COMPLETE

BUSINESS
STATISTICS
by
AMIR D. ACZEL
&
JAYAVEL SOUNDERPANDIAN
7th edition.
Prepared by Lloyd Jaisingh, Morehead State
University

Chapter 8

The Comparison of Two Populations

McGraw-Hill/Irwin

Copyright 2009 by The McGraw-Hill Companies, Inc. All

8-2

8 The Comparison of Two Populations

Using Statistics
Paired-Observation Comparisons
A Test for the Difference between Two Population Means Using
Independent Random Samples
A Large-Sample Test for the Difference between Two Population
Proportions
The F Distribution and a Test for the Equality of Two Population
Variances

8-3

8 LEARNING OBJECTIVES
After studying this chapter you should be able to:

Explain the need to compare two population parameters

Conduct a paired-difference test for the difference in population means
Conduct an independent-samples test for the difference in population means
Describe why a paired-difference test is better than independent-samples test
Conduct a test for difference in population proportions
Test whether two population variances are equal
Use templates to carry out all tests

8-4

8-1 Using Statistics

Inferences about differences between parameters of two

populations
Paired-Observations
Observe the same group of persons or things

At two different times: before and after

Under two different sets of circumstances or treatments

Independent Samples
Observe different groups of persons or things

At different times or under different sets of circumstances

8-5

8-2 Paired-Observation Comparisons

Population parameters may differ at two different times or

under two different sets of circumstances or treatments
because:

The circumstances differ between times or treatments

The people or things in the different groups are themselves different

By looking at paired-observations, we are able to minimize

the between group , extraneous variation.

Paired-Observation Comparisons
of Means
Teststatistic
statisticfor
forthe
thepaired
paired--observatio
observations
nstest
test
Test
DD D
D0
t

0 , , dfdf nn11
t
S
S D
D
nn
sampleaverage
averagefor
forthe
thedifference
differencess
DDsample
samplestandard
standarddeviation
deviationfor
forthe
thedifference
differencess
SS Dsample
D
n
samplesize
size
n sample
meanofofthe
thepopulation
populationofofdifference
differencessunder
underthe
thenull
nullhypothesis
hypothesis
D mean
D0
0

8-6

8-7

Example 8-1
randomsample
sampleofof16
16viewers
viewersofofHome
HomeShopping
ShoppingNetwork
Networkwas
wasselected
selectedfor
foran
anexperiment.
experiment. All
Allviewers
viewersininthe
the
AArandom
samplehad
hadrecorded
recordedthe
theamount
amountofofmoney
moneythey
theyspent
spentshopping
shoppingduring
duringthe
theholiday
holidayseason
seasonofofthe
theprevious
previousyear.
year.
sample
Thenext
nextyear,
year,these
thesepeople
peoplewere
weregiven
givenaccess
accesstotothe
thecable
cablenetwork
networkand
andwere
wereasked
askedtotokeep
keepaarecord
recordofoftheir
their
The
totalpurchases
purchasesduring
duringthe
theholiday
holidayseason.
season. Home
HomeShopping
ShoppingNetwork
Networkmanagers
managerswant
wanttototest
testthe
thenull
nullhypothesis
hypothesis
total
thattheir
theirservice
servicedoes
doesnot
notincrease
increaseshopping
shoppingvolume,
volume,versus
versusthe
thealternative
alternativehypothesis
hypothesisthat
thatititdoes.
does.
that
Shopper Previous Current
Shopper Previous Current
334
405
11
334
405
150
125
22
150
125
3
520
540
3
520
540
95
100
44
95
100
5
212
200
5
212
200
30
30
66
30
30
7
1055
1200
7
1055
1200
8
300
265
8
300
265
85
90
99
85
90
10
129
206
10
129
206
11
40
18
11
40
18
12
440
489
12
440
489
13
610
590
13
610
590
14
208
310
14
208
310
15
880
995
15
880
995
16
25
75
16
25
75

Diff
Diff
71
71
-25
-25
20
20
55
-12
-12
00
145
145
-35
-35
55
77
77
-22
-22
49
49
-20
-20
102
102
115
115
50
50

0
HH0:0:DD0
HH1:1:DD>>00
(n-1)==(16-1)
(16-1)==15
15
dfdf==(n-1)
D
TestStatistic:
Statistic: t
Test

D
0

sD
n

CriticalValue:
Value:t t0.05==1.753
1.753
Critical
0.05
Donot
notreject
rejectHH0ifif: :t t1.753
1.753
Do
0
RejectHH0if:
if:t t >>1.753
1.753
Reject
0

8-8

Example 8-1: Solution

2.354>>1.753,
1.753,so
soHH0isisrejected
rejectedand
andwe
weconclude
concludethat
that
t t==2.354
0
thereisisevidence
evidencethat
thatshopping
shoppingvolume
volumeby
bynetwork
network
there
viewershas
hasincreased,
increased,with
withaap-value
p-value between
between0.01
0.01an
an
viewers
0.025. The
TheTemplate
Templateoutput
outputgives
givesaamore
moreexact
exactp-value
p-value
0.025.
0.0163. See
Seethe
thenext
nextslide
slidefor
forthe
theoutput.
output.
ofof0.0163.

D D
32.81 0
0
t

2.354
sD
55.75
16

t Distribution: df=15
0.4

f(t)

0.3

0.2
Nonrejection
Region

0.1

Rejection
Region

0.0
-5

1.753
= t0.05

2.131
= t0.025

2.602
= t0.01

2.354=
test
statistic

Example 8-1: Using the Template for

Testing Paired Differences

Decision: Reject the null hypothesis

8-9

8-10

Example 8-1: Using Minitab for Testing

Paired Differences
Decision: Reject the null hypothesis, P-value < 0.05

8-11

Example 8-2
hasrecently
recentlybeen
beenasserted
assertedthat
thatreturns
returnson
onstocks
stocksmay
maychange
changeonce
onceaastory
storyabout
aboutaacompany
companyappears
appearsininThe
TheWall
Wall
ItIthas
StreetJournal
Journalcolumn
columnHeard
Heardon
onthe
theStreet.
Street. An
Aninvestments
investmentsanalyst
analystcollects
collectsaarandom
randomsample
sampleofof50
50stocks
stocksthat
that
Street
wererecommended
recommendedasaswinners
winnersby
bythe
theeditor
editorofof Heard
Heardon
onthe
theStreet,
Street,and
andproceeds
proceedstotoconduct
conductaatwo-tailed
two-tailedtest
test
were
whetherorornot
notthe
theannualized
annualizedreturn
returnon
onstocks
stocksrecommended
recommendedininthe
thecolumn
columndiffers
differsbetween
betweenthe
themonth
monthbefore
before
ofofwhether
andthe
themonth
monthafter
afterthe
therecommendation.
recommendation. For
Foreach
eachstock
stockthe
theanalysts
analystscomputes
computesthe
thereturn
returnbefore
beforeand
andthe
thereturn
return
and
afterthe
theevent,
event,and
andcomputes
computesthe
thedifference
differenceininthe
thetwo
tworeturn
returnfigures.
figures. He
Hethen
thencomputes
computesthe
theaverage
averageand
andstandard
standard
after
deviationofofthe
thedifferences.
differences.
deviation

DD DD
0.1 0
00 0.1 0 14.14
z

.05 14.14
ssDD
00.05
50
50
nn

H0: D 0
H1: D > 0
n = 50
D = 0.1%
sD = 0.05%
Test Statistic:

value: pp((zz14
14.14
.14))00
pp--value:
D
z

D
0
s
D
n

Thistest
testresult
resultisishighly
highlysignificant,
significant,
This
andHH 0may
maybe
berejected
rejectedatatany
anyreasonable
reasonable
and
0
level
ofsignificance.
significance.
level of

Confidence Intervals for Paired

Observations
(1-
-))100%
100%confidence
confidenceinterval
intervalfor
forthe
themean
meandifference
differenceD::
AA(1
D
s
DDtt2 2 sDDn
n
wherett2 2isisthe
thevalue
valueof
of the
thettdistributi
distribution
onwith
with(n
(n-1)
-1)degrees
degreesof
offreedom
freedom
where
thatcuts
cutsoff
offan
anarea
areaof
of 22totoits
itsright,
right, When
Whenthe
thesample
samplesize
sizeisislarge,
large,
that
wemay
mayapproximat
approximateett 2with
with zz 2. .
we
2
2

8-12

Confidence Intervals for Paired

Observations Example 8-2

8-13

95% confidence
confidence interval
interval for
for the
the data
data in
in Example
Example8822::
95%
sDD 0.1 1.960.05
0.05 0.1 (1.96)(.0071)
s
D

z
Dz
0.1 1.96
0.1 (1.96)(.0071)
n
50
n
50
014[[00..086
086,, 00..114
114]]
00..1100..014
2
2

Note that
that th
thisis confidence
confidence interval
interval
Note
does not
not include
include the
the value
value 0.0.
does

8-14

Hypothesis Test & Confidence Interval for

Example 8-2 - Using the Template

Decision: Reject the null hypothesis.

Confidence Interval

8-15

8-3 A Test for the Difference between Two Population

Means Using Independent Random Samples

When paired data cannot be obtained, use independent

random samples drawn at different times or under different
circumstances.

Large sample test if:

Both n130 and n230 (Central Limit Theorem), or

Both populations are normal and 1 and 2 are both known

Small sample test if:

Both populations are normal and 1 and 2 are unknown

Comparisons of Two Population

Means: Testing Situations

I: Difference between two population means is 0

H0: 1 -2 = 0

H1: 1 -2 0

II: Difference between two population means is less than 0

1= 2

12

H0: 1 -2 0

H1: 1 -2 0

III: Difference between two population means is less than D

1 2+D

H0: 1 -2 D

H1: 1 -2 D

8-16

Comparisons of Two Population

Means: Testing Situations

IV: Difference between two population means is greater

than 0

12

H0: 1 -2 0

H1: 1 -2 0

V: Difference between two population means is greater than D

1 2+ D

H0: 1 -2 D

H1: 1 -2 D

8-17

Comparisons of Two Population

Means: Test Statistic

8-18

Large-sampletest
teststatistic
statisticfor
forthe
thedifference
differencebetween
betweentwo
two
Large-sample
populationmeans:
means:
population
z

( x x ) ( )

n
n
1

Theterm
term(
(11--22))00isisthe
thedifference
differencebetween
between11an
an22under
underthe
thenull
null
The
hypothesis. IsIsisisequal
equalto
tozero
zeroin
insituations
situationsII,,IIIIand
andIV,
IV,and
andititisis
hypothesis.
equalto
tothe
theprespecified
prespecifiedvalue
valueDDin
insituations
situationsIII
IIIand
andV.
V. The
Theterm
term
equal
inthe
thedenominator
denominatorisisthe
thestandard
standarddeviation
deviationof
ofthe
thedifference
difference
in
betweenthe
thetwo
twosample
samplemeans
means(it
(itrelies
relieson
onthe
theassumption
assumptionthat
that
between
thetwo
twosamples
samplesare
areindependent).
independent).
the

Two-Tailed Test for Equality of Two

Population Means: Example 8-3

8-19

Is there evidence to conclude that the average monthly charge in the entire population of American Express Gold
Card members is different from the average monthly charge in the entire population of Preferred Visa
cardholders?

Population 1 : Preferred Visa

n = 1200

: 0
1
2

H : 0
1
1
2

x = 452
1

= 212

Population 2 : Gold Card

( x x ) ( )
1
2
1
2 0 ( 452 523) 0
2
2
2
2

212
185
1 2

1200
800
n
n
1
2
71

80.2346

71
8.96

7.926

n = 800
2

x = 523

p - value : p(z < -7.926) 0

= 185
2

is rejected at any common level of significance

8-20

Example 8-3: Carrying Out the Test

Standard Normal Distribution
0.4

f(z)

0.3

0.2

0.1

0.0

-z0.01=-2.576

Rejection
Region
Test Statistic=-7.926

Nonrejection
Region

z
z0.01=2.576

Rejection
Region

Sincethe
thevalue
valueof
ofthe
thetest
test
Since
statisticisisfar
farbelow
belowthe
thelower
lower
statistic
criticalpoint,
point,the
thenull
null
critical
hypothesismay
maybe
berejected,
rejected,
hypothesis
andwe
wemay
mayconclude
concludethat
that
and
thereisisaastatistically
statistically
there
significantdifference
differencebetween
between
significant
theaverage
averagemonthly
monthlycharges
charges
the
ofGold
GoldCard
Cardand
andPreferred
Preferred
of
Visacardholders.
cardholders.
Visa

8-21

Example 8-3: Using the Template

Decision: reject the null hypothesis.

8-22

Example 8-4
Is there evidence to substantiate Duracells claim that their batteries last, on average, at least 45 minutes longer
than Energizer batteries of the same size?

Population 1 : Duracell

H : 45
0 1
2
H : 45
1 1
2

n = 100
1

x = 308
1

= 84
1

Population 2 : Energizer

( x x ) ( )
2
1
2 0 (308 254 ) 45
z 1
2
2
2
2

84
67
1 2

100
100
n
n
1
2

9
115 .45

9
10.75

0.838

n = 100
2

x = 254
2

= 67
2

p - value : p(z > 0.838) = 0.201

H may not be rejected at any common
0
level of significance

8-23

Example 8-4 Using the Template

Is there evidence to substantiate Duracells claim that their batteries last, on average, at least 45 minutes longer
than Energizer batteries of the same size?

P-value

8-24

Confidence Intervals for the Difference

between Two Population Means

large-sample(1-)100%
(1-)100%confidence
confidenceinterval
intervalfor
forthe
thedifference
difference
AAlarge-sample
betweentwo
twopopulation
populationmeans,
means,11--22,,using
usingindependent
independentrandom
random
between
samples:
samples:
(x x ) z
1
2

2
2

1 2
n
n
1
2

95%confidence
confidenceinterval
intervalusing
usingthe
thedata
datain
inexample
example8-3:
8-3:
AA95%
(x x ) z
1
2

2
2
2 1852

212
1 2 (523 452) 1.96

[53.44,88.56]
1200
800
n
n
1
2

8-25

A Test for the Difference between Two Population

Means: Assuming Equal Population Variances
wemight
mightassume
assumethat
thatthe
thepopulation
populationvariances
variances212and
and222are
areequal
equal(even
(eventhough
though
IfIfwe
1
2
unknown),then
thenthe
thetwo
twosample
samplevariances,
variances,ss212and
andss22,2,provide
providetwo
twoseparate
separateestimators
estimatorsofof
unknown),
1
2
thecommon
commonpopulation
populationvariance.
variance. Combining
Combiningthe
thetwo
twoseparate
separateestimates
estimatesinto
intoaapooled
pooled
the
estimateshould
shouldgive
giveus
usaabetter
betterestimate
estimatethan
thaneither
eithersample
samplevariance
varianceby
byitself.
itself.
estimate

Deviation from the

mean. One for each
sample data point.

** * * * * **
**
x1

Deviation from the

mean. One for each
sample data point.

* *

* *
Sample 1

From sample 1 we get the estimate s12 with

(n1-1) degrees of freedom.

* ** *

* ** * *
x2

** *
*
Sample 2

From sample 2 we get the estimate s22 with

(n2-1) degrees of freedom.

From both samples together we get a pooled estimate, sp2 , with (n1-1) + (n2-1) = (n1+ n2 -2)
total degrees of freedom.

Pooled Estimate of the Population

Variance

8-26

pooledestimate
estimateof
ofthe
thecommon
commonpopulation
populationvariance,
variance,based
basedon
onaasample
sample
AApooled
variancess212from
fromaasample
sampleof
ofsize
sizenn1and
andaasample
samplevariance
variancess222from
fromaasample
sample
variance
1
1
2
ofsize
sizenn2isisgiven
givenby:
by:
of
2
2
2

s 2p

( n1 1) s1 (n2 1) s2
n1 n2 2

Thedegrees
degreesof
offreedom
freedomassociated
associatedwith
withthis
thisestimator
estimatoris:
is:
The
df==(n
(n+
1+ n2-2)
df
1 n2-2)
Thepooled
pooledestimate
estimateof
ofthe
thevariance
varianceisisaaweighted
weightedaverage
averageof
ofthe
thetwo
two
The
individualsample
samplevariances,
variances,with
withweights
weightsproportional
proportionaltotothe
thesizes
sizesof
ofthe
thetwo
two
individual
samples. That
Thatis,
is,larger
largerweight
weightisisgiven
giventotothe
thevariance
variancefrom
fromthe
thelarger
larger
samples.
sample.
sample.

Using the Pooled Estimate of the

Population Variance
Theestimate
estimateof
ofthe
thestandard
standarddeviation
deviationof
of(x
(x1xx 2))isisgiven
givenby:
by:
The
1
2

2 11
11
2

sspp
nn1 nn 2
1
2

Teststatistic
statisticfor
forthe
thedifference
differencebetween
betweentwo
twopopulation
populationmeans,
means, assuming
assumingequal
equal
Test
populationvariances:
variances:
population
(x1xx 2))(( 1 2)) 0
(x
1
2
1
2 0
t t==
2 11 11
2
sspp n n
n11 n22
where(( 1 2)) 0 isisthe
thedifference
differencebetween
betweenthe
thetwo
twopopulation
populationmeans
meansunder
underthe
thenull
null
where
1
2 0
hypothesis(zero
(zeroororsome
someother
othernumber
numberD).
D).
hypothesis
Thenumber
numberofofdegrees
degreesofoffreedom
freedomof
ofthe
thetest
teststatistic
statisticisisdfdf ==((nn1nn2 22))(the
(the
The
1
2
2
2
numberofofdegrees
degreesofoffreedom
freedomassociated
associatedwith
withss p, , the
thepooled
pooledestimate
estimateofofthe
the
number
p
populationvariance.
variance.
population

8-27

8-28

Example 8-5
Dothe
thedata
dataprovide
providesufficient
sufficientevidence
evidencetotoconclude
concludethat
thataverage
averagepercentage
percentageincrease
increaseininthe
theCPI
CPIdiffers
differswhen
whenoil
oil
Do
sellsatatthese
thesetwo
twodifferent
differentprices?
prices?
sells

Population 1: Oil price = $66.00

n = 14
1
x = 0.317%
1
s = 0.12%
1
Population 2 : Oil price = $58.00
n2 = 9
x 2 = 0.21%
s2 = 0.11%
df = (n n 2) (14 9 2) 21
1 2

H 0 : 1 2 0
H1: 1 2 0

( x1 x 2 ) ( 1 2 ) 0
t
( n1 1) s12 ( n2 1) s22 1 1

n1 n2
1
2
0.107
0.107

2.154
0
.
0497
0.00247
Critical point: t

= 2.080

0.025
H 0 may be rejected at the 5% level of significance

8-29

Example 8-5: Using the Template

Do the data provide sufficient evidence to conclude that average percentage increase in the CPI differs when oil
sells at these two different prices?

Decision: reject the null hypothesis.

8-30

Example 8-5: Using Minitab

Do the data provide sufficient evidence to conclude that average percentage increase in the CPI differs when oil
sells at these two different prices?

Decision: reject the null hypothesis; p-value = 0.043.

8-31

Example 8-6
The manufacturers of compact disk players want
to test whether a small price reduction is enough
to increase sales of their product. Is there
evidence that the small price reduction is enough
to increase sales of compact disk players?

H : 0
0
2
1
H : 0
1
2
1
t

Population 1: Before Reduction

n 1 = 15
x 1 = $6598
s1 = $844

Population 2: After Reduction

n 2 = 12
x 2 = $6870
s 2 = $669
df = (n n 2 ) (15 12 2 ) 25
1
2

( x x ) ( )
2
1
2
1 0
2
2
( n 1) s ( n 1) s 1
1
1
1
2
2

n n
n n 2
1
2
1 2

( 6870 6598) 0

2
2
(14)844 (11) 669

15 12 2

272
89375.25

Critical point : t

1
15

12

272
0.91
298.96

0.10

= 1.316

H may not be rejected even at the 10% level of significance

0

8-32

Example 8-6: Continued

t Distribution: df = 25
0.4

f(t)

0.3
0.2
0.1
0.0
-5

-4

-3

-2

-1

Nonrejection
Region

t0.10=1.316
Rejection
Region

Test Statistic=0.91

Sincethe
thetest
teststatistic
statisticisisless
less
Since
thantt0.10,
thenull
nullhypothesis
hypothesis
than
0.10,the
cannotbe
berejected
rejectedatatany
any
cannot
reasonablelevel
levelof
of
reasonable
significance. We
Weconclude
conclude
significance.
thatthe
theprice
pricereduction
reductiondoes
does
that
notsignificantly
significantlyaffect
affectsales.
sales.
not

8-33

Example 8-6: Using the Template

Decision: Do not reject the null hypothesis; p-value = 0.1858.

8-34

Example 8-6: Using Minitab

Decision: Do not reject the null hypothesis; p-value = 0.186.

8-35

Confidence Intervals Using the Pooled

Variance
(1-)100%
100%confidence
confidenceinterval
intervalfor
forthe
thedifference
differencebetween
betweentwo
two
AA(1-)
populationmeans,
means,11--22,,using
usingindependent
independentrandom
randomsamples
samplesand
and
population
assumingequal
equalpopulation
populationvariances:
variances:
assuming
( x1 x2 ) t

sp

n1

n2

95%confidence
confidenceinterval
intervalusing
usingthe
thedata
datain
inExample
Example8-6:
8-6:
AA95%
( x1 x 2 ) t

2
sp

1
n1

1
n2

( 6870 6598 ) 2 .06 ( 595835)( 0.15) [ 343.85,887 .85]

8-36

Confidence Intervals Using the Pooled Variance

and the Template-Example 8-6

NOTE: The MINITAB outputs have the confidence

Intervals included in the output as well.

Confidence Interval

8-37

8-4 A Large-Sample Test for the Difference

between Two Population Proportions

Hypothesized difference is zero

I: Difference between two population proportions is 0

p1= p2

H0: p1 -p2 = 0
H1: p1 -p20

II: Difference between two population proportions is less than 0

p1p2
H0: p1 -p2 0
H1: p1 -p2 > 0

Hypothesized difference is other than zero:

III: Difference between two population proportions is less than D

p1 p2+D

H0:p-p2 D
H1: p1 -p2 > D

8-38

8-4 A Large-Sample Test for the Difference

between Two Population Proportions

Hypothesized difference is zero

IV: Difference between two population proportions is greater than 0
p1p2

H0: p1 -p2 0
H1: p1 -p2 < 0

Hypothesized difference is other than zero:

V: Difference between two population proportions is greater than D

p1 p2+D

H0:p-p2 D
H1: p1 -p2 < D

8-39

Comparisons of Two Population Proportions When the

Hypothesized Difference Is Zero: Test Statistic
Whenthe
thepopulation
populationproportions
proportionsare
arehypothesized
hypothesizedtotobe
beequal,
equal,then
thenaapooled
pooledestimator
estimatorof
of
When
theproportion
proportion(( p ))may
maybe
beused
usedinincalculating
calculatingthe
thetest
teststatistic.
statistic.
the

large-sampletest
teststatistic
statisticfor
forthe
thedifference
differencebetween
betweentwo
twopopulation
population
AAlarge-sample
proportions,when
whenthe
thehypothesized
hypothesizeddifference
differenceisiszero:
zero:
proportions,

( p1 p 2 ) 0
1 1

p(1 p)
n1 n2

x1 is the sample proportion in sample 1 and

x
where
thesample
sample
where p1
is the sample proportion in sample 1 and p 1 1 isisthe
n1

n1

proportionininsample
sample2.2. The
Thesymbol
symbol p stands
standsfor
forthe
thecombined
combinedsample
sample
proportion
proportionininboth
bothsamples,
samples,considered
consideredas
asaasingle
singlesample.
sample. That
Thatis:
is:
proportion
p

x x
n n
1

8-40

Comparisons of Two Population Proportions When the

Hypothesized Difference Is Zero: Example 8-7
Carry out a two-tailed test of the equality of banks share of the car loan market in 1980 and 1995.

Population 1: 1980
n1 = 100

H 0 : p1 p 2 0
H 1: p1 p 2 0

x1 = 53

p 1 = 0.53

Population 2: 1995
n 2 = 100
x 2 = 43
p 2 = 0.43
x1 + x 2
53 43
p

0.48
n1 n 2 100 100

( p1 p 2 ) 0

p (1 p )

0.10
0.004992

Critical point: z

n1 n 2
0.10
0.07065

0.53 0.43

(.48)(.52)

1.415

= 1.645
0.05
H 0 may not be rejected even at a 10%
level of significance.

1
100

100

8-41

Example 8-7: Carrying Out the Test

Standard Normal Distribution
0.4

f(z)

0.3
0.2

0.1

0.0

-z0.05=-1.645

Rejection
Region

z
z0.05=1.645

Nonrejection
Region
Test Statistic=1.415

Rejection
Region

Sincethe
thevalue
valueof
ofthe
thetest
test
Since
statisticisiswithin
withinthe
the
statistic
nonrejectionregion,
region,even
evenatataa
nonrejection
10%level
levelof
ofsignificance,
significance,we
we
10%
mayconclude
concludethat
thatthere
thereisisno
no
may
statisticallysignificant
significant
statistically
differencebetween
betweenbanks
banks
difference
sharesof
ofcar
carloans
loansin
in1980
1980
shares
and1995.
1995.
and

8-42

Example 8-7: Using the Template

Decision: Do not reject the null hypothesis; p-value = 0.157.

8-43

Example 8-7: Using Minitab

Decision: Do not reject the null hypothesis; p-value = 0.157.

8-44

Comparisons of Two Population Proportions When the

Hypothesized Difference Is Not Zero: Example 8-8
Carryout
outaaone-tailed
one-tailedtest
testtotodetermine
determinewhether
whetherthe
thepopulation
populationproportion
proportionofoftravelers
travelerscheck
checkbuyers
buyerswho
whobuy
buyatat
Carry
least$2500
$2500ininchecks
checkswhen
whensweepstakes
sweepstakesprizes
prizesare
areoffered
offeredasasatatleast
least10%
10%higher
higherthan
thanthe
theproportion
proportionofofsuch
such
least
buyerswhen
whenno
nosweepstakes
sweepstakesare
areon.
on.
buyers

n1 = 300

H 0 : p1 p 2 0.10
H 1 : p1 p 2 0.10

x1 = 120

Population 1: With Sweepstakes

( p 1 p 2 ) D

p 1 = 0.40

Population 2: No Sweepstakes
n 2 = 700
x 2 = 140
p 2 = 0.20

p (1 p ) p (1 p )
1
1
2
2

n1
n2

( 0.40 0.20) 0.10

( 0.40)( 0.60)

300

Critical point: z

( 0.20)(.80)

700
= 3.09

0.10
0.03207

3.118

0.001
H 0 may be rejected at any common level of significance.

8-45

Example 8-8: Carrying Out the Test

Standard Normal Distribution
0.4

f(z)

0.3

0.2

0.1

0.0
0

Nonrejection
Region

z
z0.001=3.09

Rejection
Region
Test Statistic=3.118

Sincethe
thevalue
valueof
ofthe
thetest
test
Since
statisticisisabove
abovethe
thecritical
critical
statistic
point,even
evenfor
foraalevel
levelof
of
point,
significanceas
assmall
smallas
as0.001,
0.001,
significance
thenull
nullhypothesis
hypothesismay
maybe
be
the
rejected,and
andwe
wemay
may
rejected,
concludethat
thatthe
theproportion
proportion
conclude
ofcustomers
customersbuying
buyingatatleast
least
of
$2500of
oftravelers
travelerschecks
checksisisatat
$2500
least10%
10%higher
higherwhen
when
least
sweepstakesare
areon.
on.
sweepstakes

8-46

Example 8-8: Using the Template

Decision: Reject the null hypothesis; p-value = 0.0009.

8-47

Example 8-8: Using Minitab

Decision: Reject the null hypothesis; p-value = 0.001.

8-48

Confidence Intervals for the Difference

between Two Population Proportions
(1-)100%
100%large-sample
large-sampleconfidence
confidenceinterval
intervalfor
forthe
thedifference
difference
AA(1-)
betweentwo
twopopulation
populationproportions:
proportions:
between
( p1 p 2 ) z

p (1 p ) p (1 p )
1
1
2
2

n1
n2

95%confidence
confidenceinterval
intervalusing
usingthe
thedata
datain
inexample
example8-8:
8-8:
AA95%
p1 (1 p1 ) p 2 (1 p 2 )

( 0.4 0.2) 1.96 ( 0.4 )( 0.6) ( 0.2)( 0.8)

( p 1 p 2 ) z

n1
n2
300
700

2
0.2 (1.96)( 0.0321) 0.2 0.063 [ 0.137 ,0.263]

8-49

Example 8-8 Using the Template

Confidence Interval

8-50

Example 8-8 Using Minitab

NOTE: In order to use Minitab to construct the confidence interval, you will have to
Make sure that the Not Equal Alternative option is selected.

8-5 The F Distribution and a Test for

Equality of Two Population Variances
TheFFdistribution
distributionisisthe
thedistribution
distributionofofthe
theratio
ratioofoftwo
twochi-square
chi-squarerandom
randomvariables
variables
The
thatare
areindependent
independentof
ofeach
eachother,
other,each
eachof
ofwhich
whichisisdivided
dividedby
byits
itsown
owndegrees
degreesofof
that
freedom.
freedom.
AnFFrandom
randomvariable
variablewith
withkk1and
andkk2degrees
degreesofoffreedom:
freedom:
An
1
2

F k1, k 2

12 k1
2
2 k2

8-51

8-52

The F Distribution
F Distributions with different Degrees of Freedom

f(F)

TheFFrandom
randomvariable
variablecannot
cannot
The
benegative,
negative,so
soititisisbound
boundby
by
be
zeroon
onthe
theleft.
left.
zero
TheFFdistribution
distributionisisskewed
skewedtoto
The
theright.
right.
the
TheFFdistribution
distributionisisidentified
identified
The
thenumber
numberof
ofdegrees
degreesof
of
the
freedomin
inthe
thenumerator,
numerator,kk,1,
freedom
1
andthe
thenumber
numberof
ofdegrees
degreesof
of
and
freedomin
inthe
thedenominator,
denominator,
freedom
kk2.2.

F(25,30)

1.0

F(10,15)
0.5

F(5,6)

0.0
0

8-53

Using the Table of the F Distribution

Critical Points of the F Distribution Cutting Off a
Right-Tail Area of 0.05
1

k2
1 161.4 199.5 215.7 224.6 230.2 234.0 236.8 238.9 240.5
2 18.51 19.00 19.16 19.25 19.30 19.33 19.35 19.37 19.38
3 10.13 9.55 9.28 9.12 9.01 8.94 8.89 8.85 8.81
4
7.71 6.94 6.59 6.39 6.26 6.16 6.09 6.04 6.00
5
6.61 5.79 5.41 5.19 5.05 4.95 4.88 4.82 4.77
6
5.99 5.14 4.76 4.53 4.39 4.28 4.21 4.15 4.10
7
5.59 4.74 4.35 4.12 3.97 3.87 3.79 3.73 3.68
8
5.32 4.46 4.07 3.84 3.69 3.58 3.50 3.44 3.39
9
5.12 4.26 3.86 3.63 3.48 3.37 3.29 3.23 3.18
10
4.96 4.10 3.71 3.48 3.33 3.22 3.14 3.07 3.02
3.01 2.95 2.90
11
4.84 3.98 3.59 3.36 3.20 3.09 3.01
12
4.75 3.89 3.49 3.26 3.11 3.00 2.91 2.85 2.80
13
4.67 3.81 3.41 3.18 3.03 2.92 2.83 2.77 2.71
14
4.60 3.74 3.34 3.11 2.96 2.85 2.76 2.70 2.65
15
4.54 3.68 3.29 3.06 2.90 2.79 2.71 2.64 2.59

0.7
0.6
0.5

f(F)

k1

F Distribution with 7 and 11 Degrees of Freedom

0.4
0.3
0.2
0.1

0.0
0

The left-hand critical point to go along with F(k1,k2) is given by:

F0.05=3.01

1
F k 2 ,k 1

Where F(k1,k2) is the right-hand critical point for an F random variable with the reverse
number of degrees of freedom.

Critical Points of the F Distribution:

F(6, 9), = 0.10
F Distribution with 6 and 9 Degrees of Freedom
0.7

f(F)

0.05

0.90

0.6
0.5

Theright-hand
right-handcritical
criticalpoint
pointread
read
The
directlyfrom
fromthe
thetable
tableofofthe
theFF
directly
distributionis:
is:
distribution
=3.37
(6,9)=3.37
FF(6,9)

0.4
0.3

0.05

0.2
0.1
0.0
0

F0.95=(1/4.10)=0.2439

F0.05=3.37

Thecorresponding
correspondingleft-hand
left-handcritical
critical
The
pointisisgiven
givenby:
by:
point
1
1

0.2439
F 9 , 6 410
.

8-54

Test Statistic for the Equality of Two

Population Variances
Teststatistic
statisticfor
forthe
theequality
equalityof
ofthe
thevariances
variancesof
oftwo
twonormally
normally
Test
distributedpopulations:
populations:
distributed
2
2
s
s1
FF n n1,1n,n11 s122
s2
1

Two-TailedTest
Test
I:I:Two-Tailed
1==2
1

HH0:0:1 1==2 2
1:
2
HH:
1

II:One-Tailed
One-TailedTest
Test
II:
12

1

2
HH0:0:1 1
2
2
HH:1:1
1

8-55

8-56

Example 8-9
The economist wants to test whether or not the event (interceptions and prosecution of insider
traders) has decreased the variance of prices of stocks.
Population 1 : Before
n = 25
1
s 2 9 .3
1
Population 2 : After
n = 24
2
s 2 3 .0
2

0.05
F
2.01
24,23
0.01
F
2.70
24,23

H 0:
H1:

2
1
2
1

21
2
2

s2
9.3
1
F
F

3.1
3.0
n1 1, n 2 1
24,23
s2
2

H 0 may be rejected at a 1% level of significance.

8-57

Example 8-9: Solution

Distribution with 24 and 23 Degrees of Freedom
0.7
0.6

f(F)

0.5
0.4
0.3
0.2
0.1

0.0
0

F0.01=2.7

Test Statistic=3.1

Sincethe
thevalue
valueof
ofthe
thetest
test
Since
statisticisisabove
abovethe
thecritical
critical
statistic
point,even
evenfor
foraalevel
levelof
of
point,
significanceas
assmall
smallas
as0.01,
0.01,
significance
thenull
nullhypothesis
hypothesismay
maybe
be
the
rejected,and
andwe
wemay
may
rejected,
concludethat
thatthe
thevariance
varianceof
of
conclude
stockprices
pricesisisreduced
reducedafter
after
stock
theinterception
interceptionand
and
the
prosecutionof
ofinside
insidetraders.
traders.
prosecution

Example 8-9: Solution Using the

Template

Decision: Reject the null hypothesis; p-value = 0.0042.

8-58

Example 8-10: Testing the Equality of

Variances for Example 8-5
Population 1 Population 2
n = 14
1
2
2
s 0.12
1
0.05
F

13,8

3.28

0.10
F

13,8

2.50

n =9
2
2
2
s 0.11
2

2
2
H :
0 1
2
2
2
H :
1 1
2
s2
0.12 2
1
F
F

119
.
2
2
n1 1, n2 1 13,8 s 0.11
2
H may not be rejected at the 10% level of significance.
0

8-59

8-60

Example 8-10: Solution

F Distribution with 13 and 8 Degrees of Freedom
0.7

f(F)

0.10

0.80

0.6
0.5
0.4
0.3

0.10

0.2
0.1
0.0
0

F0.90=(1/2.20)=0.4545
Test Statistic=1.19

F0.10=3.28

Sincethe
thevalue
valueof
ofthe
thetest
test
Since
statisticisisbetween
betweenthe
thecritical
critical
statistic
points,even
evenfor
foraa20%
20%level
levelof
of
points,
significance,we
wecan
cannot
notreject
reject
significance,
thenull
nullhypothesis.
hypothesis. We
We
the
concludethe
thetwo
twopopulation
population
conclude
variancesare
areequal.
equal.
variances

8-61

Template to test for the Difference between Two

Population Variances: Example 8-10

Decision: Do not reject the null hypothesis; p-value = 0.8304;

Assume equal variances..

Example 8-10: Using Minitab to Test for

Equal Variances

8-62

Confidence intervals overlap with

sample estimates in both assume
Equal variances.
Test for Equal Variances
Test for Equal Variances
F-Test
F-Test
Test Statistic
1.19
Test Statistic
1.19
P-Value
0.830
P-Value
0.830

1
1

Decision: Do not reject

the null hypothesis;
p-value = 0.830;
Assume equal variances.

2
2

0.05
0.05

0.10
0.15
0.20
0.10
0.15
0.20
95% Bonferroni Confidence Intervals for StDevs
95% Bonferroni Confidence Intervals for StDevs

0.25
0.25

8-63

The F Distribution Template

8-64

The Template for Testing Equality of

Variances with data

Do not reject the

Null hypothesis for
Equality of variances
Since P-value = 0.6882

8-65

Using Minitab to test for the Equality of

Variances with data

Donot
notreject
rejectthe
the
Do
nullhypothesis
hypothesisfor
for
null
equalityofofvariances
variances
equality
sinceP-values
P-valuesare
are
since
largefor
forboth
boththe
the
large
F-testand
andLevines
Levinestest.
test.
F-test

8-66

Using Minitab to test for the Equality of

Variances with data
Sample
Sample

Testfor
forEqual
EqualVariances
Variancesfor
forData
Data
Test

F-Test
F-Test
Test Statistic
0.81
Test Statistic
0.81
P-Value
0.688
P-Value
0.688
Levene's Test
Levene's Test
Test Statistic
0.07
Test Statistic
0.07
P-Value
0.799
P-Value
0.799

Sample
Sample

200
200

300
400
500
300
400
500
95% Bonferroni Confidence I ntervals for StDevs
95% Bonferroni Confidence I ntervals for StDevs

600
600

200
200

400
400

600
600
Data
Data

800
800

1000
1000

1200
1200

Donot
notreject
rejectthe
the
Do
nullhypothesis
hypothesisfor
for
null
equalityofofvariances
variances
equality
sincethe
theconfidence
confidence
since
intervalsfor
forthe
the
intervals
standarddeviations
deviations
standard
overlap.
overlap.