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Chapter Nine

Introduction to Hypothesis Testing

**Rejection and nonrejection regions Type I and Type II errors
**

About Population Mean (known ) About Population Mean (unknown ) About Proportion

Practice Problems: 9.3, 9.5, 9.6, 9.7, 9.11, 9.17, 9.23, 9.25

Introduction to Hypothesis Testing

Hypothesis Testing ± use statistical evidence to test various theories about phenomena Statistical Hypotheses

** a more formal structure derived from the research
**

hypothesis.

** Composed of two parts
**

Null hypothesis (Ho) ± null hypothesis exists; nothing new is happening; the null condition exists Alternative (Ha) ± the new theory is true; something new is happening

Null and Alternative Hypotheses

The Null and Alternative Hypotheses are mutually exclusive

Only one of them can be true

The Null and Alternative Hypotheses are collectively exhaustive

The Null Hypothesis is assumed to be true The burden of proof falls on the Alternative Hypothesis

packages with flour The company wants the package contents to average 40 ounces H 0 : Q ! 40 oz H a : Q { 40 oz .Null and Alternative Hypotheses: Example A manufacturer is filling 40 oz.

18 H 0 : Q ! 12 H a : Q { 12 40 Two-tailed Test .18 H a : p " 0.One-tailed and Two-tailed Tests One-tailed Tests H 0 : Q ! 40 Ha : Q H 0 : p ! 0.

8.8 Steps in Testing Hypotheses 1. 3. Establish hypotheses: state the null and alternative hypotheses Determine the appropriate test and sampling distribution (one-tailed or two-tailed and parameter (µ or or p) Specify the Type I error rate State the decision rule Gather sample data Calculate the value of the test statistic State the statistical conclusion Make a managerial decision 2. . 6. 4. 7. 5.

Rejection and Non Rejection Regions Conceptually and graphically. statistical outcomes that result in the rejection of the null hypothesis lie in what is termed the rejection region Statistical outcomes that fail to result in the rejection of the null hypothesis lie in what is termed the non rejection region .

2. Draw the Rejection and Non-Rejection Graph . ***If values fall in ³rejection region´ you reject the null hypothesis 4. Reject null hypothesis ± results lie in this area Do not reject hypothesis ± stat results fail to reject the null hypothesis 3.Rejection and Non Rejection Regions Possible statistical outcomes 1.

Rejection and Non Rejection Regions Rejection Region Rejection Region Non Rejection Region µ = 40 oz Critical Value Critical Value .

One-tailed Tests H 0 : Q ! 40 Ha : Q Rejection Region H0 : Q ! 40 Ha : Q " 40 Rejection Region 40 Non Rejection Region Q = 40 oz Non Rejection Region Q = 40 oz Critical Value Critical Value .

Two-tailed Tests Ho : Q ! 40 Ha : Q { 40 Rejection Region Rejection Region Non Rejection Region = 12 oz Critical Values .

Type I and Type II Errors Type I Error Committed by rejecting a true null hypothesis If the null hypothesis is true. any mean that falls in a rejection region will be a type I error The probability of committing a Type I error is called . the level of significance Type II Error Committed when a researcher fails to reject a false null hypothesis The probability of committing a Type II error is called .

Decision Table for Hypothesis Testing Null True Fail to reject null Null False Type II error .

F Correct Decision Correct Decision Type I error .

E Reject null .

Testing a Hypotheses About a Population Mean Using the z Statistic ( Known) The hypothesized mean µ that we are testing is a benchmark The value of µ does not come from a sample The test statistic compares the sample mean x with the hypothesized mean µ The difference between x and µ is divided by the standard error of the mean (denoted x) The test statistic is x±µ z= / n .

645.Testing a Hypotheses About a Population Mean Using the z Statistic ( Known) Testing the Hypothesis Task 1: State the hypotheses For example. Reject H0 if z > 1. otherwise do not reject H0 . H0: µ < 216 mm Ha: µ > 216 mm Task 2: Test For example.05 for the right-tail area. for = .

we reject H0 and conclude Ha .Testing a Hypotheses About a Population Mean Using the z Statistic ( Known) Testing the Hypothesis Task 3: Take Statistical Action x±Q z= W/ n Task 4: Determine the Business Implication If the test statistic falls in the rejection region as defined by the critical value.

S. A sample of 112 CPAs produced a mean salary of $78. An accounting researcher would like to test whether this average has changed over the years. found that their average salary was $74. done 10 years ago.914. of CPAs in the U. Assume that the population standard deviation of salaries.695. W = $14.Testing a Hypotheses About a Population Mean Using the z Statistic ( Known) Example: A survey. .530.

96 Step 4: Establish the decision rule Reject H0 if the test statistic < -1.96 or if test statistic > + 1.914 Step 2: Test X Q z! W/ n Step 3: Specify the Type I error rate .96 .Testing a Hypotheses About a Population Mean Using the z Statistic ( Known) Step 1: Hypothesize H 0 : Q ! $74.914 H a : Q { $74.E = 0.05 zE/2 = s1.

914 14. W = $14. hypothesized Q = $74.914 Also.695 74. z! 78.530 / 112 ! 2.75 .Testing a Hypotheses About a Population Mean Using the z Statistic ( Known) Step 5: Gather sample datax-bar = $78. n = 112.530 Step 6: Compute the test statistic.695.

Testing a Hypotheses About a Population Mean Using the z Statistic ( Known) Step 7: Reach a statistical conclusion Since z = 2. based on the evidence gathered.914 as the true average salary for CPAs. the researcher has enough evidence to reject the figure of $74.96.75 > 1. it may suggest that the average has increased over the 10-year period. In addition. Step 8: Business decision Statistically. . reject H0.

we split the risk of Type I error by putting /2 in each tail.05 . for = . For example.Testing a Hypotheses About a Population Mean Using the z Statistic ( Known) Testing the Hypothesis For a two-tailed test.

05) is exactly equivalent to asking whether the 95% confidence interval for the mean includes the hypothesized mean If the confidence interval includes the hypothesized mean. then we cannot reject the null hypothesis .Testing a Hypotheses About a Population Mean Using the z Statistic ( Known) Analogy to Confidence Intervals A two-tailed hypothesis test at the 5% level of significance ( = .

Using p value to Test Hypotheses p value ± another way to reach statistical conclusion in hypothesis testing No preset value of is given in the p value method p value defines the smallest value of for which the null hypothesis can be ejected p-value < E reject H0 p-value u E do not reject H0 For two tailed test. is split to determine the critical value of the test statistic The p value is then compared z or /2 for two tailed tests to determine statistical significance .

Using p value to Test Hypotheses .

Critical Value Method to Test Hypotheses The critical value method determines the critical mean value required for z to be in the rejection region and uses it to test the hypotheses. xc Q zc ! W n .

530 ! 74.Critical Value Method to Test Hypotheses For the previous example.223 and upper xc ! 77.914 s1.914 s 2. xc 74.605 .530 112 or 14.691 xc ! 74.96 ! 14.914 s1.96 112 lower xc ! 72.

the test statistic follows the Student¶s t distribution with n = n ± 1 degrees of freedom. The test statistic is x±Q t= s/ n .Testing a Hypotheses About a Population Mean Using the t Statistic ( unknown) Using Student¶s t When the population standard deviation s is unknown and the population may be assumed normal.

714 or t < -1. otherwise do not reject H0 .10 for a two-tailed area. for = . H0: µ = 142 H1: µ 142 Task 2: Test For example.Testing a Hypotheses About a Population Mean Using the t Statistic ( unknown) Testing a Hypothesis Task 1: State the hypotheses For example.714. Reject H0 if t > 1.

we reject H0 and conclude Ha .Testing a Hypotheses About a Population Mean Using the t Statistic ( unknown) Testing a Hypothesis Task 3: Calculate the test statistic x±Q tcalc = s/ n Task 4: Make the decision If the test statistic falls in the rejection region as defined by the critical values.

then we reject the null hypothesis .Testing a Hypotheses About a Population Mean Using the t Statistic ( unknown) Confidence Intervals versus Hypothesis Test A two-tailed hypothesis test at the 10% level of significance (E = .10) is equivalent to a twosided 90% confidence interval for the mean If the confidence interval does not include the hypothesized mean.

Testing Hypotheses About a Proportion The value of p that we are testing is a benchmark such as past experience. or a product specification The value of p does not come from a sample Critical Value The test statistic is compared with a critical value from a table The critical value shows the range of values for the test statistic that would be expected by chance if the H0 were true . an industry standard.

13 H1: p < .05 for a left-tail area. reject H0 if z < -1.Testing Hypotheses About a Proportion Steps in Testing a Proportion Task 1: State the hypotheses For example.13 Task 2: Specify the decision rule For example.12 . otherwise do not reject H0 Figure 9.645. H0: p > . for = .

14 . For example.Testing Hypotheses About a Proportion Steps in Testing a Proportion For a two-tailed test.05 Figure 9. for = . we split the risk of type I error by putting /2 in each tail.

p) > 5 Task 3: Calculate the test statistic 3: p(1-p) (1p hat ± p where Wp = z= n Wp Task 4: Make the decision If test statistic falls in the rejection region as defined by the critical value. check the normality assumption: np > 5 and n(1.Testing Hypotheses About a Proportion Steps in Testing a Proportion Now. we reject H0 and conclude Ha .

we reject H0 if p-value < .Testing Hypotheses About a Proportion Using the p-Value The p-value is the probability of the sample result (or one more extreme) assuming that H0 is true The p-value can be obtained using Excel¶s cumulative standard normal function = NORMSDIST(z) The p-value can also be obtained from Appendix A-5 Using the p-value.

975. . to compare the p-value to a. So.975) = 2 x .1. if our test statistic was -1. first combine the p-values in the two tail areas For example. then 2 x P(z < .04826 At E = . we divide the risk into equal tails.05. we would reject H0 since p-value = .02413 = .04826 < E.Testing Hypotheses About a Proportion Calculating a p-Value for a Two-Tailed Test For a two-tailed test.

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