Introduction to Quantitative Analysis Assignment #3

Parinya Showanasai:4949613

P318
9.46 Children in United States account directly for $36 billion in sales annually.
When their indirect influence over product decisions from stereos to vacations is
considered, the total economic spending impacted by children in the United
States is $290 billion. It is estimated that by age 10, a child makes an average
of over five trips a week to a store (M.E.Goldberg, G. J, Gorn, L.A. Peracchio, and
G. Bamossy, “Understanding Material Among Youth,” Journal of Consumer
Psychology, 2003, 13(3);278-288). Suppose that you want to prove that children
in your city average more than five trips a week to a store. Let µ represent the
population mean number of times children in your city make trips to store.

a. State the null and alternative hypothesis.

b. Explain in the context above scenario the meaning of type I and Type II
errors
c. Suppose that you carry out a study in the city in which you live. Based on
past studies, you assume that the standard deviation of the number of
trips to the store is 1.6. you take a sample of 100 children and find that
the mean numbers of trips to the store is 5.47. At the 0.01 level of
significance, is there evidence that the population mean number of trips
to the store is greater than 5 per week?
d. Interpret the meaning of the p-value in (c)

a) The null hypothesis is that the population mean has not changed, the
average number of children going to the store is 5 times a week.
Ho: µ ≤ 5
The alternative hypothesis is that the population mean is not correct, using the
samples in city, the population means should be more than 5 times a week
Ha: µ > 5

b) In this study, the conclusion of

the study from these samples can
be wrong in two ways:

1- The null hypothesis is rejected

when it is true (Type I error). This
could happen when the samples
that we surveyed might be in an
extreme group (people who go
shopping too often) that does not
represent the whole population, this
will make the sample mean to fall
outside an acceptable area. The
error also depends on the
significant level specified.
Probability of this error equals to
significance level determined which
is alpha (α). Im this case we reject
null hypothesis when it is true
2- the samples in the survey do not represent population, and they are in
another extreme group who go to the store less than 5 times a week. (beta β)
c) The study has a sample size of 100, sample standard deviation is 1.6 and the
mean 5.47 is obtained. The question is, at 0.01 level of significance, if this
sample represents the population or in other word, if children in this area go to
the store more often than the average.


p-value = P[ p = 5.47 | p ≤ 5.0, n = 100]
Using normal distribution and Z test statistics:
Determine the rejection region:
Z =( X -µ)/(σ/ √n) Z = (5.47-5)/(1.6/√100) = 0.47/0.16 = 2.9375

Assuming a normal
distribution, the p-value can be
calculated using excel

To calculate using Z-score

=NORMSINV(0.01) =
-2.32634
=NORMSDIST(z-score) =
0.998345
Or
1- 0.998345 = 0.001654 = p-
value

The p-value, 0.001654, Ho has to be rejected

As the p-value is lower than the significant level, it means that observed level of
significance is lower than actual level of significance.
There is sufficient evidence that it is possible that the population mean might
not be 5 or less, the statistics of the samples show 1) the p-value is less than
0.01 and 2) Z value of the test is greater than Z value of an upper
bound(Z=2.9375 > Z =2.33)
P324: 9.59
In the New York State, saving banks are permitted to sell a form of life insurance
called Savings Bank Life Insurance (SBLI). The approval process consists of
underwriting , which includes a review of the application, a medical information
bureau check, possible requests for additional medical information and medical
exams, and a policy compilation stage where the policy pages are generated
and sent to the bank for delivery. The ability to deliver approved policies to
customers in a timely manner is a critical to the profitability of this service.
During a period of one month, a random sample of 27 approved policies is
selected INSURANCE and the total processing time in days recorded:
a) In the past , the mean processing time averaged 45 days. At the 0.05
level of significance, is there evidence that the mean processing time
has changed from 45 days?
b) What assumption about the population distribution is needed in (a)
c) Do you think that the assumption needed in (b) is seriously violated?
Explain.
d) ???
e) Suppose that you expect that the mean processing time has increased.
Formulate a null and alternative hypothesis and give the p-value for this
test, using SPSS output
f) Suppose that you expect that the mean processing time has decreased.
Formulate a null and alternative hypothesis and give the p-value for this
test, using SPSS output

a) In the past , the mean processing time averaged 45 days. At the 0.05
level of significance, is there evidence that the mean processing time has
changed from 45 days

By running SPSS testing one

sample statistics, using the
median = 45, the test
shows that the mean of the
samples is not different
from the value 45. (two-
tailed test significance level
at 95%) and the null
hypothesis:
Ho: xbar ≠ 45
Cannot be rejected.

b) What assumption about the population distribution is needed in (a)

The assumption of normality is usually used in analysis.

c) Do you think that the assumption needed in (b) is seriously violated?

Explain.
The assumption of normality is tested and shown that the distribution of
samples is acceptable.

d) ???
e) Suppose that you expect that the mean processing time has increased.
Formulate a null and alternative hypothesis and give the p-value for this
test, using SPSS output
If we suspect that the mean of processing time has decreased, therefore the
null and alternative hypothesis will be:

Ho: X ≤ 45
Ha: X > 45

SPSS provides a one simple t-

test of the samples comparing
to the value 45. p-value can be
calculated from the value
labeled “Sig (2-tailed)”. This
value is a area under the
distribution curve started from
the left. The sign of t-value is
minus which means that the
value is on the left of the
mean.

The p-value equals to 0.821 (starts from the right of the curve to the left).
Therefore the null hypothesis cannot be rejected as p-value is much greater
than confidence level (0.05)

Also, SPSS shows that the upper level

equals to 45+7.19 = 52.19 .The value
46.89 is in this range and the null
hypothesis cannot be rejected
f) Suppose that you expect that the mean processing time has decreased.
Formulate a null and alternative hypothesis and give the p-value for this test,
using SPSS output
If we suspect that the mean of processing time has decreased, therefore the
null and alternative hypothesis will be:
Ho: X ≥ 45
Ha: X < 45

The p-value equals to 0.179 (starts from the left to the right). Therefore the null
hypothesis cannot be rejected as p-value is much greater than confidence level
(0.05)

Also, SPSS shows that the lower level equals to 45-9.41 = 33.59 .The value
43.89 is greater than a lower bound and the null hypothesis cannot be rejected.