IS 310

Business
Statistics
CSU
Long Beach

IS 310 – Business Statistics Slide 1

 Inferences on Two Populations

In the past, we dealt with one population mean and one

population proportion. However, there are
situations where two populations are involved
dealing with two means.

Examples are the following:

O We want to compare the mean salaries of male and female

graduates (two populations and two means).

O We want to compare the mean miles per gallon(MPG) of two

comparable automobile makes (two populations and two
means)

IS 310 – Business Statistics Slide 2

 Statistical Inferences About Means
and Proportions with Two Populations

 Inferences About the Difference Between

Two Population Means: s 1 and s 2 Known

 Inferences About the Difference Between
Two Population Means: s 1 and s 2 Unknown

IS 310 – Business Statistics Slide 3

 Inferences About the Difference Between
Two Population Means: s 1 and s 2 Known

 Interval Estimation of m 1 – m 2

 Hypothesis Tests About m 1 – m 2

IS 310 – Business Statistics Slide 4

 Estimating the Difference Between
Two Population Means
 Let m1 equal the mean of population 1 and m2 equal
the mean of population 2.
 The difference between the two population means is
m1 - m2.
 To estimate m1 - m2, we will select a simple random
sample of size n1 from population 1 and a simple
random sample of size n2 from population 2.
 Let x1 equal the mean of sample 1 and x2 equal the
mean of sample 2.
 The point estimator of the difference between the
means of the populations 1 and 2 is x1  x2.

IS 310 – Business Statistics Slide 5

 Sampling Distribution of x1  x2

 Expected Value
E ( x1  x2 )  m1  m 2

 Standard Deviation (Standard Error)

s12 s 22
s x1  x2  
n1 n2

where: s1 = standard deviation of population 1

s2 = standard deviation of population 2
n1 = sample size from population 1
n2 = sample size from population 2

IS 310 – Business Statistics Slide 6

 Interval Estimation of m1 - m2:
s 1 and s 2 Known
 Interval Estimate

s 12 s 22
x1  x2  z / 2 
n1 n2
where:
1 -  is the confidence coefficient

IS 310 – Business Statistics Slide 7

 Interval Estimation of m1 - m2:
s 1 and s 2 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.

IS 310 – Business Statistics Slide 8

 Interval Estimation of m1 - m2:
s 1 and s 2 Known
 Example: Par, Inc.

Sample #1 Sample #2
Par, Inc. Rap, Ltd.
Sample Size 120 balls 80 balls
Sample Mean 275 yards 258 yards

Based on data from previous driving distance

tests, the two population standard deviations are
known with s 1 = 15 yards and s 2 = 20 yards.

IS 310 – Business Statistics Slide 9

 Interval Estimation of m1 - m2:
s 1 and s 2 Known
 Example: Par, Inc.
Let us develop a 95% confidence interval estimate
of the difference between the mean driving distances of
the two brands of golf ball.

IS 310 – Business Statistics Slide 10

 Estimating the Difference Between
Two Population Means

Population 1 Population 2
Par, Inc. Golf Balls Rap, Ltd. Golf Balls
m1 = mean driving m2 = mean driving
distance of Par distance of Rap
golf balls golf balls
m1 – m2 = difference between
the mean distances
Simple random sample Simple random sample
of n1 Par golf balls of n2 Rap golf balls
x1 = sample mean distance x2 = sample mean distance
for the Par golf balls for the Rap golf balls
x1 - x2 = Point Estimate of m1 – m2

IS 310 – Business Statistics Slide 11

 Point Estimate of m1 - m2

Point estimate of m1  m2 = x1  x2
= 275  258
= 17 yards

where:
m1 = mean distance for the population
of Par, Inc. golf balls
m2 = mean distance for the population
of Rap, Ltd. golf balls

IS 310 – Business Statistics Slide 12

 Interval Estimation of m1 - m2:
s 1 and s 2 Known

s12 s 22 (15) 2 ( 20) 2

x1  x2  z / 2   17  1. 96 
n1 n2 120 80
17 + 5.14 or 11.86 yards to 22.14 yards

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.

IS 310 – Business Statistics Slide 13

 Hypothesis Tests About m 1  m 2:
s 1 and s 2 Known
 Hypotheses

H0 : m1  m2  D0 H0 : m1  m2  D0 H0 : m1  m2  D0
H a : m1  m2  D0 H a : m1  m2  D0 H a : m1  m2  D0
Left-tailed Right-tailed Two-tailed
 Test Statistic

( x1  x2 )  D0
z
s 12 s 22

n1 n2

IS 310 – Business Statistics Slide 14

 Hypothesis Tests About m 1  m 2:
s 1 and s 2 Known
 Example: Par, Inc.
Can we conclude, using
 = .01, that the mean driving
distance of Par, Inc. golf balls
is greater than the mean driving
distance of Rap, Ltd. golf balls?

IS 310 – Business Statistics Slide 15

 Hypothesis Tests About m 1  m 2:
s 1 and s 2 Known
 p –Value and Critical Value Approaches

1. Develop the hypotheses. H0: m1 - m2 < 0

Ha: m1 - m2 > 0
where:
m1 = mean distance for the population
of Par, Inc. golf balls
m2 = mean distance for the population
of Rap, Ltd. golf balls

2. Specify the level of significance.  = .01

IS 310 – Business Statistics Slide 16

 Hypothesis Tests About m 1  m 2:
s 1 and s 2 Known
 p –Value and Critical Value Approaches

3. Compute the value of the test statistic.

( x1  x2 )  D0
z
s 12 s 22

n1 n2
(235  218)  0 17
z   6.49
(15)2 (20)2 2.62

120 80

IS 310 – Business Statistics Slide 17

 Hypothesis Tests About m 1  m 2:
s 1 and s 2 Known
 p –Value Approach

4. Compute the p–value.

For z = 6.49, the p –value < .0001.

5. Determine whether to reject H0.

Because p–value <  = .01, we reject H0.
At the .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.

IS 310 – Business Statistics Slide 18

 Hypothesis Tests About m 1  m 2:
s 1 and s 2 Known
 Critical Value Approach

4. Determine the critical value and rejection rule.

For  = .01, z.01 = 2.33

Reject H0 if z > 2.33

5. Determine whether to reject H0.

Because z = 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.

IS 310 – Business Statistics Slide 19

 Sample Problem

Problem # 7 (10-Page 401; 11-Page 414)

a. H : µ = µ H : µ > µ
0 1 2 a 1 2
b. Point reduction in the mean duration of games during 2003 = 172 – 166
= 6 minutes
_ _ 2 2
c. Test-statistic, z = [( x - x ) – 0] /√ [ (σ / n ) + (σ / n )]
1 2 1 1 2 2
=(172 – 166)/√[ (144/60 + 144/50)]
= 6/2.3 = 2.61
Critical z at = 1.645 Reject H
0.05 0
Statistical test supports that the mean duration of games in 2003 is less
than that in 2002.
p-value = 1 – 0.9955 = 0.0045

IS 310 – Business Statistics Slide 20

 Inferences About the Difference Between
Two Population Means: s 1 and s 2 Unknown

 Interval Estimation of m 1 – m 2

 Hypothesis Tests About m 1 – m 2

IS 310 – Business Statistics Slide 21

 Interval Estimation of m1 - m2:
s 1 and s 2 Unknown
When s 1 and s 2 are unknown, we will:
• use the sample standard deviations s1 and s2
as estimates of s 1 and s 2 , and
• replace z/2 with t/2.

IS 310 – Business Statistics Slide 22

 Interval Estimation of µ - µ
1 2
 (Unknown and )
 1 2

 Interval estimate
 _ _ 2 2
 (x - x ) ± t √ (s /n + s /n )
 1 2 /2 1 1 2 2

 Degree of freedom = n + n - 2
 1 2

IS 310 – Business Statistics Slide 23

 Difference Between Two Population Means:
s 1 and s 2 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 miles-per-gallon (mpg) performance.
The sample statistics are shown on the next slide.

IS 310 – Business Statistics Slide 24

 Difference Between Two Population Means:
s 1 and s 2 Unknown
 Example: Specific Motors

Sample #1 Sample #2
M Cars J Cars
24 cars 28 cars Sample Size
29.8 mpg 27.3 mpg Sample Mean
2.56 mpg 1.81 mpg Sample Std. Dev.

IS 310 – Business Statistics Slide 25

 Difference Between Two Population Means:
s 1 and s 2 Unknown
 Example: Specific Motors
Let us develop a 90% confidence
interval estimate of the difference
between the mpg performances of
the two models of automobile.

IS 310 – Business Statistics Slide 26

 Point Estimate of m 1  m 2

Point estimate of m1  m2 = x1  x2
= 29.8 - 27.3
= 2.5 mpg

where:
m1 = mean miles-per-gallon for the
population of M cars
m2 = mean miles-per-gallon for the
population of J cars

IS 310 – Business Statistics Slide 27

 Interval Estimate of µ - µ
1 2
 Interval estimate
 2 2
 29.8 – 27.3 ± t √ (2.56) /24 + (1.81) /28)
 0.1/2
 2.5 ± 1.676 (0.62)
 2.5 ± 1.04
 1.46 and 3.54
 We are 90% confident that the difference between the
average miles per gallon between the J cars and M
cars is between 1.46 and 3.54.

IS 310 – Business Statistics Slide 28

 Hypothesis Tests About m 1  m 2:
s 1 and s 2 Unknown
 Hypotheses

H0 : m1  m2  D0 H0 : m1  m2  D0 H0 : m1  m2  D0
H a : m1  m2  D0 H a : m1  m2  D0 H a : m1  m2  D0
Left-tailed Right-tailed Two-tailed
 Test Statistic

( x1  x2 )  D0
t
2 2
s s
1
 2
n1 n2

IS 310 – Business Statistics Slide 29

 Hypothesis Tests About m 1  m 2:
s 1 and s 2 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?

IS 310 – Business Statistics Slide 30

 Hypothesis Tests About m 1  m 2:
s 1 and s 2 Unknown
 p –Value and Critical Value Approaches
2. Specify the level of significance.  = .05

3. Compute the value of the test statistic.

( x1  x2 )  D0 (29.8  27.3)  0
t   4.003
s12 s22 (2.56)2 (1.81)2
 
n1 n2 24 28

IS 310 – Business Statistics Slide 31

 Hypothesis Tests of µ - µ
1 2
 H : µ =µ H :µ >µ
 0 1 2 a 1 2

 Where µ average miles per gallon of M cars

 1
 µ average miles per gallon of J cars
 2

 At = 0.05 with 50 degree of freedom, critical t = 1.676

 Since t-statistic (4.003) is larger than critical t (1.676), we reject

the null hypothesis. This means that the average MPG of M cars
is not equal to that of J cars

IS 310 – Business Statistics Slide 32

 End of Chapter 10
Part A

IS 310 – Business Statistics Slide 33