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MR Hypothesis Testing 1

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MR Hypothesis Testing 1

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valechany9113
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Steps in Hypothesis Testing

1. State the null hypothesis, H0 and the alternative hypothesis, H1


2. Choose the level of significance, , and the sample size.
What if we test a hypothesis at 5 % level of significance? This means that we will reject the null hypothesis
if the difference between the sample statistics and the hypothesized population parameters so large that it or
a larger difference would occur, on the average, only five or fewer times in every 100 samples when
hypothesized population parameters is correct.

region where there is no diff b/w


sample statistics and
hypothesized population
parameter

.025 .95 .025

3
Reject H0 H0 Reject H0
Selecting a significance level : Generally at .01,.05, .10 or 99,95,90%: The higher the significance level we use for testing a hypothesis,
the higher the probability of rejecting a null hypothesis when it is true.

.005 .99 .005

Significance level of .01


μ H0
X
.05 .90 .05

Significance level of .10


μ H0

X
.25 .50 .25

Significance level of .50


μ H0
X
Steps in Hypothesis Testing

3. Determine the appropriate test statistic and sampling


distribution: t or z test
4. Determine the critical values that divide the rejection and
nonrejection regions
- In two tail – we have two rejection regions, it is appropriate
when null hypothesis is μ = μH0 and the alternate
hypothesis μ = μH0 .
Let the mean life of bulb μ = μHo = 1000 (NH)
μH1 = 1000 (AH)

If sample mean falls in this region


, we would accept null hypothesis

μ H0

If sample mean falls in either of


these regions , we would reject
null hypothesis
One tail test- A wholesaler that buys bulb would not accept if life is less than 1000.

Ho: μ = 1000 (NH)


If sample mean falls in this region
H1: μ < 1000 (AH) , we would accept null hypothesis

If sample mean falls in this region


, we would reject null hypothesis

μ H0

Left tail or lower tail test


One tail test- Monthly expenditure should be kept at 100 on an average.
Ho: μ = 100 (NH)
If sample mean falls in this
H1: μ > 100 (AH) region , we would accept null If sample mean falls in this
hypothesis region , we reject null
hypothesis

μ H0
Steps in Hypothesis Testing
(continued)

5. Collect data and compute the value of the test


statistic
6. Make the statistical decision and state the managerial
conclusion. If the test statistic falls into the non
rejection region, do not reject the null hypothesis
H0. If the test statistic falls into the rejection region,
reject the null hypothesis. Express the managerial
conclusion in the context of the problem
406-1. How many standard errors around the hypothesized value should we use to be 99.44 percent certain that we
accept the hypothesis when it is true?

8
Solution:

To leave a probability of 1 – 0.9944 = 0.0056 in the tails, the


absolute value of z must be greater than or equal to 2.77, so the
interval should be ±2.77 standard errors about the hypothesized
value.

9
414-2. Martha Inman, a highway safety engineer, decides to test the
load-bearing capacity of a bridge that is 20 years old. Considerable
data are available from similar tests on the same type of bridge.
Which is appropriate, a one-tailed or a two-tailed test? If the
minimum load-bearing capacity of this bridge must be 10 tons,
what are the null and alternative hypotheses?

10
Solution:

The engineer would be interested in whether a bridge of this age


could withstand minimum load bearing capacities necessary for
safety purposes. She therefore wants its capacity to be above a certain
minimum level, so a one tailed test (specifically an upper-tailed or
right-tailed test) would be used. The hypotheses are

Ho: µ = 10 tons H1: µ > 10 tons

11
Hypothesis Testing Example
Test the claim that the true mean # of TV sets in Indian
homes is equal to 3.
(Assume σ = 0.8)

1. State the appropriate null and alternative hypotheses


 H0: μ = 3 H1: μ ≠ 3 (This is a two-tail test)
2. Specify the desired level of significance and the sample
size
 Suppose that  = 0.05 and n = 100 are chosen for this

test
Hypothesis Testing Example
(continued)
3. Determine the appropriate technique
 σ is assumed known so this is a Z test.

4. Determine the critical values


 For  = 0.05 the critical Z values are ±1.96

5. Collect the data and compute the test statistic


 Suppose the sample results are

n = 100, X = 2.84 (σ = 0.8 is assumed known)


So the test statistic is:
X  μ 2.84  3  .16
Z STAT     2.0
σ 0.8 .08
n 100
Hypothesis Testing Example
(continued)-+-
• 6. Is the test statistic in the rejection region?

/2 = 0.025 /2 = 0.025

Reject H0 if Reject H0 Do not reject H0 Reject H0


ZSTAT < -1.96 or -Zα/2 = -1.96 0 +Zα/2 = +1.96
ZSTAT > 1.96;
otherwise do not
reject H0 Here, ZSTAT = -2.0 < -1.96, so the test
statistic is in the rejection region
Hypothesis Testing Example
(continued)
6 (continued). Reach a decision and interpret the result

 = 0.05/2  = 0.05/2

Reject H0 Do not reject H0 Reject H0

-Zα/2 = -1.96 0 +Zα/2= +1.96


-2.0
Since ZSTAT = -2.0 < -1.96, reject the null hypothesis and conclude there
is sufficient evidence that the mean number of TVs in Indian homes is not
equal to 3
Ex: Mean thickness of aluminum sheet (μ) =.04, σ = 0.004
n= 100, X = 0.0408,

X μ
ZSTAT 
σ
n

Z = (0.0408-0.04)/0.0004 = 2
0.04+- (2)* (0.0004)
=0.0392 and 0.0408

Reject H0 Reject H0
Reject company’s .04

claim that population


mean is 0.04
.0392 .0408
Sample mean
Ex: Mean thickness of aluminum sheet (μ) =.04, σ = 0.004
n= 100, X = 0.0408,

X μ
ZSTAT 
σ
n

Z = (0.0408-0.04)/0.0004 = 2
0.04+- (2)* (0.0004)
 = 2.25  = 2.25
=0.0392 and 0.0408 95.5

Reject H0 Reject H0
Reject company’s .04

claim that population


mean is 0.04
.0392 .0408
Sample mean
Ex: Axel strength is 80000 pounds per square inch
μ H0 = 80000 (Hypothesized value of population mean)
σ = 4000
n=100
X = 79600
Significance level=.05
Ex: Axel strength is 80000 pounds per square inch
μ H0 = 80000 (Hypothesized value of population mean)
σ = 4000
n=100
X = 79600
Significance level=.05
Soltn: μ= 80000 (NH)
μ=80000 (AH)
.025 .025
.95
σ
σX =
n Reject H0 Reject H0
80000

= 400
=80000+-1.96*400 79216 79600 80784
(79216 to 80784) -1.96 -1 +1.96
Sample mean
Z = (79600-80000)/400 = -1
Accept (Do not reject ) the null hypothesis.
Ex: Drug dose of 100cc, excess dose is not harmful but insufficient dose does not produce results.

μ H0 = 100(Hypothesized value of population mean)


σ=2
n=50
X = 99.75
Significance level=.10

Soltn: μ= 100 (NH) .10


μ< 100 (AH) .40 .50
σ
σX =
n Reject H0 100
=2/7.07
= .2829 -.88
100+-1.28*.2829 -1.28
100.36 and 99.63

Z = (99.75-100)/.2829= -.88 Look in z table where area is .40


So, accept (Do not reject ) null hypothesis.

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