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Quantitative Methods
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Assignment on Hypothesis Testing- Two-Sample
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“If I fall ill, who is to blame?”
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Under the guidance of:
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Dr. Sunil Bhardwaj
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Submitted By:
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Surya Prakash Patnaik
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 Quantitative Methods Hypothesis

Acknowledgement:

The sole credit for the completion of this project within the stipulated time goes to our esteemed
Professor, Dr. Sunil Bahrdwaj, whose ideas on the topic and method of teaching was extremely helpful in
bringing about a thorough understanding of the subject. I am also thankful to him for providing us with ample
time so that I was able to do justice to this assignment.

I will also like to take this opportunity to thank my friends and the students of IBS, Hyderabad for
participating in the survey without even knowing its true purpose.

Two-Sample Page 2
 Quantitative Methods Hypothesis

Introduction
Statistical Decisions: Very often in practice we are called upon by the requirements of our job to make decisions about a
population on the basis of sample information only. Such decisions are called Statistical decisions. For example, we may
wish to decide on the basis of sample data whether a new serum is effective in curing a disease, whether one educational
procedure is better than another, or whether a given coin is loaded.

In attempting to reach decisions, it is useful to make assumptions or should I say “calculated guesses” about the
populations involved. Such assumptions which may or may not be true are called statistical hypotheses and in
general are the statements about the probability distributions in populations.

For example, if we want to decide if a coin is loaded, we formulate the hypothesis that the coin is fair, i.e., p =
0.5, where p is the probability of heads. Such hypothesis is called as null hypothesis and is denoted by H0. Any
Hypothesis that differs from the given Hypothesis is called as Alternate Hypothesis and is denoted by H1.

In the corporate world, managers have to make decisions regularly, and this decision may not always be backed
by concrete data. In such cases, assumptions regarding statistical significance need to be made. Hypothesis
testing tells us exactly how such a decision can be made if only a little related data is known.

Steps involved:

1. Specify the null and alternate hypothesis

2. Determined if test will be two tailed or on tailed
3. Specify the significance level.
4. Find the proportion or probability value.
5. Find the observed and tabulated value of Z and compare them.
6. Accept or reject the null hypothesis accordingly

Assumptions:

1. The parameters of the base data is genuine enough to be considered as the population parameters.
2. The students of both the batches will not come to know about the treachery I have committed (that
means I will live a long life) by publishing the results of the survey.
3. The report will be used as evidence to sue the culprits or smokers if and when I fall ill due to passive
smoking.

Two-Sample Page 3
 Quantitative Methods Hypothesis

Hypothesis Statement:
With the help of Hypothesis Testing, I am going to conclude “if the students of 2009 batch and 2010 batch of
IBS Hyderabad (Regular MBA program) are equally responsible for the expected degradation of my health in
the near future”. For this purpose, we will test the acceptance or rejection of the hypothesis:

H0: (p1-p2) = 0 or, equivalently, (p1=p2)

H1: (p1-p2) ≠ 0 or, equivalently, (p1≠p2)

The hypothesis will be tested at 1% significance level.

Why the statement was selected:

From my childhood, I have always been somewhat allergic to cigarette smoke. For that purpose, I have always
tried to be as far away from a cigarette smoking crowd as I can. After coming to IBS Hyderabad, I realized that
it was time I geared up to face the challenges that lay ahead. By this I not only mean the academic ones, but also
some others. Here, I saw that many students have work experience, and the only experience that they had
picked from their work was smoking. But I was relieved to know that students are not allowed to smoke in the
hostel premises. Finally, a ray of hope. But soon I realized how foolish I had been to believe that this would
stop the students. I mean, when has a MBA student shown any respect for rules and regulations. Sources here,
whose authenticity is widely known, have confirmed that about 70% of the students here are smokers and that
includes girls as well. And when you know that passive smoking is actually more dangerous than active
smoking the rest 30% are either on their way to becoming a smoker or becoming extinct. Since I don’t smoke
(not because of ethical reasons but because of health reasons), my chances of becoming the latter are quite high.
For the purpose of the testing I had to take oral survey of a total 100 students both from 2009 and 2010 batch.
To highlight the gravity of the situation I will give the outline of my hostel wing on my floor and from these
facts, and show the perils that I face on a regular basis when I walk from my room to the lift. The diagram in the
next page shows the path or the way that I follow to reach the lift or even the water purifier for that matter.
Again this data shows what a non-smoker faces in a single wing. The gravity of this catastrophe gets highly
magnified when one takes into account the hostel as a whole.

Two-Sample Page 4
 This
Quantitative Methods Hypothesis
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WR=
Testing of Hypothesis: washroom
To test this hypothesis, I randomly selected and questioned 50 students from 2009 batch and 50 students from
2010 batch.

The Question: Do you smoke regularly inside the Hostel Premises?

From the oral survey (the survey could not be taken on a written basis as at the present moment, no student is in
any way inclined to get expelled from the hostel), the requisite data was collected and analyzed to find the
probability of students who had zero regards to rules and regulations from both the years. The findings of the
survey showed that:

For the population of 2009 batch:

No. of students sampled = n1 = 50

No. of students who smoke within campus = 10

No. of students who do not smoke within the campus = 40

Two-Sample Page 5
 Quantitative Methods Hypothesis
Probability of students who smoke = ṕ1 = 10/50 = 1/5 = 0.20

Probability of students who don’t smoke = q́ 1 = 40/50 = 4/5 = 0.80

For the population of 2010 batch:

No. of students sampled = n2 = 50

No. of students who smoke within campus = 15

No. of students who do not smoke within the campus = 35

Probability of students who smoke = ṕ2 = 15/50 = 1.5/5 = 0.30

Probability of students who don’t smoke = q́ 2 = 35/50 = 3.5/5 = 0.70

Here we hypothesize that there is no difference between the two population proportions, so our best estimate of
the overall population proportion of smokers in hostel is the combined proportion of smokers in hostel in both
the sanples.
Best
estimate of no. of smokers no. of smokers
+
the overall = in 2009 batch in 2010 batch
^p=¿ ṕ
proportion total size of both samples
of smokers n1 1 + n2
2
in hotel
ṕ / n + n
1 2

=50(0.20) + 50(0.30) / 50 +50

=10 + 15 / 100 =25 / 100 =0.25

And q^ = 1 - ^p = 1 – 0.25 = 0.75

And the estimated standard error of the difference between the two population proportions using combined
estimates from both samples will be:

σ^ ṕ1 + ṕ2 = √ {(^p q^ /n1) + (^p q^ /n2)}

= √ {(0.25.0.75 / 50) + (0.25.0.75 / 50)}

= √{(0.00375) + (0.00375)}

= 0.087

Two-Sample Page 6
 Quantitative Methods Hypothesis

Zcalculated = ( ṕ1 - ṕ2) + (p1- p2) / (σ^ ṕ1 + ṕ2)

= (0.20-0.30) + (0) / 0.087

= - 0.10 / 0.087

= - 1.15

It is also known that, the significance level or α is 1% or 0.01.

Critical Value Critical Value

Z = -2.58 Z = + 2.58

0.005 of 0.005 of
the area the area

Calculated Value k
Z = - 1.15 (falls in the acceptance region)

Fig 2- Two tailed Hypothesis test

So the tabulated value of Ztabulated from the z-table at 0.01 significance level is (for 1- 0.01/2 = 0.4950) +¿´ ¿
2.58, as this is a two-tailed test.

So, we can clearly see that the value of Zcalculated falls within the acceptance region as

-2.58 < Zcalculated > 2.58.

▲ Therefore, I conclude that H0 is to be accepted, or I can say that the students of 2009 batch and 2010 batch
are equally responsible for the possible health hazard that I may face in future.

Two-Sample Page 7
 Quantitative Methods Hypothesis

Conclusion:
With the help of this Hypothesis test it was determined with a significance level of 1% that the number of
students of 2010 batch is nearly or most appropriately equal to the number of students of 2009 batch who smoke
inside the hostel premises and don’t give a damn to rules and regulations. But I can’t complain as they are all
my classmates and seniors and they are good in many other ways. With the help of this survey and Hypothesis
test I was able to determine how and to which extent, the students of IBS, Hyderabad will determine if I will
live a healthy long life or not.

Not only in above mentioned case, but also in a thousand other managerial decisions, the use of hypothesis
testing is ambivalent.

 Hypothesis testing by using samples helps us to save time and money by eliminating the need for
studying the whole population.
 It helps businesses to make important decisions regarding the future by anlysing the present and
historical data at the desired confidence level.
 The suggested result, i.e., acceptance or rejection of the hypothesis is quite accurate depending
on the significance level.
 Hypothesis testing also helps to analyze the present scenario and finds the relation between data
sets that otherwise remain hidden.
 With the help of Hypothesis testing any organization can determine the effect f any change
introduced recently by comparing the data regarding the before and after scenario.
 The needs of making a hypothesis test are many, you name it and you get it.

Two-Sample Page 8