Newbold Sbe8 ch09 Ge

Statistics for
Business and Economics

8th Global Edition
Chapter 9
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
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

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

The Null Hypothesis, H0
(continued)
◼ Begin with the assumption that the null

hypothesis is true
◼ Similar to the notion of innocent until
proven guilty
◼ Refers to the status quo
◼ Always contains “=” , “≤” or “” sign
◼ May or may not be rejected

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
EXAMPLE
Copyright © 2013 Pearson Education MODIFIED BY CAROLINA COSCULLUELA 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
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
sample mean of ... if in fact this were hypothesis that
the population mean… μ = 50.
this value ...
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

Level of Significance
and the Rejection Region
Level of significance =  Represents
critical value
H 0: μ = 3 /2 /2
H 1: μ ≠ 3 Rejection
Two-tail test 0 region is
shaded
H 0: μ ≤ 3 
H 1: μ > 3
Upper-tail test 0
H 0: μ ≥ 3

H 1: μ < 3
Lower-tail test 0 BACK
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
Type I Error = P(Reject H0 | H0 is true)

Errors in Making Decisions
(continued)
◼ Type II Error
◼ Fail to reject a false null hypothesis
The probability of Type II Error is β
Type II Error = P(no rejection of H0 | H1 is true)

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
Consequences of Fixing the
Significance Level of a Test
◼ Once the significance level α is chosen

(generally less than 0.10), the probability of
Type II error, β, can be found.
Investigator chooses
significance level Decision rule is Probability of Type II
(probability of Type I established error follows
error)

Type I & II Error Relationship
▪ Type I and Type II errors can not happen at

the same time
▪ Type I error can only occur if H0 is true
▪ Type II error can only occur if H 0 is false
If Type I error probability (  ) , then

Type II error probability ( β )

Factors Affecting Type II Error
◼ All else equal,
◼ β when the difference between
hypothesized parameter and its true value
◼ β when 
◼ β when σ
◼ β when n

Power of the Test
◼ The power of a test is the probability of rejecting

a null hypothesis that is false
◼ i.e., Power = P(Reject H0 | H1 is true)
◼ Power of the test increases as the sample size

increases

Hypothesis Tests for the Mean
Hypothesis
Tests for 
 Known  Unknown

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
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. 9-20
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

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
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)

Example: Find Rejection Region
(continued)
◼ Suppose that  = .10 is chosen for this test
Find the rejection region: Reject H0
 = .10

0 1.28
x − μ0
Reject H0 if z =  1.28
σ/ n
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
Example: Decision
(continued)
Reach a decision and interpret the result:
Reject H0
 = .10

0
1.28
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
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

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

Upper-Tail Tests
◼ There is only one H0: μ ≤ 3

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

Z 0 zα
x μ
Critical value x c

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

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
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

(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
(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
(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
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
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
9.3
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
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)
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

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)

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

9.4
Tests of the Population Proportion
◼ Involves categorical variables

◼ Two possible outcomes
◼ “Success” (a certain characteristic is present)
◼ “Failure” (the characteristic is not present)
◼ Fraction or proportion of the population in the

“success” category is denoted by P
◼ Assume sample size is large

Tests of the Population Proportion
(continued)
◼ The sample proportion in the success category
is denoted by p̂
ˆp = x = number of successes in sample

◼
n sample size
◼ When nP(1 – P) > 5, p̂ can be approximated

by a normal distribution with mean and
standard deviation
◼ μp̂ = P P(1− P)
σ p̂ =
n
Hypothesis Tests for Proportions
◼ The sampling
distribution of p̂ is Hypothesis
approximately Tests for P
normal, so the test
statistic is a z
nP(1 – P) > 5 nP(1 – P) < 5
value:
pˆ − P0
z=
Not discussed
H0 : P = P0 in this chapter
P0 (1− P0 ) H1 : P  P0
n
Example: Z Test for Proportion
A marketing company
claims that it receives
8% responses from its
mailing. To test this
claim, a random sample
of 500 were surveyed
Check:
with 25 responses. Test
Our approximation for P is
at the  = .05 p̂ = 25/500 = .05
significance level.
nP(1 - P) = (500)(.05)(.95)
= 23.75 > 5 ✓
Z Test for Proportion: Solution
H0: P = .08 Test Statistic:

H1: P  .08 pˆ − P0 .05 − .08
z= = = −2.47
P0 (1− P0 ) .08(1 − .08)
 = .05
n 500
n = 500, p̂ = .05
Critical Values: ± 1.96 Decision:
Reject Reject Reject H0 at  = .05
Conclusion:
.025 .025
There is sufficient
-1.96 0 1.96 z evidence to reject the
-2.47 company’s claim of 8%
response rate.
p-Value Solution
(continued)
Calculate the p-value and compare to 
(For a two sided test the p-value is always two sided)
Do not reject H0
Reject H0 Reject H0 p-value = .0136:
/2 = .025 /2 = .025
P(Z  −2.47) + P(Z  2.47)
.0068 .0068
= 2(.0068) = 0.0136
-1.96 0 1.96
Z = -2.47 Z = 2.47
Reject H0 since p-value = .0136 <  = .05

9.5
Assessing the Power of a Test
◼ Recall the possible hypothesis test outcomes:
Actual Situation
Key:
Outcome Do Not Correct Decision Type II Error
(Probability) Reject H0 (1 -  ) (β)
Reject H0 Type I Error Correct Decision

() (1-β)
◼ β denotes the probability of Type II Error

◼ 1 – β is defined as the power of the test
Power = 1 – β = the probability that a false null
hypothesis is rejected
Type II Error
Assume the population is normal and the population
variance is known. Consider the test
H0 : μ = μ0
H1 : μ  μ0
x − μ0
Reject H0 if z =  z α or Reject H0 if x  xc = μ0 + zασ/ n
σ/ n
If the null hypothesis is false and the true mean is μ*,
then the probability of type II error is
 xc − μ * 
β = P(x  x c | μ = μ*) = P z  

 σ / n 
Type II Error Example
◼ Type II error is the probability of failing
to reject a false H0
Suppose we fail to reject H0: μ  52
when in fact the true mean is μ* = 50
50 52
Reject Do not reject
H0: μ  52 xc H0 : μ  52

(continued)
◼ Suppose we do not reject H0: μ  52 when in fact

the true mean is μ* = 50
This is the range of x where
This is the true H0 is not rejected
distribution of x if μ = 50
50 52
H0: μ  52 H0 : μ  52
xc
(continued)
◼ Suppose we do not reject H0: μ  52 when

in fact the true mean is μ* = 50
Here, β = P( x  x c ) if μ* = 50
 β
50 52
H0: μ  52 H0 : μ  52
xc
Calculating β
◼ Suppose n = 64 , σ = 6 , and  = .05
σ 6
x c = μ0 − z α = 52 − 1.645 = 50.766
n 64
(for H0 : μ  52)
So β = P( x  50.766 ) if μ* = 50
50 50.766 52
H0: μ  52 H0 : μ  52
xc
Calculating β
(continued)
◼ Suppose n = 64 , σ = 6 , and  = .05

 
 50.766 − 50 
P( x  50.766 | μ* = 50) = P z   = P(z  1.02) = .5 − .3461 = .1539
 6 
 64 
Probability of
type II error:
 β = .1539
50 52
H0: μ  52 H0 : μ  52
xc
Power of the Test Example
If the true mean is μ* = 50,
◼ The probability of Type II Error = β = 0.1539
◼ The power of the test = 1 – β = 1 – 0.1539 = 0.8461
Actual Situation
Key:
Outcome Do Not Correct Decision Type II Error
(Probability) Reject H0 1 -  = 0.95 β = 0.1539
Reject H0 Type I Error Correct Decision

 = 0.05 1 - β = 0.8461
(The value of β and the power will be different for each μ*)
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 11-56

Tests of the Variance of a
Normal Distribution
(continued)
The test statistic for hypothesis tests

about one population variance is
(n − 1)s 2
χ 2
n −1 =
σ02

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− χ n2−1, χ n2−1,1− / 2 χn2−1, / 2
Reject H0 if Reject H0 if Reject H0 if

χ 2
χ 2 χ n2−1  χ n2−1, or
χ n2−1  χ n2−1, / 2
n −1 n −1,1−
χn2−1  χ n2−1,1− / 2
Chapter Summary
◼ Addressed hypothesis testing methodology
◼ Performed z Test for the mean (σ known)
◼ Discussed critical value and p-value approaches to
hypothesis testing
◼ Performed one-tail and two-tail tests
◼ Performed t test for the mean (σ unknown)
◼ Performed z test for the proportion
◼ Discussed type II error and power of the test
◼ Performed a hypothesis test for the variance (χ2)
Appendix: Guidelines for Decision Rule
Figure 9.11
Guidelines for
Choosing the
Appropriate Decision
Rule for a Population
Mean

Appendix: Guidelines for Decision Rule
Figure 9.12
Guidelines for
Choosing the
Appropriate Decision
Rule for a Population
Proportion

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Statistics for

Business and Economics

Hypothesis Tests of a Single

Copyright © 2013 Pearson Education Ch. 9-3

◼ States the assumption (numerical) to be

◼ Is always about a population parameter,

Copyright © 2013 Pearson Education Ch. 9-4

◼ Begin with the assumption that the null

Copyright © 2013 Pearson Education Ch. 9-5

◼ Is the opposite of the null hypothesis

Copyright © 2013 Pearson Education MODIFIED BY CAROLINA COSCULLUELA Ch. 9-6

◼ Defines the unlikely values of the sample

Copyright © 2013 Pearson Education Ch. 9-9

◼ Considered a serious type of error

The probability of Type I Error is 

Copyright © 2013 Pearson Education MODIFIED BY CAROLINA COSCULLUELA Ch. 9-11

The probability of Type II Error is β

Type II Error = P(no rejection of H0 | H1 is true)

Copyright © 2013 Pearson Education Ch. 9-12

Possible Hypothesis Test Outcomes

◼ Once the significance level α is chosen

Copyright © 2013 Pearson Education Ch. 9-14

▪ Type I and Type II errors can not happen at

If Type I error probability (  ) , then

Copyright © 2013 Pearson Education Ch. 9-15

Copyright © 2013 Pearson Education Ch. 9-16

◼ The power of a test is the probability of rejecting

◼ i.e., Power = P(Reject H0 | H1 is true)

◼ Power of the test increases as the sample size

Copyright © 2013 Pearson Education Ch. 9-17

Copyright © 2013 Pearson Education Ch. 9-18

Consider the test

Do not reject H0 Reject H0

Copyright © 2013 Pearson Education

◼ p-value: Probability of obtaining a test

◼ Smallest value of  for which H0 can be

Copyright © 2013 Pearson Education Ch. 9-21

◼ Decision rule: compare the p-value to 

◼ If p-value <  , reject H0

Form hypothesis test:

Copyright © 2013 Pearson Education Ch. 9-23

Find the rejection region: Reject H0

Do not reject H0 Reject H0

Obtain sample and compute the test statistic

Suppose a sample is taken with the following

Do not reject H0 Reject H0

Do not reject H0 since z = 0.88 < 1.28

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

◼ In many cases, the alternative hypothesis

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

This is a lower-tail test since the

Copyright © 2013 Pearson Education Ch. 9-28

◼ There is only one H0: μ ≤ 3

Do not reject H0 Reject H0

Copyright © 2013 Pearson Education Ch. 9-29

Reject H0 Do not reject H0

Copyright © 2013 Pearson Education Ch. 9-30

◼ Choose a sample size

Copyright © 2013 Pearson Education Ch. 9-32