2.33
 Reject Ho if sample Z  + 2.33  Reject Ho if sample Z  -2.33
4. n = 64, 𝑋 = Birr 9,400,  = Birr 3,000 4. 𝑋 = 34 quintals, n = 36 &  =5 quintals
Sample Z =? Sample Z =?
9,400−8,400 34−35
𝑍9,400 = 3,000 = +2.67 𝑍34 = 5
ൗ 36
= −1.20
ൗ 64

5. Reject Ho because + 2.67  2.33 5. Do not reject H0, because -1.20 > -2.33
16
 Example 4
A survey of college graduates showed that the average yearly cash income
for these graduates in at least Birr 12,000. In Addis where you live this
average does not seem possible, so you decide to test this claim. You
randomly select 48 graduates who are marking. The sample average income
for these working graduates is Birr 11,400 with a standard deviation of Birr
2,280. Is there enough evidence from this sample data to reject the national
claim for your area as being too high? Use  = 0.10.

17
 Solution 4
1. Ho :   Birr 12,000

Ha:   Birr 12,000

2. Z – distribution, Left tailed test
3.  = 0.1
Z = Z0.1 = -1.28
Reject Ho if sample Z < -1.28 Sample Z =?
4. 𝑋 = Birr 11,400 11,400−12,000
𝑍11,400 = 2,280 = −1.82
ൗ 48
S = Birr 2,280
= -1.82
n = 48
5. Reject Ho because –1.82 <18 -1.28
 Alternative Methods of Testing Hypotheses
Two other methods of testing hypotheses are the critical value method and the
probability (p-value) method.
Critical Value Method
It determines the critical mean value required for z to be in the rejection region and
uses it to test the hypothesis.
It uses the formula 𝑍 = 𝜎𝑥−𝜇 or 𝑍 = 𝑥−𝜇
s depending on the knowledge of the
ൗ 𝑛 ൗ 𝑛
population standard deviation.
A critical 𝑋 value, 𝑋𝑐 , is determined and the critical value of 𝑍𝑐 is inserted into the

𝑋𝑐 −𝜇
formula, along with μ and σ. Thus, 𝑍𝑐 = 𝜎
ൗ 𝑛
19
 Count….
Substituting values from the preceding example gives
𝑋𝑐 −35,000 3,000
±1.96 = 3,000 , 𝑋𝑐 = 35,000 ± 1.96 =35,000 ± 750.
ൗ 16 16

𝑋𝑐 =35,750 or 34,250
Reject Ho if mean value is less than or greater than critical mean values.
So, the sample mean for this problem is 33,000 miles, we reject the null hypothesis.

In this method, most of the computational work is done ahead of time. It is attractive
in industrial settings where standards can be set ahead of time and then quality
control technicians can gather data and compare actual measurements of products to
specifications. 20
 The probability (p-value) Method

• In this method, we determine a probability for the computed value

and compare that probability to the level of significance (alpha).
To reject the Ho, the probability of the computed value must be less
than α for a one tailed test or less than α/2 for a two tailed test.

21
 Example
1. A researcher wishes to test the claim that the average cost of tuition and fees at a
four year public college is at most birr 5700. She selects a random sample of 36
four-year public colleges and finds the mean to be birr 5950. The population
standard deviation is birr 659. Test the claim at a 0.05 by use the P-value
method.

2. A researcher claims that the average wind speed in a certain city is 8 miles per
hour. A sample of 32 days has an average wind speed of 8.2 miles per hour. The
standard deviation of the population is 0.6 mile per hour. At a 0.05, is there
enough evidence to reject the claim? Use the P-value method.
22
 Solution 1
1. Ho:  = Birr 5700
Ha:   Birr 5700
2. Z – distribution, right – tailed test,  = 0.05,
 Reject Ho if computed p value < 

3. n = 36, 𝑋 = Birr 5950,  = Birr 659 Sample Z =?

5950−5700
𝑍9,400 = 659 = +2.28
ൗ 36

4. Find the P-value. The corresponding area under the normal distribution for z = 2.28 is 0.4887.

p(Z>2.28) = 0.5 - 0.4887 = 0.0113. Hence the P-value is 0.0113.

5. Reject Ho because 0.0113 < 0.05
23
 Solution 2
1. Ho:  = 8
Ha:  ≠ 8
2. Z – distribution, two – tailed test,  = 0.05, Τ2 = 0.025
 Reject Ho if computed p value < Τ 2

3. n = 32, 𝑋 = 8.2,  = 0.6 Sample Z =?

8.2 − 8
𝑍9,400 = 0.6 = +1.89
ൗ
32

4. Find the P-value. The corresponding area under the normal distribution for z = 1.89 is 0.4706.

p(Z> 1.89) = 0.5 - 0.4706 = 0.0294. Hence the P-value is 0.0294.

5. Don’t reject Ho because 0.0294 > 0.025 24
 Hypothesis Testing about : Population - Normal,  - Unknown, n - Small

• The t-distribution is appropriate when  is unknown, the sample size is small

(n30), and population is normally distributed. When we use the t-distribution, it
replaces Z as test statistic.

𝑋−𝜇 𝑆
𝑡= 𝑆𝑋 =
𝑆𝑋 𝑛

25
 Example
1. A contractor assumes that construction workers are idle for 75 minutes or less per day.
A random sample of 25 construction workers was taken and the mean idle time was
found to be 84 minutes per day with a sample standard deviation of 20 minutes.
Assume that the population is approximately normally distributed, use a 5% level of
significance to test the contractor’s assumption.
2. A director of a secretarial school claims that its graduates can type at least 50 words per
minute on average. Suppose you want to hire some of these graduates if the director’s
claim is true; and you test the typing speed of 18 of the graduates and obtain a mean of
40 wards per minute with a sample variance of 720. Assuming the typing speed for the
graduates of the secretarial school is normally distributed, test the director’s claim and
26
decide whether to hire the graduates or not, using a 5% level of significance.
 Solution 1
1. Ho:  ≤ 75 minutes
Ha:   75 minutes
2. t – distribution, Right – tailed test
3.  = 0.05, n = 25,  = n – 1 = 25 – 1 = 24, t, = t0.05,24 = 1.711
 Reject Ho if sample t  1.711
4. n = 25, 𝑋 = 84 minutes, S = 20 minutes Sample t =?

84−75
𝑡84 = 20 = +2.25
ൗ 25

5. Reject Ho; because + 2.25  1.711. Workers are idle for more than 75 minutes per
day. 27
 Solution 2
1. Ho:   50 words
Ha:   50 words
2. t – distribution, Left – tailed test
3.  = 0.05 n = 18
 = n – 1 = 18 – 1 = 17, t, = t0.05, 17 = 1.74
 Reject Ho if sample t  -1.74
4. 𝑋 = 40 words, s2 = 720
Sample t =?

40−50
𝑡40 = 720
= −1.58
18

5. Do not reject Ho because –1.58 > -1.74 28

 Hypothesis Testing about Population Proportion (P)
• A proportion is a value between 0 and 1 that expresses the part of the whole that possesses a
given characteristic.
• The hypothesis testing about a population proportion has three terms.
1. Ho: P = y 2. Ho: P  y 3. Ho: P  y
Ha: P  y Ha: P>y Ha: P< y
  
Two tailed test Right tailed test Left tailed test
Hypothesis testing about a population proportion is based on the difference between the
sample proportion 𝑝and the hypothesized value P.
• The central Limit Theorem applied to the sample proportions states that 𝑝 values are
𝑝𝑞
normally distributed, with E(P) & 𝜎𝑝 , when np & nq ≥ 5.
𝑛
• If np & nq ≥ 5, a Z - test is used to test hypothesis about P.
𝑝−𝑝
𝑍= 𝜎
𝑝 29
 Example
1. A magazine claims that 25% of its readers are college students. A random sample of 200 readers is
taken. It is found that 42 of these readers are college students. Use a 10% level of significance and test
the magazine’s claim.
2. An Economist states that less than 35% of Addis’s labor force is unemployed. You don’t know if the
economist’s estimate is too high or too low. Thus, you want to test the economist’s claim using a 5%
level of significance. You obtain a random sample of 400 people in the labor force, of whom 128 are
unemployed. Would you reject the economist’s claim?
3. A survey of the morning beverage market has shown that the primary breakfast beverage for 60% of
Ethiopian town and city dwellers is tea. Ethiopian coffee and Tea Authority believes that the figure is
higher for Addis. To test this idea, one of the employees of Ethiopian coffee and Tea Authority contacts
a random sample of 500 residents in Addis and asks which primary beverage they consumed for
breakfast that day. Suppose 325 replied that tea was the primary beverage. Using a 0.01 level of
30
significance, test the idea that the tea figure is higher for Addis.
 Solution 1 and 2
1 Ho: P = 0.25 2 1. Ho: P ≤ 0.35
Ha: P  0.25
2. Z – distribution; two tailed test Ha: P > 0.35

3.  = 0.1 /2 = 0.05 2. Z – distribution , right-tailed test

Z/2 = Z0.05 = 1.64 3.  = 0.05 Z 0.05 = 1.64

Reject Ho if /sample Z/  1.64 Reject Ho if sample Z > 1.64

4. n = 200, x = 42, 𝑝= 0.21 4. n = 400, x = 128 𝑝= 0.32

Sample Z =? Sample Z =?

0.21−0.25 0.32−0.35
𝑍0.21 = = −1.31 • 𝑍0.32 = = −1.26
0.25∗0.75 0.35∗0.65
200 400

5. Do not reject Ho because / -1.31/ < 1.64 5. Do not reject Ho because 31/ -1.31/ < 1.64
 Solution 3
1. Ho: P  0.60
Ha: P  0.60
2. Z – distribution, – Right tailed test
3.  = 0.01 Z0.01 = 2.33
Reject Ho if sample Z  2.33
4. n = 500 X = 325 P = 0.45
Sample Z =?

0.65−0.60
𝑍0.65 = = +2.28
0.65∗0.4
500

Do not reject Ho because 2.28 < 2.33 32

 Hypothesis Testing Involving Two Populations
Hypothesis Testing About difference between Two Means
According to the central limit theorem, the difference in two sample means in normally
distributed for large sample sizes (n1, n2  30) and if the parent populations are normally
distributed regardless of the sample size the difference in two sample means is normally
distributed.

Large sample case

• Hypothesis testing about the difference between two means has also three forms. That is,
1. Ho: 1-2 =0 2. Ho: 1-2 0 3. Ho: 1-2  0
Ha: 1-2 0 Ha: 1-2  0 Ha: 1-2  0
  
Two tailed test Right tailed test Left tailed test
33
 Count…
Based on the central limit theorem, the mean of the sampling distribution sample means in the
difference between two population means; i.e., σ 𝑋1 − 𝑋2 =𝑋ത1− 𝑋ത2 = 1-2; and the standard
𝛿12 𝜎22
error is 𝜎𝑋1−𝑋2 = + .
𝑛1 𝑛2
For large sample sizes the sampling distribution of the difference between two sample means is
normally distributed with a Z – test statistic.
𝑋1 − 𝑋2 − 𝜇1 − 𝜇2
𝑍=
𝜎12 𝜎22
+
𝑛1 𝑛2

And when ever n1 and n2  30, we can use 𝑆12 and 𝑆22 as estimates of 𝜎12 and 𝜎22 to compute Z. if
𝜎12 and 𝜎22 are unknown, and Z will be computed as
𝑋1 − 𝑋2 − 𝜇1 − 𝜇2
𝑍=
𝑆12 𝑆22
+
𝑛1 𝑛2
NOTE: In most of the hypothesis tests about two means, the hypothesized difference
34
is zero.
 Example 1
1. Is there any difference between the average salary of a legal secretary and a
medical secretary? In an effort to answer that question a researcher takes a random
sample of 33 legal secretaries across a region, resulting in a sample average annual
salary of Birr 20,000 with a standard deviation of Birr 1,550. The researcher then
takes a random sample of 35 medical secretaries across the region, which yields an
average annual salary of Birr 18,500 with a standard deviation of Birr 2,100. Use
=0.01 to test this question

35
 Solution 1
1. Ho: 1-2 = 0
Ha: 1-2  0
2. Z – distribution , two tailed test

3.  = 0.01, /2 = 0.005 Z/ = Z0.005 = 2.57 Reject Ho if /sample Z/  2.57

4. Legal Secretary Medical Secretary
𝑋1 = Birr 20,000 𝑋2 = Birr 18,500
n1 = 33 n2 = 35
S1 = Birr 1,550 S2 = Birr 2,100
Sample Z =?
𝑋1 −𝑋2 − 𝜇1 −𝜇2 20,000−18,500 − 0
𝑍 𝑋1 −𝑋2 = = 𝑍 20,000−18,500 = = +3.36
1,5502 2,1002
𝑆2 2
1 + 𝑆2 + 35
33
𝑛1 𝑛2

5. Reject Ho; because /sample Z/ = 3.36  2.57. There is a difference in the average annual
salary of legal and medical secretary. 36
 Example 2
2. A firm is studying the delivery times for two raw material suppliers. The firm in basically
satisfied with supplier A and is prepared to stay with this supplier provided that the mean
delivery time is the same or less than that of supplier B. However if a firm finds that the
mean delivery time from supplier B is less than that of supplier A, it will begin making raw
material purchases from supplier B.
a. What are the null and alternative hypotheses for this situation?
b. Assume that independent samples show the following delivery time x is for the two
suppliers.
Supplier A Supplier B
n1 = 50 𝑋1 = 14 days S1 = 3 days n2 = 30 𝑋2 = 12.5 days S2 = 2 days
Using  = 0.05, what is your conclusion for the hypotheses from part (a)? What action do
you recommend in terms of supplier selection?
37
 Solution 2
1. Ho: 1-2  0
Ha: 1-2  0
2. Z – distribution , Right - tailed test
3.  = 0.05 Z = Z0.05 = 1.64
Reject Ho if sample Z  1.64
4. Supplier A Supplier B
n1 = 50 𝑋1 = 14 days S1 = 3 days n2 = 30 𝑋2 = 12.5 days S2 = 2 days
Sample Z =?
14−12.5 − 0
𝑍 𝑋1 −𝑋2 =𝑍 14−12.5 = = +2.68
32 22
+
50 30

Reject Ho; because 2.68  1.64 38

 Example 3
3. In a wage discrimination case involving male and female employees, it is assumed

that male employees have a mean salary less than or equal to that of female
employees. To justify this, independent random samples of male and female
employees were taken and the following result obtained.
Male Employees Female Employees
n1 = 100 n2 = 100
𝑋1 = Birr 20,600 𝑋2 = Birr 19,700
S1 = 3,000 S2 = Birr 2,500
Test the hypothesis with  = 0.025. Does wage discrimination appear to exist in this
case? 39
 Solution 3
1 Ho: 1-2  0
Ha: 1-2  0
2. Z – distribution , Right - tailed test
3.  = 0.025 Z = Z0.025 = 1.96
Reject Ho if sample Z  1.9
4. Male employees Female employees
n1 = 100 𝑋1 = Birr 20,600 S1 = Birr 3,000 n2 = 100 𝑋2 = Birr 19,700 S2 = Birr 2,500
Sample Z =?
20,600−19,700 − 0
𝑍 𝑋1 −𝑋2 =𝑍 20,600−19,700 = = +2.30
3,0002 2,5002
100
+ 100
5. Reject Ho; because 2.30  1.96. Wage discrimination appears to exist
40
 Small Sample Case
In testing of hypothesis for the difference between two means, given that the sample sizes taken
are small (n1, n2  30), we can use either Z or t – distribution as a test statistic assuming that the
parent populations are normally distributed.
➢Population normal, and 1 and 2 known – Z distribution is used
➢Population normal, and 1 , and 2 unknown - t distribution is used
t – Distribution: used when population normal, 1, & 2 unknown, and n1, and/or n2  30.
The unknown population standard deviations are approximated by sample standard deviations
as:
𝑆12 𝑛1 −1 +𝑆22 𝑛2 −1 1 1
𝜎𝑋1 −𝑋2 ≈ 𝑆𝑋1−𝑋2 = + ; where df = n1 + n2 - 2
𝑛1 +𝑛2 −2 𝑛1 𝑛2

This approximation is based on the assumption that the two population standard deviations are
equal.
41
 Count…
𝑋1 −𝑋2 − 𝜇1 −𝜇2
Once 𝑆𝑋1−𝑋2 is known t is computed as: 𝑡 =
𝑆2 2
1 𝑛1 −1 +𝑆2 𝑛2 −1 1 1
𝑛1 +𝑛2 −2
+
𝑛1 𝑛2

Or
𝑋1 −𝑋2 − 𝜇1 −𝜇2 2 𝑆12 𝑛1 −1 +𝑆22 𝑛2 −2
𝑡= ; Where 𝑆𝑝 = 𝑃𝑜𝑜𝑙𝑒𝑑𝑉𝑎𝑟𝑖𝑎𝑛𝑐𝑒 =
𝑛1 +𝑛2 −2
𝑆2
𝑝 𝑆𝑝
2
+
𝑛1 𝑛2

If 1 and 2 are not equal, the sample standard error of the difference between
two means and the degrees of freedom are calculated as:
𝑆2 𝑆 2 2
1+ 2
𝑆12 𝑆22 𝑛1 𝑛2
𝑆𝑋1−𝑋2 = + ; 𝑉 = 𝑑𝑓 = 2 2
𝑛1 𝑛2 𝑆2
1 𝑆2
2
𝑛1 𝑛2
𝑛1 −1
+ 𝑛 −1
2 42
 Example
1. A marketing research firm wishes to know if the mean number of his of TV viewing per
week is the same for teenage boys and teenage girls using a 5% level of significance. The
unknown population variances are assumed to be equal. The following data were obtained
is an attempt to test the equality of 1 and 2.
Teenage Boys Teenage Girls
n1 = 20 n2 = 12
𝑋1 = 24.5 hrs 𝑋2 = 28.7 hrs
2
S 1 = 64 hrs S22 = 71 hrs
Test the above hypothesis.
2. A time-and-motion study is conducted to test whether the mean length of time required to
perform a certain task is higher for employees on the day shift than for employees on the
night shift. The data are as follows.
Day shift Night Shift
n1 = 10 n2 = 8
𝑋1 = 20 hrs 𝑋2 = 29 hrs
S12 = 64 hrs S22 = 50 hrs
Use a 1% level of significance to test the hypothesis. Assume the populations are
approximately normal, the population variances are equal, and the samples are independent.
43
 Solution 1 & 2
1. Ho: 1 = 2 or 1-2 = 0 1. Ho: 1 - 2  0
Ha: 1  2 or 1-2  0 Ha: 1 - 2  0
2. t – distribution , Two - tailed test 2. t – distribution , Left - tailed test
3.  = 0.05 /2 = 0.025 3.  = 0.01 v = 10 +8-2 = 16
v = n1 + n2 - 2 = 12 + 20 –2 = 30 t, v = t0.01,16 = 2.583
t/2, V = t0.25, 30 = 2.042,
Reject Ho if sample t  - 2.583
Reject Ho if /sample t/  2.042
4. Sample t =? 4. Sample t =?
𝑋 −𝑋 − 𝜇1 −𝜇2 20−29 −0
𝑡𝑋1 −𝑋2 = 1 2 𝑡= = −2.49
𝑆2
𝑝 𝑆𝑝
2
64 10−1 +50 8−1 1 1
+ +
𝑛1 𝑛2 10+8−2 10 8
24.5−28.7 −0
𝑡24.5−28.7 = = −𝟏. 𝟒𝟏 − 5. Do not reject Ho because –2.49 -2.58
64 20−1 +71 12−1 1 1
20+12−2
+
20 12
The mean length of time required to
perform a certain task for day-shift
𝟏. 𝟒𝟏
employees is greater than or equal to for
5. Do not Reject Ho; There is no significant
difference
night shift employees.
44
Hypothesis testing about difference between two population proportions (P1-P2)
• To test hypothesis about the difference between two population proportions, we
obtain independent random sample of n1 items from the first population and n2 items
𝑋1 𝑋2
from the second; and calculate 𝑃1 = and 𝑃2 = 𝑎𝑛𝑑 use a test based on the
𝑛1 𝑛2

standard normal distribution.

• In testing hypothesis about the difference in two population proportions, particular

values of the population proportions are not usually known or assumed; unlike
hypothesis testing about population proportion. Rather, the hypotheses are about the
difference in the two population proportions, (P1-P2). 45
 Count…
• Hypothesis testing about the difference between two population proportions has
three forms:
1. Ho: P1-P2 = 0 2. Ho: P1-P2  0 3. Ho: P1-P2  0
Ha: P1-P2  0 Ha: P1-P2  0 Ha: P1-P2  0
The first form leads to a two-tailed test while the later two lead to a one-tailed test.

The central Limit Theorem applied to the difference between two population
proportions states that P1-P2 values are normally distributed, with a mean of 𝑃1 − 𝑃2 a

𝑃1 (1−𝑃1 ) 𝑃2 (1−𝑃2 ) 𝑃1 −𝑃2 − 𝑃1 −𝑃2

standard deviation of + , and 𝑍 = .
𝑛1 𝑛2 𝑃1 𝑞1 𝑃2𝑞2
+
𝑛1 𝑛2

46
 Count…
• If the standard error is unknown, it has to be estimated from the sample data, i.e. by using
𝑃1 and𝑃2 .
• For the special case where the hypotheses involve no difference between the population
proportions (i.e. either Ho: P1-P2 = 0 Ho: P1-P2  0, or Ho: P1-P2  0) is modified to reflect the
fact that when we assume Ho to be true at the equality, we are assuming P1 = P2. When this
occurs, we combine or pool the two sample proportions to provide one estimate and is denoted
by 𝑃,
𝑛1 𝑝1 +𝑛2 𝑝2 𝑋1 +𝑋2
𝑃= = , & standard erro𝑟 𝜎𝑝1−𝑝2 is estimated by𝑆𝑝1−𝑝2 , which is calculated as
𝑛1 +𝑛2 𝑛1 +𝑛2
1 1 1 1 𝑃𝑄 𝑃𝑄
𝑆𝑝1−𝑝2 = 𝑃(1 − 𝑃) +𝑛 = 𝑃𝑄 +𝑛 = + and Z is calculated as
𝑛1 2 𝑛1 2 𝑛1 𝑛2

𝑃1 −𝑃2 − 𝑃1 −𝑃2
𝑍= 1 1
.
𝑃𝑄 +
𝑛1 𝑛2

𝑃1 −𝑃2
• And when P1 =P2, Z becomes𝑍 = 1 1
.
𝑃𝑄 +
𝑛1 𝑛2
47
 Example
1. In a sample of 400 products produced by machine I, 200 were defective, and in a sample of
400 products produced by machine II, 170 were defective. Using  = 0.05, test the
hypothesis that the rate of defect is the same for both machine 1 and machine 2.

2. To test the effectiveness of the approach and layout of two direct mail brochures, a
marketing manager of SELAM Inc mailed out 150 copies of each brochure and recorded the
number of responses penetrated by each. There were 30 responses generated by the first
brochure and 15 generated by the second. Can the marketing manager conclude that the
first brochure is less effective? Use = 0.05.
3. Random samples of Video cassette Recorders assembled in ALEM assembly plant included
50 assembled during the first shift and 50 assembled during the second shift. Of the Video
Cassette Recorders assembled during the first shift 10 were defective; and 20 were defective
from the second shift. From the data, would the production foreman reject the hypothesis
that the proportion of defectives assembled by the first shift is greater than or equal to that
for the second shift? Use a 0.05 level of significance. 48
1. Ho: P1-P2 = 0
Solution 1 & 2
Ha: P1-P2  0 1. Ho: P1-P2  0 Ha: P1-P2  0
2. Z – distribution, two – tailed test 2. Z – distribution, Right – tailed test
3.  = 0.05, Z = Z0.05 = 1.64
3.  = 0.05, /2 = 0.025,
Reject Ho if Sample Z  1.64
Z/2 = Z0.025 = 1.96, 4. Brochure I Brochure II
Reject Ho if /Sample Z/  1.96 n1 = 150 x1 = 30 n2= 150 x2 = 15
4. Machine I Machine II 𝑋 +𝑋 30+15
n1 = 400 x1 = 200 n2 = 400 x2 = 170 𝑃 = 𝑛1+𝑛2 = 150+150 = 0.15
1 2
𝑋1 +𝑋2 170+200 𝑃1 −𝑃2 − 𝑃1 −𝑃2
𝑃= = = 0.4625 Sample 𝑍= =
𝑛1 +𝑛2 400+400
1 1
𝑃𝑄 +
𝑛1 𝑛2
𝑃1 −𝑃2 − 𝑃1 −𝑃2 0.5−0.425 −0 0.20−0.10 −0
Sample 𝑍 = 1 1
=
1 1 1 1
= +2.43
𝑃𝑄 + 0.4625∗0.5375 + 0.15∗0.85 +
𝑛1 𝑛2 400 400 150 150

= +2.13 5. Reject Ho.

49
5. Reject Ho
 Solution 3
1. Ho: P1-P2  0
Ha: P1-P2  0
2. Z distribution, Left-tailed test
3.  = 0.05, Z = Z0.05 = 1.64
Reject Ho if Sample Z  1.64
4. Shift 1 Shift 2
n1 = 50 x1 = 10 n2 = 50 x2 = 20
𝑋1 +𝑋2 10+20
𝑃= = = 0.30
𝑛1 +𝑛2 50+50
𝑃1 −𝑃2 − 𝑃1 −𝑃2 0.20−0.40 −0
Sample 𝑍 = 1 1
= = −2.18
1 1
𝑃𝑄 + 0.30∗0.70 +
𝑛1 𝑛2 50 50

5. Reject Ho. The proportion of defectives assembled by the second shift is greater than that for
50
the first shift.
Solving for Type II Errors (Computation of Beta, β)
• A Type II error can be committed when the researcher fails to reject a false Ho.
• Determining the probability of committing a Type II error is more complex. It varies
with the possible values of the alternative parameter.
Example: a researcher conducting a statistical test on the following hypothesis:
Ho:   12 oz
Ha:   12 oz
• In these hypotheses, if Ho,   12 oz is false, what is the true value for the
population mean?
• Is the mean really 11.99 oz or 11.90 oz, or 11.50 oz or 10 oz?
• For each of possible values of the population mean, the researcher can compute the
51
probability of committing a Type II error.
 Count..
• When Ho is false, the value of the alternative mean is unknown, so the researcher will
compute the probability of committing Type II errors for several possible values.

• How can the probability of committing a Type II error be computed for a specific
alternative value of mean?

• For the above hypotheses testing, a sample of 60 cans of beverage yields a sample
mean of 11.985 0z, with a standard deviation of 0.10 oz. α = 0.05. Z0.05 = 1.64.

The calculated Z value is

11.985−12.00
𝑍= 0.10 = −1.16
ൗ 60

• The researcher determines not to reject the null hypothesis. 52

 Count..
• By not rejecting the null hypothesis, the researcher either made a correct decision or
committed a Type II error.

• What is the probability of committing a Type II error in this problem if the

population mean actually is 11.99?

53
 Count..
• The first step in determining the probability of a Type II error is to calculate the

critical value for the mean, This value is used as a cutoff point for the acceptance
region in testing the Ho.

• For any sample mean obtained that is less than (or greater for an upper tail rejection
region), the Ho is rejected. Any sample mean greater than (or less for an upper tail
rejection region) causes the researcher to accept the Ho.

Solving for the critical value of the mean gives

𝑋ത𝑐 −𝜇 𝑋ത𝑐 −12.00
𝑍𝑐 = 𝑆 1.64 = 0.10
ൗ 𝑛 ൗ 60

𝑋 = 11.979 54
 Count…
• From the above computation, the Ho will be rejected for a sample mean vale of less
than 11.979 oz. Assume that the alternative hypothesis is a = 11.99 oz. Will the
researcher accept the  = 12 as true, when, in reality,  = 11.99 is true?

• If the Ho is false, the Ho will be incorrectly accepted whenever  falls in the

acceptance region, 𝑋  11.979 oz.

• If  actually equals 11.99 oz, what is the probability of failing to reject  = 12 oz

when 11.979 oz is the critical value?

• The researcher calculates this probability by extending the critical value (𝑋ത𝑐 = 11.979
oz) and finding the area to the right of 11.979. 55
 Count…
11.979−11.99
• 𝑍11.979 = 0.1 = -0.85
ൗ 60

• This value of Z yields an area of 0.3023.

• The probability of committing a Type II error is all the area to the right of = 11.979,
or 0.3023+0.5000 = 0.8023. Hence, there is an 80.23% chance of committing a Type
II error if the alternative mean is 11.990z.

• With two-tailed tests, both tails of the distribution contain rejection regions. If the
null hypothesis is false, obtaining a calculated statistic falling in the tails results in
the correct decision: to reject the null hypothesis.

56
 Example
1. Suppose that you are conducting a two-tailed hypothesis test of proportions. The null
hypothesis is that the population proportion is 0.40. The alternative hypothesis is that the
population proportion is not 0.40. A random sample of 250 produces a sample proportion of
0.44. Using alpha of 0.05 and assuming that the alternative population proportions really is
0.36, what is the probability of committing a Type II error?

2. Suppose that the null hypothesis is that the population mean is greater than or equal to 100.
Suppose further that a random sample of 48 items is taken and the sample standard deviation
is 14. For each of the following alpha values, compute the probability of committing a Type
II error if the population mean actually is 99.
A. α = 0.01 B. α = 0.05 C. α = 0.10
D. Based on the answers to (a), (b), and (c), what happens to the value of β as α gets
57
larger?
 Solution 1
α=0.05, α/2=0.025, 𝑍0.025 =1.96. Using 1.96, solve for the critical value of the
proportion.
𝑝−𝑃 𝑝−0.40
Z= ±1.96 =
𝑃𝑞 0.4∗0.6
𝑛 250

𝑃 = 0.40 ± 0.06 The critical values are 0.34 on the lower end and 0.46 on the upper
end. The alternative population proportion is 0.36.
Solving the area between 𝑝= 0.34 and p = 0.36 yields
0.34−0.36
𝑍= = 0.66
0.36∗0.64
250

The area associated with Z= 0.66 is 0.2454. The probability of committing a Type II
error is 0.5000 + 0.2454 = 0.7454. 58
 Solution 2 a

α=0.01, ,𝑍0.01 = -2.33. Using -2.33, solve for the critical value of the mean.

𝑋𝑐 −𝜇 𝑋𝑐 −100
𝑍= 𝑠 − 2.33 = 14 𝑋𝑐 = 95.292
ൗ 𝑛 ൗ 48

The critical value is 95.292 on the lower end. The alternative population mean is 99.
Solving the area between 𝑋𝑐 = 95.292 and μ = 99 yields

95.292−99
𝑍= 14 = −1.83
ൗ 48

The area associated with Z= -1.83 is 0.46638. The probability of committing a Type II
error is 0.5000 + 0.46638 = 0.96638.
59
 Solution 2 b

α=0.05, ,𝑍0.05 = -1.64. Using -1.64, solve for the critical value of the mean.
𝑋𝑐 −𝜇 𝑋−100
𝑍= 𝑠 − 1.64 = 14 𝑋𝑐 = 96.686
ൗ 𝑛 ൗ 48

The critical value is 96.686 on the lower end. The alternative population mean is 99.

Solving the area between 𝑋𝑐 = 96.686 and μ = 99 yields

96.686−99
𝑍= 14 = −1.14
ൗ 48

The area associated with Z= -1.14 is 0.39251. The probability of committing a Type
II error is 0.5000 + 0.39251 = 0.89251.
60
 Solution 2 c & d
c. α=0.1, ,𝑍0.1 = -1.28. Using -1.28, solve for the critical value of the mean.
𝑋𝑐 −𝜇 𝑋−100
𝑍= 𝑠 − 1.28 = 14
ൗ 𝑛 ൗ 48
𝑋𝑐 = 97.413
The critical value is 97.413 on the lower end. The alternative population mean is 99.

Solving the area between 𝑋𝑐 = 97.413 and μ = 99 yields

97.413−99
𝑍= 14 = −0.79
ൗ 48

The area associated with Z= -0.79 is 0.28524. The probability of committing a Type
II error is 0.5000 + 0.28524 = 0.78524.

d. Based on the answers to (a), (b), and (c), the value of β gets smaller as61α gets larger.
1. Clearly explain the concepts of hypotheses and hypothesis testing. (3 pts)

2. If the p-value of one tailed test is .044. What will be your conclusion at alpha levels
of 0.10? (2 pts)

3. A survey of college graduates showed that the average yearly cash income for these
graduates in at least Birr 12,000. In other area of the country average yearly cash
income is different from this. For randomly select 48 graduates, the sample average
income for these working graduates is Birr 11,400 with a standard deviation of Birr
2,280. Is there enough evidence from this sample data to reject the national claim for
your area different from this? Test by using critical value method at  = 0.05. Show
62
necessary steps clearly. (5 pts)
1. Clearly describe null hypothesis and alternative hypothesis. (3 pts)

2. If the p-value of two tailed test is .044. What will be your conclusion at alpha levels
of 0.05? (2 pts)

3. A certain company manager assumes that the mean time of employees’ waste at
work each day is more than 122 minutes. For randomly selected sample of 16
employees, the average sample is 120 with a standard deviation of 12 minutes per
day. Assume the population is approximately normally distributed. Test the
assumption at 5% significance level by using probability (p-value) method. Show
necessary steps clearly. (5 pts)
63
1. Clearly discuss about type I and Type II errors. (3 pts)

2. If the sample mean and critical mean value of a sample is 400 and 350 & 460
respectively. What will be your conclusion at null hypothesis? (2 pts)

3. The college dean claims, the mean time of needed for college students to complete
a certain network is at least 45 seconds. The IT expert states there is the mean time
change by energetic exercise, you have a sample of nine college students. The
sample mean and standard deviation of the collected data is 49.2 seconds and 3.5
seconds respectively. Test the claim of college dean at 10% level of significance.
Show necessary steps clearly. (5 pts)
64
1. Develop the rejection rule for hypothesis testing about population mean in critical
value method and the probability (p-value) method for both one tailed and two
tailed. (4 pts)
2. What is statistic? (1 pts)
3. Abebe works for the XY Air Pollution Study, and studies the correlation between air
pollution and the heart disease. Nationally, 40% of adults suffer from disease. Abebe
suspects that the proportion of people with a heart disease in high-pollution areas is
higher. In a SRS of 600 residents of high-pollution areas, he finds that 270 subjects
have heart disease. At the 1% level, is this good evidence that people in high-
pollution areas are more likely to have heart disease? Show necessary steps clearly.
(5 pts) 65
1. Clearly discuss with graph the type of tests. (4 pts)
2. What is parameter? (1 pts)

3. The researcher estimates that the dropout rate for senior students at university in
Addis Ababa is 12%. Last year in a random sample of 300 senior students, 27
withdrew from university. At α = 0.05, is there enough evidence to reject the
researcher’s claim? Show necessary steps clearly. (5 pts)

66