Newbold Sbe8 Ch09

Statistics for
Business and Economics

8th Edition
Chapter 9
Hypothesis Testing:
Single Population
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 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), i.e., nP(1 – P) > 5
 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
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
Ch. 9-3
The Null Hypothesis, H0
(1 0f 2)
 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
(2 0f 2)
(continued)
 Begin with the assumption that the null hypothesis is

true
 Similar to the notion of innocent until
proven guilty
 H0: Refers to the status quo
 H0: Always contains “=” , “≤” or “” sign
 H0: May or may not be rejected
The Alternative Hypothesis, H1
 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 )
 H1: Challenges the status quo
 H1: Never contains the “=” , “≤” or “” sign
 H1: May or may not be supported
 H1: Is generally the hypothesis that the researcher is
trying to support
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
If it is unlikely that ... then we
we would get a reject the null
sample mean of ... if in fact this were hypothesis that
this value ... the population mean… μ = 50.
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 = a Represents
critical value
H0: μ = 3 a/2 a/2
Rejection
H1: μ ≠ 3 Two-tail test 0 region is
shaded
H0: μ ≤ 3 a
H1: μ > 3
Upper-tail test 0
H0: μ ≥ 3
a
H1: μ < 3
Lower-tail test 0
Errors in Making Decisions
(1 of 2)
 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
Errors in Making Decisions
(2 of 2)
(continued)
 Type II Error
 Fail to reject a false null hypothesis
The probability of Type II Error is β
Outcomes and Probabilities
Possible Hypothesis Test Outcomes
Actual Situation
Decision H0 True H0 False
Fail to Correct
Decision Type II Error
Reject
Key: (1 - a ) (β)
H0
Outcome
(Probability) Reject Type I Error Correct
H0 (a) 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 H0 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 (1 - β)
 The power of a test is the probability of making the correct
decision, of rejecting a null hypothesis that is false, i.e.,
correctly rejecting H0 when H1 is true.
 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
Tests of the Mean of a Normal Distribution
9.2 (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 n
normal)
Decision Rule
x  μ0 H0: μ = μ0
Reject H0 if z   zα H1: μ > μ0
σ
n
Alternate rule:
Reject H0 if x  μ0  Z ασ/ n a
Do not reject H0 Reject H0

Z 0 zα
x μ0 μ0  z α
σ
n
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

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

For an upper x - μ0
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 = 10)
(1 of 5)
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
(2 of 5)
(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
(3 of 5)
(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
(4 of 5)
(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
(5 of 5)
(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
1.28  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
the lower tail below the mean of 3
H1: μ < 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 a

Z 0 zα
x μ
Critical value x c
Lower-Tail Tests
H0: μ ≥ 3
 There is only one
critical value, since H1: μ < 3
the rejection area is
in only one tail a
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
not specify a unique direction H1: μ ¹
3
/2 /2
 There are two
critical values, x
3
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
Two-Tail Tests
Hypothesis Testing Example (1 of 4)
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
 H : μ = 3 , H : μ ≠ 3 (This is a two tailed test)
0 1
 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
Two-Tail Tests
(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
Two-Tail Tests
(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
Two-Tail Tests
(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
Two-Tail Tests
Example: p-Value
(1 of 2)
 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
(1-0.9772)*2 = 0.0228*2 = 0.0456
Two-Tail Tests
Example: p-Value
(2 of 2)
(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
Tests of the Mean of a Normal
Population (σ Unknown) (1 of 2)
 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
x̄ − μ0
H1 : μ  μ0 Reject H 0 if t = >t n −1 , α
𝐬
(Assume the population is normal) √n
Ch. 9-39
Tests of the Mean of a Normal Population
(σ Unknown) (2 of 2)
(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 ¹
 = 0.05 level. 168
(Assume the population distribution is normal)
Example Solution:
Two-Tail Test
( Unknown)
H0: μ = 168 a/2=.025 a/2=.025

H1: μ ¹
 168
a = 0.05 Reject H0 Do not reject H0 Reject H0
-t n-1,α/2 0
t n-1,α/2
 n = 25 -2.064 2.064
1.46
  is unknown, so x μ 172.50  168
use a t statistic t n1    1.46
s 15.40
 Critical Value: n 25
t24 , .025 = ± 2.064 Do not reject H0: not sufficient evidence that
true mean cost is different than $168
2
1 3
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, i.e., n·P(1 – P) > 5
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 value:
nP(1 – P) > 5 nP(1 – P) < 5
pˆ  P0 Not discussed
z H0 : P  P0 in this chapter
P0 (1 P0 ) H1 : P  P0
n
Ch. 9-46
Example: Z Test for Proportion
nP(1 – P) > 5
A marketing company claims

that it receives 8% responses
from its mailing. To test this
claim, a random sample of 500
were surveyed with 25
responses. Test at the  = .05
Check for nP(1 - P) > 5:
significance level. Our approximation for P is
p̂ = 25/500 = .05
nP(1 - P) = (500)(.05)(.95)
= 23.75 > 5

Z Test for Proportion: Solution
Test Statistic:
H0: P = .08
pˆ  P0 .05  .08
H1: P z   2.47
P0 (1 P0 ) .08(1  .08)
a¹ = .05
.08
n = 500, p̂ = .05
n 500
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.
(1 - 0.9932)*2 = 0.0068*2 = 0.0136
3 B
2 1
A C
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 - a ) (β)
Reject H0 Type I Error Correct Decision

(a ) (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 (β)
Do Not Reject H0 When H0 is False
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  x c  μ0  z ασ/ 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 (β) Example
(1 of 3)
 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
(2 of 3)
(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
(3 of 3)
(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 Type II Error (β)
(1 of 2)
 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 Type II Error (β)
(2 of 2)
(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*)
Second Example (1 of 6 )
Tests of the Mean of a Normal Distribution:
Population Variance Known
Consider an example where we are testing the null hypothesis that the
population mean weight of ball bearings from a production process is 5 ounces
versus the alternative hypothesis that the population mean weight is greater than
5 ounces.
We conduct the test with a random sample of 16 observations and a significance

level of 0.05.
The population distribution is assumed to be a normal distribution with a

known standard deviation of 0.1 ounce.
 Thus, the null hypothesis is H0 : µ = 5

 versus the alternative hypothesis H1 : µ > 5
Ch. 9-59
Second Example (2 of 6 )
 and the decision rule is as follows:

 reject H0 if x  μ0
 Reject H0 if z   zα
σ/ n
or Reject H0 if x  x c  μ0  z ασ/ n
1.645
 Or
= 5.041
 Now, if the sample mean is less than or equal to 5.041, then, using our rule, we will fail to
reject the null hypothesis.
Ch. 9-60
Second Example (3 of 6)
 Suppose that we want to determine the probability that the

null hypothesis will not be rejected if the true mean weight
is 5.05 ounces.
 Clearly, the alternative hypothesis is correct, and we want to
determine the probability that we will fail to reject the null
hypothesis and thus have a Type II error.
 That is, we want to determine the probability that the sample
mean is less than 5.041 if the population mean is actually
5.05.
Ch. 9-61
 Using the 16 observations we compute the probability of Type II error as follows:
 xc  μ * 
β  P(x  x c | μ  μ*)  P z  

 σ / n 
= = 0.3594
 Thus, using the preceding decision rule, we determine that the probability, , of Type
II error when the population mean is 5.05 ounces is 0.3594.
 Since the power of a test is 1 minus the probability of Type II error, when the
population mean is 5.05, we have the following:
 power = 1 - = 1 - 0.3594 = 0.6406
 These above power calculations are shown in Figure 9.5.
 In part (a), we see that, when the population mean is 5, the probability that the sample
mean exceeds 5.041 is 0.05—the significance level of the test.
 Part (b) of the figure shows the density function of the sampling distribution of the
sample mean when the population mean is 5.05. The shaded area in this figure shows the
probability that the sample mean exceeds 5.041 when the population mean is 5.05—the
power of the test.
 Similar calculations could be made to determine the power and probability of a Type II
error for any value of m greater than 5.0.
Ch. 9-63
 By computing the power of a test for all values of m included in the alternative hypothesis,
the power function can be generated, as shown in Figure 9.6.
9.6
Tests of the Variance of a Normal Distribution
(1 of 2)
 Goal:
 Test hypotheses about the population variance, σ2
 (e.g., H0: σ2 = σ02)
 If the population is normally distributed,
2
2 (n  1)s
 n 1 
σ2
has a chi-square distribution with (n – 1) degrees of freedom
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Chap 11-65
Tests of the Variance of a Normal Distribution
(2 of 2)
(continued)
The test statistic for hypothesis tests about one population

variance is
(n  1)s 2
χ n21  2
σ0
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
a a a/2 a/2
χ n2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, χ n21  χ n21, / 2
n 1 n 1,1 or
χn21  χ n21,1 / 2
Example 9.7 Variance of Chemical Impurities
(Hypothesis Tests of Population Variances)
 The quality control manager of Stonehead Chemicals has asked you to
determine if the variance of impurities in its shipments of fertilizer is within
the established standard.
 This standard states that for 100-pound bags of fertilizer, the variance in the
pounds of impurities cannot exceed 4.
 Solution
 A random sample of 20 bags is obtained, and the pounds of impurities are
measured for each bag.
 The sample variance is computed to be 6.62.
 In this problem we are testing the null hypothesis

Ch. 9-68
 H 0 : σ2 ≤ σ20 = 4
 against the alternative
 H 1 : σ2 > 4
 Based on the assumption that the population has a normal distribution, the decision
 rule for a test of significance level α, is to reject H0 in favor of H1 if
>
 For this test, with α = 0.05 and 19 degrees of freedom, the critical value of the
chi-square variable is 30.144, from Appendix Table 7 (see next slide).
 Then, using the test data, we find the following:
= = 31.445 > = 30.144
 Therefore, we reject the null hypothesis and conclude that the variability of the
impurities exceeds the standard.
 As a result, we recommend that the production process should be studied, and

improvements made to reduce the variability of the product components.
Ch. 9-70
 The p-value for this test is the probability of obtaining a chi-

square statistic with 19 degrees of freedom that is greater
than the observed 31.445:
 > = 31.445) = 0.036
 The p-value of 0.036 was computed using the program R,

probability distribution function, for the chi-square
distribution (see next slide).
Ch. 9-72
Using R
https://www.statology.org/p-value-chi-square-statistic-r/
 > # find p-value for the Chi-Square test statistic, use:
 > pchisq(q=31.445, df=19, lower.tail=FALSE)
 [1] 0.03605553
 > # the answer is: 0.03605553
Ch. 9-73
An Alternative to R
Chi-Square Calculator
https://stattrek.com/online-calculator/chi-square.aspx
 The chi-square (distribution calculator makes it easy to

compute cumulative probabilities, based on the chi-square
statistic.
 If anything is unclear, read the Frequently-Asked Questions or the
Sample Problems. To learn more about the chi-square, read Stat
Trek's tutorial on the chi-square distribution.
(1 of 2)
Input and click Calculate
(2 of 2)
The Answer After Clicking Calculate (less decimal points than in R)
Another Example
 ABC Company claims that their widgets last 5 years, with a
standard deviation of 1 year.
 Assume that their claims are true.
 If you test a random sample of 9 ABC widgets, what is the

probability that the standard deviation in your sample will be
less than 0.95 years?
Solution:
 We know the following:

• The population standard deviation is equal to 1.
• The sample standard deviation is equal to 0.95.
• The sample size is equal to 9.
• The degrees of freedom is equal to 8 (because sample size minus one = 9 - 1 = 8).
 Given these data, we compute the chi-square statistic:

 = [ ( n - 1 ) * s2 ] / σ2
= [ ( 9 - 1 ) * (0.95)2 ] / (1.0)2 = 7.22
 where σ is the standard deviation of the population, s is the

standard deviation of the sample, and n is the sample size.
Solution
 Now, using the Chi-Square Distribution Calculator, we can determine
the cumulative probability for the chi-square statistic.
 We enter the degrees of freedom (8) and the chi-square

statistic (7.22) into the calculator and hit the Calculate
button.
 The calculator reports that the P(Χ2 < CV) is 0.49.

Therefore, there is a 49% chance that the sample standard
deviation will be no more than 0.95.
Solution
… And in R
 > #find p-value for the Chi-Square test statistic

 > pchisq(q=7.22, df=8, lower.tail=TRUE)
 [1] 0.4869068
Yet Another Example
Find the chi-square critical value (CV), if the

P(< CV) is 0.75 and the sample size is 25.
Yet Another Example
Solution:
We know the following:
 The P( < CV) is 0.75.
 The sample size is 25.
 The degrees of freedom is equal to 24 (because sample size minus one = 25 - 1 = 24).
Given these data, we compute the chi-square statistic, using the

Chi-Square Distribution Calculator.
We enter the degrees of freedom (24) and the cumulative probability (0.75) into the calculator
and hit the Calculate button.
The calculator reports that the chi-square critical value is 28.2.
This means that if you select a random sample of 25 observations, there is a 75% chance that the
chi-square statistic from that sample will be less than or equal to 28.2.
Ch. 9-83
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
Ch. 9-85
Appendix: Guidelines for Decision Rule
Figure 9.12
Guidelines for
Choosing the
Appropriate Decision
Rule for a Population
Proportion
Ch. 9-86
All rights reserved. No part of this publication may be reproduced, stored in a retrieval
system, or transmitted, in any form or by any means, electronic, mechanical, photocopying,
recording, or otherwise, without the prior written permission of the publisher.
Printed in the United States of America.

Newbold Sbe8 Ch09

Uploaded by

Copyright:

Available Formats

Newbold Sbe8 Ch09

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Newbold Sbe8 Ch09

Uploaded by

Copyright:

Available Formats

Statistics for

Business and Economics

After completing this chapter, you should be able to:

 Formulate null and alternative hypotheses for applications

 States the assumption (numerical) to be

 Begin with the assumption that the null hypothesis is

 Considered a serious type of error

The probability of Type I Error is 

 Called level of significance of the test

The probability of Type II Error is β

Possible Hypothesis Test Outcomes

 Once the significance level α is chosen (generally less than

 Type I and Type II errors can not happen at

If Type I error probability (  ) , then

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

 Power of the test increases as the sample size increases

Do not reject H0 Reject H0

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

 p-value: Probability of obtaining a test statistic more

 Decision rule: compare the p-value to 

A phone industry manager thinks that

Form hypothesis test:

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

 There is only one H0: μ ≤ 3

Do not reject H0 Reject H0

Reject H0 Do not reject H0

 Choose a sample size

 Determine the appropriate technique

 Set up the critical values

 Collect the data and compute the test statistic

Reject H0 if  = .05/2  = .05/2

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

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

Reject H0 Do not reject H0 Reject H0

 Example: How likely is it to see a sample mean of

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

Consider the test

The decision rule is:

The average cost of a

H0: μ = 168 a/2=.025 a/2=.025

Tests of the Population Proportion

 Involves categorical variables

 ˆp  x  number of successes in sample

 When nP(1 – P) > 5, p̂ can be approximated

A marketing company claims

Critical Values: ± 1.96 Decision:

Reject H0 since p-value = .0136 <  = .05

Reject H0 Type I Error Correct Decision

 β denotes the probability of Type II Error

 Suppose we do not reject H0: μ  52 when in fact

 Suppose we do not reject H0: μ  52 when