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Chapter Eight
Hypothesis Testing

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McGraw-Hill/Irwin

Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

Hypothesis Testing
8.1

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Null and Alternative Hypotheses and Errors in

Testing
8.2 Large Sample Tests about a Mean:
Testing a One-Sided Alternative Hypothesis
8.3 Large Sample Tests about a Mean:
Testing a Two-Sided Alternative Hypothesis
8.4 Small Sample Tests about a Population Mean
8.5 Hypothesis Tests about a Population Proportion
8.6* Type II Error Probabilities and Sample Size
Determination
8.7* The Chi-Square Distribution
8.8* Statistical Inference for a Population Variance

8.1 Null and Alternative

Hypotheses
The null hypothesis, denoted H0, is a statement of
the basic proposition being tested. The statement
generally represents the status quo and is not
rejected unless there is convincing sample evidence
that it is false.

The alternative or research hypothesis,

denoted Ha, is an alternative (to the null
hypothesis) statement that will be accepted
only if there is convincing sample evidence
that it is true.
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Types of Hypothesis
One-Sided, Greater Than
H0: 50

Ha: > 50

(Trash Bag)

Ha: < 19.5

(Accounts Receivable)

One-Sided, Less Than

H0: 19.5

Two-Sided, Not Equal To

H0: = 4.5

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Ha: 4.5

(Camshaft)

Type I and Type II Errors

Type I Error
Type II Error

Rejecting H0 when it is true

Failing to reject H0 when it is false

State of Nature
Conclusion
Reject H0
Do not Reject H0
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H0 True

H0 False

Type I
Error
Correct
Decision

Correct
Decision
Type II
Error

8.2 Large Sample Tests about a Mean:

Testing a One-Sided Alternative
Hypothesis
If the sampled population is normal or if n is large, we can reject
H0: = 0 at the level of significance (probability of Type I
error equal to ) if and only if the appropriate rejection point
condition holds.
Test Statistic

x- 0
z=
/ n

Alternative
:
H :
H

a
a

Reject H0 if:
z z
0
0

z z

If unknown and n is large, estimate by s.

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Example: One-Sided, Greater

Than
Testing H0: 50 versus
Trash Bag
Ha: > 50 for = 0.05 and = 0.01

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Example: The p-Value for Greater

Than
Testing H0: 50 vs Ha: > 50
using rejection points and pvalue.
Trash Bag

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The p-value or the observed

level of significance is the
probability of observing a value
of the test statistic greater than or
equal to z when H0 is true. It
measures the weight of the
evidence against the null
hypothesis and is also the
smallest value of for which we
can reject H0.

Example: One-Sided, Less Than

Testing H0: 19.5 versus
Accts Rec
Ha: < 19.5 for = 0.01

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Large Sample Tests about Mean: pValues

If the sampled population is normal or if n is large, we can
reject H0: = 0 at the level of significance (probability
of Type I error equal to ) if and only if the appropriate
rejection point condition holds or, equivalently, if the
corresponding p-value is less than .
Alternative
H a : 0
H a : 0
H a : 0

Reject H0 if:
z z
z z
z z / 2 , that is

p-Value
Area under std normal curve right of z
Area under std normal curve left of z
Twice area under std normal curve right of z

z z / 2 or z z / 2
Test Statistic
x- 0
If unknown and n is large, estimate by s.
z=
/ n
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Five Steps of Hypothesis Testing

1. Determine null and alternative hypotheses
2. Specify level of significance (probability of Type I
error)
3. Select the test statistic that will be used. Collect the
sample data and compute the value of the test
statistic.
4. Use the value of the test statistic to make a
decision using a rejection point or a p-value.
5. Interpret statistical result in (real-world) managerial
terms

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Example: Two-Sided, Not Equal

to
Testing H0: = 4.5 versus
Ha: 4.5 for = 0.05

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Camshaft

8.5 Small Sample Tests about a

Population Mean
If the sampled population is normal, we can reject H0: =
0 at the level of significance (probability of Type I error
equal to ) if and only if the appropriate rejection point
condition holds or, equivalently, if the corresponding pvalue is less than .
p-Value
Alternative Reject H0 if:
Area under t distribution right of t
t t
H a : 0
Area under t distribution left of t
H a : 0
t t
H a : 0
Twice area under t distribution right of t
t t , that is
/2

t t / 2 or t t / 2

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Test Statistic
x- 0
t, t/2 and p-values are based on n 1 degrees of
t=
s/ n
freedom.

Example: Small Sample Test about

a Mean
Testing H0: 18.8 vs Ha: <
18.8 using rejection points and
p-value.
Credit Card Interest Rates

x- 0
s/ n
16.827 - 18.8
=
4.97
1.538 / 15

t=

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8.5 Hypothesis Tests about a

Population Proportion
If the sample size n is large, we can reject H0: p = p0 at the
level of significance (probability of Type I error equal to
) if and only if the appropriate rejection point condition
holds or, equivalently, if the corresponding p-value is less
than .
p-Value
Alternative Reject H0 if:
Area under std normal curve right of z
z z
H a : p p0
Area under std normal curve left of z
z z
H a : p p0
H a : p p0
Twice area under std normal curve right of z
z z , that is
/2

z z / 2 or z z / 2
Test Statistic
z=
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p - p 0
p0 (1 p0 )
n

Example: Hypothesis Tests about a

Proportion
Testing H0: p 0.70 versus Ha: p > 0.70
using rejection points and p-value.
Using Phantol, proportion of patients with reduced severity and
duration of viral infections.

z=

p - p 0
=
p0 (1 p0 )
n

0.77 - 0.70
2.65
0.70(1 0.70)
300

z 2.65 z.05 1.645, z 2.65 z.01 2.33, z 2.65 z.001 3.09

p - value P(z 2.65) (0.5 0.4960) 0.004
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*8.6 Type II Error Probabilities

Testing H0: vs Ha: < 3
(Amount of Coffee in 3-Pound Can)
, Probability of Type II Error,
Given = 2.995, = 0.05.
x- 0

z.05
/ n

= P

P x 0 z.05

0.0147

P x 3 1.645

35

P x 2.9959126| 2.995
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How Type II Error Varies Against

Alternatives
Testing H0: vs Ha: < 3
(Amount of Coffee in 3-Pound Can)
, Probability of Type II Error
( = 0.05)
Given = 2.995,
Given = 2.990,
Given = 2.985,

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*8.7 The Chi-Square Distribution

The chi-square distribution depends on the number of

degrees of freedom.
2
A chi-square point is the point under a chi-square
distribution that gives right-hand tail area .

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*8.8 Statistical Inference for

Population Variance
If s2 is the variance of a random sample of n measurements
from a normal population with variance 2, then the
sampling distribution of the statistic (n - 1) s2 / 2 is a chisquare distribution with (n 1) degrees of freedom and
100(1-)% confidence
interval for 2

Test of H0: 2 = 20
Test Statistic

(n 1) s 2 (n 1) s 2

, 2
2
/ 2 1 / 2

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(n 1) s 2

02
2

Reject H0 in favor of
H a : 2 02 if 2 2
H a : 2 02 if 2 12
H a : 2 02 if 2 2 or 2 12

All chi-square points are based

on n 1 degrees of freedom

Summary: Selecting an Appropriate

Test Statistic for a Test about a
Population Mean

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Hypothesis Testing
Summary
:8.1 Null and Alternative Hypotheses and Errors in

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Testing
8.2 Large Sample Tests about a Mean:
Testing a One-Sided Alternative Hypothesis
8.3 Large Sample Tests about a Mean:
Testing a Two-Sided Alternative Hypothesis
8.4 Small Sample Tests about a Population Mean
8.5 Hypothesis Tests about a Population Proportion
8.6* Type II Error Probabilities and Sample Size
Determination
8.7* The Chi-Square Distribution
8.8* Statistical Inference for a Population Variance