Statistics for

Business and Economics

8th Global Edition

Chapter 6

Hypothesis Tests of a Single

Population
Copyright © 2013 Pearson Education Ch. 9-1
 Chapter Goals
After completing this chapter, you should be able to:
 Formulate null and alternative hypotheses for
applications involving
 a single population mean from a normal distribution
 a single population proportion (large samples)
 the variance of a normal distribution
 Formulate a decision rule for testing a hypothesis
 Know how to use the critical value and p-value
approaches to test the null hypothesis (for both mean
and proportion problems)
 Define Type I and Type II errors and assess the power
of a test
 Use the chi-square distribution for tests of the
variance of a normal distribution
Copyright © 2013 Pearson Education Ch. 9-2
9.1
Concepts of Hypothesis Testing
 A hypothesis is a claim
(assumption) about a
population parameter:

 population mean
Example: The mean monthly cell phone bill
of this city is μ = $52
 population proportion
Example: The proportion of adults in this
city with cell phones is P = .88

Copyright © 2013 Pearson Education Ch. 9-3

 The Null Hypothesis, H0

 States the assumption (numerical) to be

tested
Example: The average number of TV sets in
U.S. Homes is equal to three ( H0 : μ  3 )

 Is always about a population parameter,

not about a sample statistic

H0 : μ  3 H0 : x  3

Copyright © 2013 Pearson Education Ch. 9-4

 The Null Hypothesis, H0
(continued)

 Begin with the assumption that the null

hypothesis is true
 Refers to the status quo
 Always contains “=” , “≤” or “” sign
 May or may not be rejected

Copyright © 2013 Pearson Education Ch. 9-5

 The Alternative Hypothesis, H1

 Is the opposite of the null hypothesis

 e.g., The average number of TV sets in U.S.
homes is not equal to 3 ( H1: μ ≠ 3 )
 Challenges the status quo
 Never contains the “=” , “≤” or “” sign
 May or may not be supported
 Is generally the hypothesis that the
researcher is trying to support

Copyright © 2013 Pearson Education Ch. 9-6

 Hypothesis Testing Process

Claim: the
population
mean age is 50.
(Null Hypothesis:
Population
H0: μ = 50 )
Now select a
random sample
Is x  20 likely if μ = 50?
If not likely, Suppose
the sample
REJECT mean age Sample
Null Hypothesis is 20: x = 20
Copyright © 2013 Pearson Education Ch. 9-7
 Reason for Rejecting H0
Sampling Distribution of X

X
20 μ = 50
If H0 is true
... then we
If it is unlikely that
reject the null
we would get a
... if in fact this were hypothesis that
sample mean of
the population mean… μ = 50.
this value ...
Copyright © 2013 Pearson Education Ch. 9-8
 Reason for Rejecting H0
Sampling Distribution of X

X
20 μ = 30 μ = 40 μ = 50
If H0 is true

Copyright © 2013 Pearson Education Ch. 9-9

 Level of Significance, 

 Defines the unlikely values of the sample

statistic if the null hypothesis is true
 Defines rejection region of the sampling
distribution
 Is designated by  , (level of significance)
 Typical values are 0.01, 0.05, or 0.10
 Is selected by the researcher at the beginning
 Provides the critical value(s) of the test

Copyright © 2013 Pearson Education Ch. 9-10

 Level of Significance
and the Rejection Region
Level of significance =  Represents
critical value
H0: μ = 3 /2 /2
H1: μ ≠ 3 Rejection
Two-tail test 0 region is
shaded
H0: μ ≤ 3 
H1: μ > 3
Upper-tail test 0

H0: μ ≥ 3

H1: μ < 3
Lower-tail test 0
Copyright © 2013 Pearson Education Ch. 9-11
 Errors in Making Decisions

 Type I Error
 Reject a true null hypothesis

 Considered a serious type of error

The probability of Type I Error is 

 Called level of significance of the test
 Set by researcher in advance

Copyright © 2013 Pearson Education Ch. 9-12

 Errors in Making Decisions
(continued)

 Type II Error
 Fail to reject a false null hypothesis

The probability of Type II Error is β

Copyright © 2013 Pearson Education Ch. 9-13

 Outcomes and Probabilities

Possible Hypothesis Test Outcomes

Actual Situation
Decision H0 True H0 False
Fail to Correct
Decision Type II Error
Reject
Key:
H0 (1 -  ) (β)
Outcome
(Probability) Reject Type I Error Correct
H0 () Decision
(1-β)
( 1 - β ) is called the
power of the test
Copyright © 2013 Pearson Education Ch. 9-14
 Hypothesis Tests for the Mean

Hypothesis
Tests for 

 Known  Unknown

Copyright © 2013 Pearson Education Ch. 9-15

 9.2
Tests of the Mean of a Normal
Distribution (σ Known)
 Convert sample result ( x ) to a z value
Hypothesis
Tests for 

σ Known σ Unknown

Consider the test

H0 : μ  μ0 The decision rule is:
H1 : μ  μ0 x  μ0
Reject H0 if z   zα
σ
(Assume the population is normal) n
Copyright © 2013 Pearson Education Ch. 9-16
 Decision Rule
H0: μ = μ0
x  μ0
Reject H0 if z   zα H1: μ > μ0
σ
n

Alternate rule:
Reject H0 if x  μ0  Z ασ/ n 

Do not reject H0 Reject H0

Z 0 zα
σ
x μ0 μ0  z α
n

Copyright © 2013 Pearson Education

Critical value x c Ch. 9-17
 p-Value

 p-value: Probability of obtaining a test

statistic more extreme ( ≤ or  ) than the
observed sample value given H0 is true
 Also called observed level of significance

 Smallest value of  for which H0 can be

rejected

Copyright © 2013 Pearson Education Ch. 9-18

 p-Value Approach to Testing
 Convert sample result (e.g., x ) to test statistic (e.g., z
statistic )
 Obtain the p-value
x - μ0
 For an upper p - value  P(z  , given that H0 is true)
tail test: σ/ n
x - μ0
 P(z  | μ  μ0 )
σ/ n

 Decision rule: compare the p-value to 

 If p-value <  , reject H0

 If p-value   , do not reject H0
Copyright © 2013 Pearson Education Ch. 9-19
 Example: Upper-Tail Z Test
for Mean ( Known)
A phone industry manager thinks that
customer monthly cell phone bill have
increased, and now average over $52 per
month. The company wishes to test this
claim. (Assume  = 10 is known)

Form hypothesis test:

H0: μ ≤ 52 the average is not over $52 per month
H1: μ > 52 the average is greater than $52 per month
(i.e., sufficient evidence exists to support the
manager’s claim)

Copyright © 2013 Pearson Education Ch. 9-20

 Example: Find Rejection Region
(continued)
 Suppose that  = .10 is chosen for this test

Find the rejection region: Reject H0

 = .10

Do not reject H0 Reject H0

0 1.28

x  μ0
Reject H0 if z   1.28
σ/ n
Copyright © 2013 Pearson Education Ch. 9-21
 Example: Sample Results
(continued)

Obtain sample and compute the test statistic

Suppose a sample is taken with the following

results: n = 64, x = 53.1 ( = 10 was assumed known)
 Using the sample results,

x  μ0 53.1  52
z   0.88
σ 10
n 64
Copyright © 2013 Pearson Education Ch. 9-22
 Example: Decision
(continued)
Reach a decision and interpret the result:
Reject H0

 = .10

Do not reject H0 Reject H0

1.28
0
z = 0.88

Do not reject H0 since z = 0.88 < 1.28

i.e.: there is not sufficient evidence that the
mean bill is over $52
Copyright © 2013 Pearson Education Ch. 9-23
 Example: p-Value Solution
(continued)
Calculate the p-value and compare to 
(assuming that μ = 52.0)
p-value = .1894
P(x  53.1| μ  52.0)
Reject H0
 = .10
 53.1 52.0 
 P z  
 10/ 64 
0
Do not reject H0
1.28
Reject H0
 P(z  0.88)  1 .8106
Z = .88
 .1894

Do not reject H0 since p-value = .1894 >  = .10

Copyright © 2013 Pearson Education Ch. 9-24
 One-Tail Tests

 In many cases, the alternative hypothesis

focuses on one particular direction

H0: μ ≤ 3 This is an upper-tail test since the

alternative hypothesis is focused on
H1: μ > 3
the upper tail above the mean of 3

This is a lower-tail test since the

H0: μ ≥ 3
alternative hypothesis is focused on
H1: μ < 3 the lower tail below the mean of 3

Copyright © 2013 Pearson Education Ch. 9-25

 Upper-Tail Tests

 There is only one H0: μ ≤ 3

critical value, since H1: μ > 3
the rejection area is
in only one tail 

Do not reject H0 Reject H0

Z 0 zα

x μ

Critical value x c

Copyright © 2013 Pearson Education Ch. 9-26

 Lower-Tail Tests
H0: μ ≥ 3
 There is only one H1: μ < 3
critical value, since
the rejection area is
in only one tail 

Reject H0 Do not reject H0

-z 0 Z

μ x
Critical value x c

Copyright © 2013 Pearson Education Ch. 9-27

 Two-Tail Tests
 In some settings, the H0: μ = 3
alternative hypothesis does
H1: μ  3
not specify a unique direction

/2 /2
 There are two
critical values,
3 x
defining the two
Reject H0 Do not reject H0 Reject H0
regions of
-z/2 0 +z/2 z
rejection
Lower Upper
critical value critical value
Copyright © 2013 Pearson Education Ch. 9-28
 Hypothesis Testing Example
Test the claim that the true mean # of TV
sets in US homes is equal to 3.
(Assume σ = 0.8)
 State the appropriate null and alternative
hypotheses
 H0: μ = 3 , H1: μ ≠ 3 (This is a two tailed test)
 Specify the desired level of significance
 Suppose that  = .05 is chosen for this test

 Choose a sample size

 Suppose a sample of size n = 100 is selected

Copyright © 2013 Pearson Education Ch. 9-29

 Hypothesis Testing Example
(continued)

 Determine the appropriate technique

 σ is known so this is a z test

 Set up the critical values

 For  = .05 the critical z values are ±1.96

 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  μ0 2.84  3  .16
z     2.0
σ 0.8 .08
n 100
Copyright © 2013 Pearson Education Ch. 9-30
 Hypothesis Testing Example
(continued)

 Is the test statistic in the rejection region?

Reject H0 if  = .05/2  = .05/2

z < -1.96 or
z > 1.96;
otherwise Reject H0 Do not reject H0 Reject H0

do not -z = -1.96 0 +z = +1.96

reject H0

Here, z = -2.0 < -1.96, so the

test statistic is in the rejection
region
Copyright © 2013 Pearson Education Ch. 9-31
 Hypothesis Testing Example
(continued)
 Reach a decision and interpret the result

 = .05/2  = .05/2

Reject H0 Do not reject H0 Reject H0

-z = -1.96 0 +z = +1.96
-2.0
Since z = -2.0 < -1.96, we reject the null hypothesis
and conclude that there is sufficient evidence that the
mean number of TVs in US homes is not equal to 3
Copyright © 2013 Pearson Education Ch. 9-32
 Example: p-Value
 Example: How likely is it to see a sample mean of
2.84 (or something further from the mean, in either
direction) if the true mean is  = 3.0?

x = 2.84 is translated to
a z score of z = -2.0
P(z  2.0)  .0228 /2 = .025 /2 = .025

.0228 .0228
P(z  2.0)  .0228

p-value
= .0228 + .0228 = .0456 -1.96 0 1.96 Z
-2.0 2.0
Copyright © 2013 Pearson Education Ch. 9-33
 Example: p-Value
(continued)
 Compare the p-value with 
 If p-value <  , reject H0
 If p-value   , do not reject H0

Here: p-value = .0456 /2 = .025 /2 = .025

 = .05
.0228 .0228
Since .0456 < .05, we
reject the null
hypothesis
-1.96 0 1.96 Z
-2.0 2.0
Copyright © 2013 Pearson Education Ch. 9-34
9.3
Tests of the Mean of a Normal
Population (σ Unknown)
 Convert sample result ( x ) to a t test statistic
Hypothesis
Tests for 

σ Known σ Unknown

Consider the test

The decision rule is:
H0 : μ  μ0
x  μ0
H1 : μ  μ0 Reject H0 if t   t n-1, α
s
(Assume the population is normal) n
Copyright © 2013 Pearson Education Ch. 9-35
 Tests of the Mean of a Normal
Population (σ Unknown)
(continued)
 For a two-tailed test:
Consider the test
H0 : μ  μ0 (Assume the population is normal,
and the population variance is
H1 : μ  μ0 unknown)

The decision rule is:

x  μ0 x  μ0
Reject H0 if t    t n-1, α/2 or if t   t n-1, α/2
s s
n n

Copyright © 2013 Pearson Education Ch. 9-36

 Example: Two-Tail Test
( Unknown)

The average cost of a

hotel room in Chicago is
said to be $168 per
night. A random sample
of 25 hotels resulted in
x = $172.50 and H0: μ = 168
s = $15.40. Test at the H1: μ  168
 = 0.05 level.
(Assume the population distribution is normal)

Copyright © 2013 Pearson Education Ch. 9-37

 Example Solution:
Two-Tail Test

H0: μ = 168 /2=.025 /2=.025

H1: μ  168

  = 0.05 Reject H0 Do not reject H0 Reject H0

t n-1,α/2
-t n-1,α/2 0
 n = 25 -2.064 1.46
2.064
  is unknown, so x μ 172.50  168
t n1    1.46
use a t statistic s 15.40
n 25
 Critical Value:
t24 , .025 = ± 2.064 Do not reject H0: not sufficient evidence that
true mean cost is different than $168

Copyright © 2013 Pearson Education Ch. 9-38

9.6
Tests of the Variance of a
Normal Distribution

 Goal: Test hypotheses about the population

variance, σ2 (e.g., H0: σ2 = σ02)

 If the population is normally distributed,

(n  1)s
2
 2
n1 
σ2
has a chi-square distribution with (n – 1) degrees
of freedom

Copyright © 2013 Pearson Education Chap 11-39

 Tests of the Variance of a
Normal Distribution
(continued)

The test statistic for hypothesis tests

about one population variance is

(n  1)s2
χ 2
n1 
σ02

Copyright © 2013 Pearson Education Chap 11-40

 Decision Rules: Variance
Population variance
Lower-tail test: Upper-tail test: Two-tail test:
H0: σ2  σ02 H0: σ2 ≤ σ02 H0: σ2 = σ02
H1: σ2 < σ02 H1: σ2 > σ02 H1: σ2 ≠ σ02

  /2 /2

χn21,1 χn21, χn21,1 / 2 χn21, / 2

Reject H0 if Reject H0 if Reject H0 if

χ 2
χ 2 χn21  χn21, or χn21  χn21, / 2
n1 n1,1
χn21  χn21,1 / 2
Copyright © 2013 Pearson Education Chap 11-41
 Appendix: Guidelines for Decision Rule

Figure 9.11
Guidelines for
Choosing the
Appropriate Decision
Rule for a Population
Mean

Copyright © 2013 Pearson Education Ch. 9-42