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Statistical Inference:
Hypothesis Testing for
Single Populations

Statistical Inference: Hypothesis Testing for


Single Populations 1
Learning Objectives

Upon completion of this chapter, you will be able to:

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 Understand hypothesis-testing procedure using one-tailed and
two- tailed tests
 Understand the concepts of Type I and Type II errors in
hypothesis testing
 Understand the concept of hypothesis testing for a single
population using the z statistic
 Understand the concepts of p-value approach and critical value
approach for hypothesis testing
 Understand the concept of hypothesis testing for a single
population using the t statistic
 Understand the procedure of hypothesis testing for population
proportion
Statistical Inference: Hypothesis Testing for
Single Populations 2
Introduction to Hypothesis Testing
 A statistical hypothesis is an assumption about an
unknown population parameter.

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 Hypothesis testing is a well defined procedure which
helps us to decide objectively whether to accept or
reject the hypothesis based on the information
available from the sample.
 In statistical analysis, we use the concept of probability
to specify a probability level at which a researcher
concludes that the observed difference between the
sample statistic and the population parameter is not
due to chance.

Statistical Inference: Hypothesis Testing for


Single Populations 3
Hypothesis Testing Procedure
Figure 10.1: Seven steps of hypothesis testing

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Statistical Inference: Hypothesis Testing for
Single Populations 4
Step 1: Set Null and Alternative Hypotheses
 The null hypothesis generally referred by H0 (H sub-zero), is the hypothesis
which is tested for possible rejection under the assumption that is true.

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Theoretically, a null hypothesis is set as no difference or status quo and
considered true, until and unless it is proved wrong by the collected
sample data.
 Symbolically, a null hypothesis is represented as:

 The alternative hypothesis, generally referred by H1 (H sub-one), is a logical


opposite of the null hypothesis. In other words, when null hypothesis is found
to be true, the alternative hypothesis must be false or when the null
hypothesis is found to be false, the alternative hypothesis must be true.
 Symbolically, alternative hypothesis is represented as:

Statistical Inference: Hypothesis Testing for


Single Populations 5
Step 2: Determine the Appropriate
Statistical Test

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 Type, number, and the level of data may provide a
platform for deciding the statistical test.
 Apart from these, the statistics used in the study
(mean, proportion, variance, etc.) must also be
considered when a researcher decides on appropriate
statistical test, which can be applied for hypothesis
testing in order to obtain the best results.

Statistical Inference: Hypothesis Testing for


Single Populations 6
Step 3: Set the Level of Significance
 The level of significance generally denoted by α is the
probability, which is attached to a null hypothesis,

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which may be rejected even when it is true.
 The level of significance is also known as the size of
the rejection region or the size of the critical region.
 The levels of significance which are generally applied
by researchers are: 0.01; 0.05; 0.10.

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Single Populations 7
Step 4: Set the Decision Rule
Figure 10.2: Acceptance and rejection regions of null hypothesis (two-tailed test)

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Critical region is the area under the normal curve, divided into two
mutually exclusive regions. These regions are termed as acceptance
region (when the null hypothesis is accepted) and the rejection
region or critical region (when the null hypothesis is rejected).

Statistical Inference: Hypothesis Testing for


Single Populations 8
Step 5: Collect the Sample Data
 In this stage of sampling, data are collected and the
appropriate sample statistics are computed.

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 The first four steps should be completed before
collecting the data for the study.
 It is not advisable to collect the data first and then
decide on the stages of hypothesis testing.

Statistical Inference: Hypothesis Testing for


Single Populations 9
Step 6: Analyse the data
 In this step, the researcher has to compute the test
statistic. This involves selection of an appropriate

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probability distribution for a particular test.
 Some of the commonly used testing procedures are z,
t, F, and χ2.

Statistical Inference: Hypothesis Testing for


Single Populations 10
Step 7: Arrive at a Statistical Conclusion
and Business Implication

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 In this step, the researchers draw a statistical
conclusion. A statistical conclusion is a decision to
accept or reject a null hypothesis.
 Statisticians present the information obtained using
hypothesis-testing procedure to the decision makers.
Decisions are made on the basis of this information.
Ultimately, a decision maker decides that a statistically
significant result is a substantive result and needs to
be implemented for meeting the organization’s goals.

Statistical Inference: Hypothesis Testing for


Single Populations 11
Two-Tailed Test of Hypothesis
 Let us consider the null and alternative hypotheses as below:

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 Two-tailed tests contain the rejection region on both the tails of
the sampling distribution of a test statistic. This means a
researcher will reject the null hypothesis if the computed sample
statistic is significantly higher than or lower than the
hypothesized population parameter (considering both the tails,
right as well as left).

Statistical Inference: Hypothesis Testing for


Single Populations 12
Figure 10.3: Acceptance and rejection regions (alpha = 0.05)

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Statistical Inference: Hypothesis Testing for
Single Populations 13
One-Tailed Test of Hypothesis
Let us consider a null and alternative hypotheses as below:

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One-tailed test contains the rejection region on one tail of the
sampling distribution of a test statistic. In case of a left-tailed test, a
researcher rejects the null hypothesis if the computed sample
statistic is significantly lower than the hypothesized population
parameter (considering the left side of the curve in Figure 10.5).
In case of a right-tailed test, a researcher rejects the null hypothesis
if the computed sample statistic is significantly higher than the
hypothesized population parameter (considering the right side of the
curve in Figure 10.6).

Statistical Inference: Hypothesis Testing for


Single Populations 14
Figure 10.5: Acceptance and rejection regions for one-tailed (left)
test (alpha = 0.05)

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Statistical Inference: Hypothesis Testing for
Single Populations 15
Figure 10.6: Acceptance and rejection regions for one-tailed (right)
test (alpha = 0.05)

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Statistical Inference: Hypothesis Testing for
Single Populations 16
Type I and Type II Errors
When a researcher tests statistical hypotheses, there can be four
possible outcomes as follows:

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1. Rejecting a true null hypothesis (Type I error)
2. Accepting a false null hypothesis (Type II error)
3. Accepting a true null hypothesis (Correct decision)
4. Rejecting a false null hypothesis (Correct decision)

Statistical Inference: Hypothesis Testing for


Single Populations 17
Table 10.3: Errors in hypothesis testing and power of the test

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Statistical Inference: Hypothesis Testing for
Single Populations 18
Hypothesis Testing for a Single Population
Mean Using the Z Statistic

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Example 10.1
A marketing research firm conducted a survey 10 years
ago and found that the average household income of a
particular geographic region is Rs 10,000. Mr Gupta, who
has recently joined the firm as a vice president has
expressed doubts about the accuracy of the data. For
verifying the data, the firm has decided to take a random
sample of 200 households that yield a sample mean (for
household income) of Rs 11,000. Assume that the
population standard deviation of the household income is
Rs 1200.
Verify Mr Gupta’s doubts using the seven steps of
hypothesis testing. Let α = 0.05.
Statistical Inference: Hypothesis Testing for
Single Populations 19
Example 10.1 (Solution)

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Statistical Inference: Hypothesis Testing for
Single Populations 20
p-Value Approach for Hypothesis Testing
 The p-value approach of hypothesis testing for large
samples is some times referred to as the observed

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level of significance. The p-value defines the smallest
value of α for which the null hypothesis can be
rejected.
Example 10.2
For Example 10.1, use the p-value method to test the hypothesis
using alpha = 0.01 as the level of significance. Assume that the
sample mean is 10,200.

Statistical Inference: Hypothesis Testing for


Single Populations 21
Example 10.2 (Solution)

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The observed test statistic is computed as 2.36. From the normal table, the
corresponding probability area for z value 2.36 is 0.4909. So, the probability
of obtaining a z value greater than or equal to 2.36 is 0.5000 – 0.4909 =
0.0091 (shown in Figure 10.9). For a two-tailed test, this value is multiplied
by 2 (as discussed above). Thus, for a two-tailed test, this value is (0.0091 × 2
= 0.0182). So, the null hypothesis is accepted because (0.01 < 0.0182). It has
to be noted that for α = 0.05 and α = 0.1, the null hypothesis is rejected
because 0.0182 < 0.05 and 0.0182 < 0.1.

Statistical Inference: Hypothesis Testing for


Single Populations 22
Critical Value Approach for Hypothesis
Testing

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Statistical Inference: Hypothesis Testing for
Single Populations 23
Example 10.3

A cable TV network company wants to provide modern

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facilities to its consumers. The company has five-year old
data which reveals that the average household income is
Rs 120,000. Company officials believe that due to the fast
development in the region, the average household income
might have increased. The company takes a random
sample of 40 households to verify this assumption. From
the sample the average income of the households is
calculated as 125,000. From historical data, population
standard deviation is obtained as 1200. Use alpha = 0.05 to
verify the finding.

Statistical Inference: Hypothesis Testing for


Single Populations 24
Example 10.3 (Solution)

The null and alternative hypotheses can be set as below:

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Statistical Inference: Hypothesis Testing for
Single Populations 25
Figure 10.10: Critical value method for testing a hypothesis about the
population mean for Example 10.3

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Statistical Inference: Hypothesis Testing for
Single Populations 26
 Solved Examples\Excel\Ex 10.1.xls
 Solved Examples\Excel\Ex 10.2.xls

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 Solved Examples\Excel\Ex 10.3.xls

 Solved Examples\Minitab\Ex 10.1.MPJ


 Solved Examples\Minitab\Ex 10.2.MPJ
 Solved Examples\Minitab\Ex 10.3.MPJ

Statistical Inference: Hypothesis Testing for


Single Populations 27
Hypothesis Testing for a Single Population
Mean Using the T Statistic (Case of a
Small Random Sample When N < 30)

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When a researcher draw a small random sample (n < 30) to estimate
the population mean μ and when the population standard deviation
is unknown and population is normally distributed, t-test can be
applied.

Statistical Inference: Hypothesis Testing for


Single Populations 28
Example 10.4
Royal Tyres has launched a new brand of tyres for tractors

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and claims that under normal circumstances the average
life of the tyres is 40,000 km. A retailer wants to test this
claim and has taken a random sample of 8 tyres. He tests
the life of the tyres under normal circumstance. The
results obtained are presented in Table 10.4.

Statistical Inference: Hypothesis Testing for


Single Populations 29
Example 10.4 (Solution)

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Statistical Inference: Hypothesis Testing for
Single Populations 30
Figure 10.18: Computed and critical t values for Example 10.4

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Statistical Inference: Hypothesis Testing for
Single Populations 31
 Solved Examples\Excel\Ex 10.4.xls
 Solved Examples\Minitab\Ex 10.4.MPJ

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 Ch 10 Solved Examples\SPSS\Ex 10.4.sav
 Ch 10 Solved Examples\SPSS\Output Ex 10.4.spv

Statistical Inference: Hypothesis Testing for


Single Populations 32
Hypothesis Testing for a Population
Proportion

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Example 10.5
The production manager of a company that manufacturers electric
heaters believes that at least 10% of the heaters are defective. For
testing his belief, he takes a random sample of 100 heaters and finds
that 12 heaters are defective. He takes the level of significance as 5%
for testing the hypothesis. Applying the seven steps of hypothesis
testing, test his belief.
Statistical Inference: Hypothesis Testing for
Single Populations 33
Example 10.5 (Solution)

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Statistical Inference: Hypothesis Testing for
Single Populations 34
Using Minitab for Hypothesis Testing for a
Population Proportion

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 Solved Examples\Excel\Ex 10.5.xls
 Solved Examples\Minitab\Ex 10.5.MPJ

Statistical Inference: Hypothesis Testing for


Single Populations 35

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