QUANTITATIVE METHODS I

(STATISTICS)
TERM I, PGP

SESSION 16
INSTRUCTOR: ANAND KUMAR
Estimating the Difference Between Two
Population Means

QM I, Term I, PGP 2
Sampling Distribution of
• Mean/Expected value:

• Standard Deviation (Standard Error):

QM I, Term I, PGP 3
Interval Estimation of μ1 – μ2 when σ1 and σ2 are
Known
Interval Estimate

QM I, Term I, PGP 4
Interval Estimation of μ1 – μ2 when σ1 and σ2 are
Known
Example: Par, Inc.

Par, Inc. is a manufacturer of golf equipment and has developed a new golf ball that has
been designed to provide “extra distance.”

In a test of driving distance using a mechanical driving device, a sample of Par golf balls was
compared with a sample of golf balls made by Rap, Ltd., a competitor. The sample statistics
appear on the next slide.

QM I, Term I, PGP 5
Interval Estimation of μ1 – μ2 when σ1 and σ2 are
Known
Example: Par, Inc. Sample # 1 Sample # 2
Par, Inc. Rap, Ltd.
Empty cell

Sample Size 120 balls 80 balls

Sample Mean 295 yards 278 yards

Based on data from previous driving distance tests, the two population
standard deviations are known with σ1 = 15 yards and σ2 = 20 yards.
Let us develop a 95% confidence interval estimate of the difference
between the mean driving distances of the two brands of golf ball.
QM I, Term I, PGP 6
Estimating the Difference Between Two
Population Means

QM I, Term I, PGP 7
Interval Estimation of μ1 – μ2 when σ1 and σ2 are
Known

We are 95% confident that the difference between the mean driving distances of
Par, Inc. balls and Rap, Ltd. balls is 11.86 to 22.14 yards.

QM I, Term I, PGP 8
Interval Estimation of μ1 – μ2 when σ1 and σ2 are
Known
A hypothesis test about the value of the difference in two population means must take
one of the following three forms (where D0 is the hypothesized difference in the
population means).

Test Statistic:

QM I, Term I, PGP 9
Interval Estimation of μ1 – μ2 when σ1 and σ2 are
Known
Example: Par, Inc.

Can we conclude, using α = 0.01, that the mean driving distance of Par, Inc.
golf balls is greater than the mean driving distance of Rap, Ltd. golf balls?

QM I, Term I, PGP 10
Interval Estimation of μ1 – μ2 when σ1 and σ2 are
Known
1. Develop the hypotheses.

2. Specify the level of significance. α = 0.01

3. Compute the value of the test statistic.

QM I, Term I, PGP 11
Interval Estimation of μ1 – μ2 when σ1 and σ2 are
Known
p –Value Approach
4. Compute the p –value.

For z = 6.49, the p-value < 0.0001

5. Determine whether to reject H0.

Because p-value < 0.0001 ≤ α = 0.01, we reject H0.

At the 0.01 level of significance, the sample evidence indicates the mean driving
distance of Par, Inc. golf balls is greater than the mean driving distance of Rap, Ltd.
golf balls.

QM I, Term I, PGP 12
Interval Estimation of μ1 – μ2 when σ1 and σ2 are
Known
Critical Value Approach
4. Determine the critical value and the rejection rule.

For α = 0.01, We will reject H0 if ≥ 2.33.

5. Determine whether to reject H0.

Because 6.49 ≥ 2.33, we reject H0.

The sample evidence indicates the mean driving distance of Par, Inc. golf balls is
greater than the mean driving distance of Rap, Ltd. golf balls.

QM I, Term I, PGP 13
Interval Estimation of μ1 – μ2 when σ1 and σ2
are Unknown

QM I, Term I, PGP 14
Interval Estimation of μ1 – μ2 when σ1 and σ2
are Unknown
Interval Estimate

QM I, Term I, PGP 15
Interval Estimation of μ1 – μ2 when σ1 and σ2
are Unknown
Example: Specific Motors

Specific Motors of Detroit has

developed a new Automobile known as
the M car. 24 M cars and 28 J cars (from
Japan) were road tested to compare Sample #1 Sample #2
miles-per-gallon (mpg) performance. M Cars J Cars
Empty cell

Sample Size 24 cars 28 cars

Sample Mean 29.8 miles per gallon 27.3 miles per gallon
Sample Std. Dev. 2.56 miles per gallon 1.81 miles per gallon

QM I, Term I, PGP 16
Interval Estimation of μ1 – μ2 when σ1 and σ2
are Unknown
Let us develop a 90% confidence interval estimate of the difference between the mpg
performances of the two models of automobile.

Let
the mean miles per gallon for the population of M cars.
the mean miles per gallon for the population of J cars.

QM I, Term I, PGP 17
Interval Estimation of μ1 – μ2 when σ1 and σ2
are Unknown
The degrees of freedom for tα/2 are

 (2.56) (1.81) 
2 2

  
 24 28 
df  2 2
 40.59  40
 1   (2.56)   1   (1.81) 
2 2

     
 24  1   24   28  1   28 

with α/2 = 0.05 and df = 40, tα/2 = 1.684

QM I, Term I, PGP 18
Interval Estimation of μ1 – μ2 when σ1 and σ2
are Unknown

We are 90% confident that the difference between the miles-per-gallon

performances of M cars and J cars is 1.449 to 3.551 mpg.
QM I, Term I, PGP 19
Interval Estimation of μ1 – μ2 when σ1 and σ2
are Unknown
A hypothesis test about the value of the difference in two population
means must take one of the following three forms (where D0 is the
hypothesized difference in the population means).

Test Statistic:

QM I, Term I, PGP 20
Interval Estimation of μ1 – μ2 when σ1 and σ2
are Unknown
Example: Specific Motors

Can we conclude, using a .05 level of significance, that the miles-per-gallon (mpg)
performance of M cars is greater than the miles-per-gallon performance of J cars?

QM I, Term I, PGP 21
Interval Estimation of μ1 – μ2 when σ1 and σ2
are Unknown
1. Develop the hypotheses.

2. Specify the level of significance. α = 0.05

3. Compute the value of the test statistic

QM I, Term I, PGP 22
Interval Estimation of μ1 – μ2 when σ1 and σ2
are Unknown
The degrees of freedom for are
 (2.56) (1.81) 
2 2

  
 24 28 
df  2 2
 40.59  40
 1   (2.56)   1   (1.81) 
2 2

     
 24  1   24   28  1   28 

QM I, Term I, PGP 23
Interval Estimation of μ1 – μ2 when σ1 and σ2
are Unknown
p –Value Approach
4. Compute the p-value.

For t = 4.003 and df = 40 the p-value < 0.005

5. Determine whether to reject H0.

Because p-value ≤ α = 0.05, we reject H0.

At the 0.05 level of significance, the sample evidence indicates that the miles-per-
gallon (mpg) performance of M cars is greater than the miles-per-gallon
performance of J cars. That is, M cars have a worse mpg rating than J cars.

QM I, Term I, PGP 24
Interval Estimation of μ1 – μ2 when σ1 and σ2
are Unknown
Critical Value Approach
4. Determine the critical value and the rejection rule.

For α = 0.05 and df = 40, We will reject H0 if ≥ 1.684.

5. Determine whether to reject H0.

Because 4.003 ≥ 1.684, we reject H0.

We are at least 95% confident that the miles-per-gallon (mpg) performance of M cars
is greater than the miles-per-gallon performance of J cars.

QM I, Term I, PGP 25
Inferences About the Difference Between Two
Population Means: Matched Samples
• With a matched-sample design each sampled item provides a pair of data
values.
• This design often leads to a smaller sampling error than the independent-
sample design because variation between sampled items is eliminated as a
source of sampling error.

QM I, Term I, PGP 26
Inferences About the Difference Between Two
Population Means: Matched Samples
Example: Express Deliveries
A Chicago-based firm has documents that must be quickly distributed to district offices
throughout the U.S. The firm must decide between two delivery services, UPX (United
Parcel Express) and INTEX (International Express), to transport its documents.

In testing the delivery times of the two services, the firm sent two reports to a random
sample of its district offices with one report carried by UPX and the other report carried
by INTEX. Do the data on the next slide indicate a difference in mean delivery times for
the two services? Use a 0.05 level of significance.

QM I, Term I, PGP 27
Inferences About the Difference Between Two
Population Means: Matched Samples
Here are the data:
The mean of the differences is

The standard deviation of the

differences is

QM I, Term I, PGP 28
Inferences About the Difference Between Two
Population Means: Matched Samples
1. Develop the hypotheses.

2. Specify the level of significance. α = 0.05

3. Compute the value of the test statistic.

QM I, Term I, PGP 29
Inferences About the Difference Between Two
Population Means: Matched Samples
p –Value Approach
4. Compute the p-value.

For t = 2.94 and df = 9 the p-value is between 0.02 and 0.01.

Note: This is a two-tailed test, so we doubled the upper-tail areas of 0.005 and
0.01.

5. Determine whether to reject H0.

Because p-value ≤ α = 0.05, we reject H0.

At the 0.05 level of significance, the sample evidence indicates that there is a
difference in mean delivery times for the two services.
QM I, Term I, PGP 30
Inferences About the Difference Between Two
Population Means: Matched Samples
Critical Value Approach
4. Determine the critical value and the rejection rule.

For α = 0.05 and df = 9, We will reject H0 if ≥ 2.262.

5. Determine whether to reject H0.

Because 2.94 ≥ 2.262, we reject H0.

We are at least 95% confident that there is a difference in mean delivery times for
the two services.

QM I, Term I, PGP 31
Sampling Distribution of
• Mean/Expected value:

• Standard Deviation (Standard Error):

where: proportion for population 1

proportion for population 2
sample size from population 1
sample size from population 2

QM I, Term I, PGP 32
Sampling Distribution of
• If the sample sizes are large, the sampling distribution of
can be approximated by a normal probability distribution.
• The sample sizes are sufficiently large if all of these conditions are met:

QM I, Term I, PGP 33
Sampling Distribution of

QM I, Term I, PGP 34
Interval Estimation of p1 – p2
Interval Estimate

QM I, Term I, PGP 35
Interval Estimation of p1 – p2
Example: Market Research Associates

Market Research Associates is conducting research to evaluate the

effectiveness of a client’s new advertising campaign. Before the new campaign
began, a telephone survey of 150 households in the test market area showed
60 households “aware” of the client’s product.

The new campaign has been initiated with TV and newspaper advertisements
running for three weeks.

A survey conducted immediately after the new campaign showed 120 of 250
households “aware” of the client’s product. Does the data support the position
that the advertising campaign has provided an increased awareness of the
client’s product?
QM I, Term I, PGP 36
 Interval Estimation of p1 – p2

Hence, the 95% confidence interval for the difference in before and after
awareness of the product is –0.02 to 0.18.

QM I, Term I, PGP 37
Hypothesis Tests about p1 – p2
Hypotheses:
1. One-tailed, lower tail:

2. One-tailed, upper tail:

3. Two-tailed:

Note: We will focus on tests involving no difference between the two

population proportions.

QM I, Term I, PGP 38
Hypothesis Tests about p1 – p2
• Standard error of when :

• Pooled estimator of when :

QM I, Term I, PGP 39
Hypothesis Tests about p1 – p2
Test Statistic

QM I, Term I, PGP 40
Hypothesis Tests about p1 – p2
Example: Market Research Associates

Can we conclude, using a 0.05 level of significance, that the proportion of

households aware of the client’s product increased after the new
advertising campaign?

QM I, Term I, PGP 41
Hypothesis Tests about p1 – p2

2. Specify the level of significance. α = 0.05

QM I, Term I, PGP 42
Hypothesis Tests about p1 – p2
3. Compute the value of the test
statistic.

QM I, Term I, PGP 43
Hypothesis Tests about p1 – p2
p –Value Approach
4. Compute the p –value.
For z = 1.56, the p-value = .0594

5. Determine whether to reject H0.

Because p-value > α = 0.05, we cannot reject H0.
We cannot conclude that the proportion of households aware of the
client’s product increased after the new campaign.

QM I, Term I, PGP 44
Hypothesis Tests about p1 – p2
Critical Value Approach
4. Determine the critical value and rejection rule.
For α= .05, z.05 = 1.645
Reject H0 if z > 1.645

5. Determine whether to reject H0.

Because 1.56 < 1.645, we cannot reject H0.
We cannot conclude that the proportion of households aware of the client’s
product increased after the new campaign.
QM I, Term I, PGP 45