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In this session ….
1. Type I error refers to the situation when we reject the null hypothesis
when it is true (H0 is wrongly rejected).
- the B-school
e.g H0: there is no difference between the two drugs on average.
Type I error will occur if we conclude that the two drugs produce
different effects when actually there isn’t a difference.
Prob(Type I error) = significance level = α
2. Type II error refers to the situation when we accept the null
hypothesis when it is false.
H0: there is no difference between the two drugs on average.
Type II error will occur if we conclude that the two drugs produce
the same effect when actually there is a difference.
Prob(Type II error) = ß
Type I and Type II Errors – Example
Two tailed test will reject the null hypothesis if the sample mean is
significantly higher or lower than the hypothesized mean.
- the B-school
Appropriate when H0 : µ = µ0 and HA: µ ≠ µ0
e.g The manufacturer of light bulbs wants to produce light bulbs
with a mean life of 1000 hours. If the lifetime is shorter he will lose
customers to the competition and if it is longer then he will incur a
high cost of production. He does not want to deviate significantly
from 1000 hours in either direction. Thus he selects the hypotheses
as
H0 : µ = 1000 hours and HA: µ ≠ 1000 hours
and uses a two tail test.
One Tail Test
Upper tailed test will reject the null hypothesis if the sample mean
is significantly higher than the hypothesized mean. Appropriate
- the B-school
when H0 : µ = µ0 and HA: µ > µ0
e.g A highway safety engineer decides to test the load bearing
capacity of a 20 year old bridge. The minimum load-bearing
capacity of the bridge must be at least 10 tons.
H0 : µ = 10 tons and HA: µ >10 tons
and uses an upper tail test.
i.e he rejects H0 only if the mean load bearing capacity of the bridge
is significantly higher than 10 tons.
Hypothesis test for population mean
n ( x 0 )
H0 : µ = µ0 and Test statistic
s
- the B-school
For HA: µ > µ0, reject H0 if t n 1,
t n 1, 2
For HA: µ ≠ µ0, reject H0 if
t n 1, by z
For n ≥ 30, replace
Hypothesis test for population mean
Solution:
H0: µ = 10 (µ0) HA: µ < 10 (µ0)
n = 12, x(bar) = 8.027, s = 2.536, = 0.05
12(8.075 10) 3.46 1.925
2.62
2.536 2.536
Critical t-value = -tn-1,α= - t11,0.05= -2. 201 (TINV)
n ( pˆ p0 )
H0 : p = p0 and Test statistic
p0 (1 p0 )
For HA: p > p0 reject H0 if
-the
z B-school
For HA: p < p0 reject H0 if z
z 2
For HA: p ≠ p0 reject H0 if
Hypothesis test for population proportion
335
n 6000, pˆ 0.05583
6000
- the B-school
H0 : p 0.05( p0 ) H A : p 0.05
n ( pˆ p0 ) 6000 0.00583
p0 (1 p0 ) 0.05 0.95
77.459 0.00583
2.072
0.218
0.02
Z (the critical value of Z ) 2.05 (NORMSINV
)
Z we reject H i.e the current interest is significantly greater than
0
the interest of two years ago.
Hypothesis test for population standard
deviation
(n 1)s 2
H0 : = 0 and Test statistic
02
For HA: > 0 reject H0 if - the B-school
2( R )
( n 1),
(2(n R1),1
)
(2(n R1),) 2
For HA: ≠ 0 reject H0 if 2
or
Hypothesis test for comparing two population
means
Consider two populations with means µ1, µ2 and standard deviations 1 and 2.
x 1 and x 2
1 2 are the
means of the sampling distributions x and x
of population1 and population2 respectively.
- the B-school
1 2
x x
1 2
X1 X 2
12 22
0.26 0.71
- the B-school
0.026 0.163
n1 n2 32 38
( x1 x2 ) ( 1 2 )H0 1.13 0
6.92
X1 X 2 0.163
0.05
Critical value of Z Z 1.64
Z we reject H0 and conclude that there has
been a decline.
Hypothesis test for comparing population
proportions
Consider two samples of sizes n1 and n2 with pand
1 pas
2
the respective
proportions of successes. Then
n1p1 n2 p2
pˆ
n1 n2 populations.
- the B-school
is the estimated overall proportion of successes in the two
ˆ ˆ pq
pq ˆ ˆ is the estimated standard error of the difference between
ˆ p1 p2
n1 n2 the two proportions.
( p1 p2 ) ( p1 p2 )H0
H0 : p1 = p2 and test statistic,
ˆ x1 x2
For HA: p1 > p2 reject H0 if > Z A training director may wish to
For HA: p1 < p2 reject H0 if <- Z determine if the proportion of
Z 2 promotable employees at one office is
For HA: p1 p2 reject H0 if different from that of another.
Hypothesis test for comparing population
proportions
pˆ
- the B-school
n1p1 n2 p2 400 0.415 380 0.5395 (Proportion of success in
0.4757 the two populations)
n1 n2 400 380
1 1
ˆ ˆ 0.4757 0.5243
1 1
ˆ p1 p2 pq 0.0358
n1 n2 400 380
0.01 The hotel chain should
Critical value of Z Z 2.32 convert more rooms to non-
( p1 p2 ) ( p1 p2 )H0 0.1245 0 smoking rooms as there has
3.48 been a significant increase in
ˆ pˆ1 pˆ2 0.0358 the number of guests seeking
Z we reject H0 non-smoking rooms.