Hypothesis Testing

 What is a Hypothesis Test?

 Elements of a Hypothesis Test
 Hypothesis Tests for Means
 Hypothesis Tests for Proportions
 Introduction
• We continue our look on inferential statistics,
however, instead of developing a range of
values within which we expect the population
parameter to occur, we will conduct a test of
hypothesis regarding a statement about the
population.
 What is an Hypothesis?

• A hypothesis is a statement about a

population parameter developed for the
purpose of testing.
• Population mean:
Example: Advil will relieve the symptoms of a
headache in less than 20 minutes
• Population Proportion:
Example: The proportion of female drivers in
Jamaica that pump their own gas is 0.75
 What is Hypothesis Testing
• A procedure based on sample evidence and
probability theory to determine whether the
hypothesis is a reasonable statement.
 Elements of a Hypothesis Test
• Null Hypothesis

• Alternative Hypothesis

• Test Statistic

• Level of Significance

• Critical Value

• Rejection (Critical) Region

• Conclusion
 Elements of Hypothesis Testing Null
Hypothesis, H0
• States the claim or assertion to be tested
Example: The mean number of miles driven on a
Maxie tire is 50,000 miles (H 0 : μ  50,000 miles)
• Is always about a population parameter,
not about a sample statistic

H0 : μ  3 H0 : X  3
6
 Elements of a Hypothesis Test
• Null Hypothesis:
Hypothesis
– The statement being tested
– Usually represents the status quo
• Similar to the notion of innocent until proven guilty
– Always has an equality
• Equal to (=)
• Less than or equal to (≤)
• Greater than or equal to (≥)
– May or may not be rejected

• Alternative Hypothesis:
Hypothesis
– Only accepted if the data provide convincing evidence that it is true
– The opposite of the null hypothesis
– Never has an equality
• Not equal to (≠)
• Less than (<)
• Greater than (>)
 Elements of a Hypothesis Test
• The Alternative hypothesis will determine what type of test is being conducted.

• This can either be a:

– Two-tailed test
• The alternative hypothesis has the ≠ sign
• Eg: A researcher wants to determine if the mean family size is equal to 3.18
members.

– One-tailed test
• Lower tailed test (left-tailed test)
– The alternative hypothesis has a < sign
– Eg: A researcher wants to determine if the mean family size is less than 3.18

• Upper tailed test (right-tailed test)

– The alternative hypothesis has a > sign
– Eg: A researcher wants to determine if the family size is greater than 3.18
Elements of Hypothesis Testing: Select
a Level of Significance
• Level of Significance:
Significance The probability of rejecting the null
hypothesis when it is true

– Selected by the researcher at the beginning of the study

– Denoted by 

– Provides the critical value for the study

– Typical values are 0.01 (1%) & 0.05 (5%)

 Type I & Type II Errors
• Type I Error

– This occurs when a true null hypothesis is rejected.

– The value of α (the level of significance) represents the probability of
committing this type of error
– α =P (H0 is rejected | H0 is true)

• Type II Error
– This occurs when a false null hypothesis is not rejected.
– The value of β represents the probability of committing a Type II error
– β =P (H0 is not rejected | H0 is false)

• 1 – β is called the power of the test and it represents the probability

of not making a Type II error. (It is the probability of rejecting a false
null hypothesis.)
 Type I & Type II Errors cont’d
Possible Hypothesis Test Outcomes

Actual Situation
Decision H0 True H0 False
Do Not
No error Type II Error
Key: Reject
(1 -  ) (β)
Outcome H0
(Probability) Reject Type I Error No Error
H0 () (1-β)

11
 Elements of Hypothesis Testing: Test
Statistics
• A value determined from sample information,
used to determine whether to reject the null
hypothesis:
• The Test Statistics for Population Mean:
x  0
Z cal 

n
 Elements of Hypothesis Testing: Test
Statistics
• Test Statistics for Population Parameter:
pˆ  p0
Z cal 
p0 (1  p0 )
n
Elements of a Hypothesis Test : Critical
Value
• Critical Value:
Value These are the cut-off value(s) defining the area of
the rejection region

– The number of critical values depends on the type of test

• Two-tailed tests have 2 critical values (eg. ±1.96)

• One-tailed tests have 1 critical value (eg. 1.96 or -1.96)

– To determine the critical value(s), use the Percentage Points of the

Normal Distribution Table to find the value corresponding to:

• /2 in the case of two-tailed tests or

•  in the case of one-tail tests

 Elements of a Hypothesis Test VII
• Rejection Region :These are the numerical values of the test
statistic for which the null hypothesis will be rejected. The rejection
region is chosen so it will not contain the test statistic when the null
hypothesis is true.
Copyright © 2002 Wadsworth Group. Wadsworth is an imprint of the
Wadsworth Group, a division of Thomson Learning

Determining the Rejection Region

Copyright © 2002 Wadsworth Group. Wadsworth is an imprint of the
Wadsworth Group, a division of Thomson Learning

Generalised Rejection Regions

Critical Value & Rejection Region
Level of significance =  Represents
critical value
H0: μ = 3 /2 /2
Rejection
H1: μ ≠ 3 Two-tail test 0 region is
shaded
H0: μ ≤ 3 H1: 
μ>3
Upper-tail test 0

H0: μ ≥ 3 H1:

μ<3
Lower-tail test 0
Diagram Source: Berenson, Basic Business Statistics, 10e
 Types of Tests & Rejection Regions
Left-Tailed
Two-Tailed Test Right-Tailed Test
Test

Sign in the null

= = or ≥ = or ≤
hypothesis H0

Sign in the
alternative ≠ < >
hypothesis H1

Rejection
In both tails In the left tail In the right tail
region
 Elements of a Hypothesis Test VIII
• Conclusion:
Conclusion There are two possible decisions:

– Reject the Null Hypothesis

• This occurs if the test statistic falls in the rejection region
• Sample data indicate big discrepancy between expected mean and sample mean
• Indicates that:
– Those individuals are not part of hypothesised population or
– Population mean is different

– Fail to Reject the Null Hypothesis

• This occurs if the test statistic falls within the non-rejection region
• Never accept the null hypothesis
• Not proving the alternative to be true
• Indicates that:
– No difference really exist or
– Your sample was not large enough or comprised of the right combination of
representative individuals
 6 Steps in Hypothesis Testing
• Step 1:
1 State the null (H0) and alternative (H1) hypotheses

• Step 2:
2 Identify the level of significance

• Step 3:
3 Determine the appropriate test statistic

• Step 4:
4 Determine the critical values and identify the rejection and non-
rejection regions

• Step 5:
5 Compute the value of the test statistic

• Step 6:
6 Make a statistical decision and state the conclusion
 Hypothesis Test for Means
x  0
Z cal  Test Statistic

n

Alternative
Types of Tests Rejection Region
Hypothesis

Two-Tailed Test H 1 : μ ≠ μ0 |Zcal| > zα/2

H 1 : μ > μ0
Upper-Tailed Test Zcal > zα

H 1 : μ < μ0
Lower-Tailed Test Zcal < -zα
 Example: Hypothesis Test of
Means
• The manufacturer of the X-15 steel belted
radial tire claims that the mean mileage the
tyre can be driven before the thread wears
out is 60,000 miles. The standard deviation of
the mileage is 5,000 miles. The Crosset truck
company bought 48 tires and found that the
mean mileage for their trucks is 59,500 miles.
Is the Crosset’s experience different from that
claim by the manufacturer at the 0.05 level of
significance?
 Example: Hypothesis Test of
Means
• At the time she was hired as a server at a
family restaurant, Samantha was told “you
can average more than $20 per day on tips”.
Over the first 35 days she was employed at
the restaurant, the mean daily amount of her
tips was $24.85, with a standard deviation of
$3.24. At the 0.01 significance level, can
Samantha conclude that she is earning more
than $20 in tips?
Hypothesis Test for Proportions
pˆ  p0
Z cal 
p0 (1  p0 ) Test Statistic
n
Alternative
Types of Tests Rejection Region
Hypothesis

Two-Tailed Test H 1 : p ≠ p0 |Zcal| > zα/2

H1 : p > p0
Upper-Tailed Test Zcal > zα

H1 : p < p0
Lower-Tailed Test Zcal < -zα
 Example – Hypothesis Test for Proportions

• A machine is made to produce no more than

5% of defective components when it is
working effectively. A random sample of 300
components revealed that 21 are defective.
Test at the 1% level of significance whether or
not the machine is working effectively.
 Example – Hypothesis Test for Proportions

In a poll by the National Center for Women and Aging at Brandeis

University, 51% of the women over 50 said that aging is not as bad as they
had expected (USA TODAY, November 19, 2002). Assume that this result
holds true for the 2002 population of all women aged 50 and over. In a
recent random sample of 400 women aged 50 and over, 54% said that
aging is not as bad as they had expected.

Using the 5% significance level, can you conclude that the current
percentage of women aged 50 and over who think that aging is not as bad
as they had expected is greater than that for 2002?