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Directional
H0: µ ≥ $10 H1: µ < $10 ( µ is at least $10, or it is
less)
( µ is at no more than
H0: µ ≤ $10 H1: µ > $10
$10, or it is more)
Directional and Non-directional Testing
Directional and Non-directional Testing
Errors in Hypothesis Testing
Correct, (1 – β)
Reject Null Hypothesis Type I Error, α
Power of the test
Power of
β α the test
BASIC PROCEDURES IN HYPOTHESIS TESTING
𝑥ഥ − 𝜇0 𝑠
𝑡= ; df = n – 1 and 𝑠𝑥ҧ = and 𝜇0 is from H0
𝑠𝑥ഥ 𝑛
(σ unknown).
𝑝 − 𝜋0 𝜋0 (1 − 𝜋0 )
𝑧= where 𝜎𝑝 = and 𝜋0 is from H0.
𝜎𝑝 𝑛
A researcher wants to carry out a hypothesis test
involving the mean for a sample of size n = 18. She
does not know the true value of the population
standard deviation, but is reasonably sure that the
underlying population is approximately normally
distributed. Should she use a z-test or a t-test in
carrying out the analysis? Why?
A research firm claims that 62% of women in the
40-49 age group save in a 401(k) or individual
retirement account. If we wished to test whether this
percentage could be the same for women in this
age group living in New York City and selected a
random sample of 300 such individuals from New
York, what would be the null and alternative
hypothesis? Would the test be a z-test or a t-test?
Why?
TESTING A MEAN, σ KNOWN
Two-tail testing
One-tail testing
Two-tailed test, σ Known
A quality-assurance inspector periodically examines
the output of a machine to determine whether it is
properly adjusted. When set properly, the machine
produces nails having a mean length of 2.000
inches, with a standard deviation of 0.070 inches.
For a sample of 35 nails, the mean length is 2.025
inches. Using the 0.01 level of significance, examine
the null hypothesis that the machine is adjusted
properly. Determine and interpret the p-value for
the test.
Two-tailed test, σ Known
Formulate the null and alternative hypothesis
H0: µ = 2.000 inches
H1: µ ≠ 2.000 inches
Select the significance level
α = 0.01
Select the test statistic and calculate its value.
𝑥ഥ − 𝜇0 𝑥ഥ − 𝜇0 2.025 −2.000
𝑧 = = 𝜎 = .070
𝜎𝑥ഥ
𝑛 35
z = 2.11
Two-tailed test, σ Known
Identify Critical values for the test statistic and state
the decision rule
Confidence Level z α α/2
90% 1.645 0.10 0.05
95% 1.96 0.05 0.025
98% 2.33 0.02 0.01
99% 2.58 0.01 0.005
t = 2.20
One-Tail Testing of a Mean, σ Known
𝑡 = 2.00
Two-tailed test, σ Unknown
Identify critical values for the test statistic and state
the decision rule
Fora two-tailed test at df = 30-1, α/2 = 0.025, tcrit =
±2.045
Decision Rule
RejectH0 if calculated t < -2.045 or > +2.045,
otherwise do not reject.
Two-tailed test, σ Unknown
Compare calculated and critical values and reach a
conclusion about the null hypothesis.
Calculated t= 2.00 is within the nonrejection region.
Thus, we fail to reject H0 at the 0.05 level of
significance.
Make the related business decision.
There is no reason to doubt the average of 464 miles.
One-Tail Testing of a Mean, σ Unknown
𝑡 = 2.34
One-tailed test, σ Unknown
Identify critical values for the test statistic and state
the decision rule
Fora two-tailed test at df = 20-1, α = 0.05, tcrit =
1.729
Decision Rule
Reject H0 if calculated t > 1.729, otherwise do not
reject.
Two-tailed test, σ Unknown
Compare calculated and critical values and reach a
conclusion about the null hypothesis.
Calculated t= 2.34 is beyond the critical t and falls
within the rejection region.
Thus, we reject H0 at the 0.05 level of significance.
𝑧 = 2.55
Two-tailed test for a Proportion
Identify critical values for the test statistic and state
the decision rule
Fora two-tailed test at α/2 = 0.025, zcrit = ±1.96
Decision Rule
Reject H0 if calculated z > ±1.96, otherwise do not
reject.
Two-tailed test for a Proportion
Compare calculated and critical values and reach a
conclusion about the null hypothesis.
Calculated z= 2.55 is beyond the critical z and falls
within the rejection region.
Thus, we reject H0 at the 0.05 level of significance.
𝑧 = 2.55
One-tailed test for a Proportion
Identify critical values for the test statistic and state
the decision rule
Fora two-tailed test at α = 0.05, zcrit = ±1.96
Decision Rule
Reject H0 if calculated z > ±1.96, otherwise do not
reject.
One-tailed test for a Proportion
Compare calculated and critical values and reach a
conclusion about the null hypothesis.
Calculated z= 2.55 is beyond the critical z and falls
within the rejection region.
Thus, we reject H0 at the 0.05 level of significance.