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Terminology
Hypothesis
…is a statement about a population distribution such that:
(i) it is either true or false, but never both, and
(ii) with full knowledge of the population data,
it is possible to identify, with certainty,
whether it is true or false.
Examples
…the mean
…the mean monthly
monthly income
income forfor all
all
Examples
systems analysts
systems analysts isis $3569.
$3569.
…35% of
…35% of all
all customers
customers buying
buying coffee
coffee
at Tim
at Tim Horton’s
Horton’s return
return within
within aa week.
week.
Copyright © 2003 McGraw-Hill Ryerson Limited. All rights reserved.
10 - 5
Terminology
Alternative Hypothesis H1
…is the statement that
we are interested in proving
.
It is usually a research hypothesis.
Null Hypothesis Ho
…is the complement of the alternative hypothesis.
We accept the null hypothesis as the default
hypothesis. It is not rejected unless there is
convincing sample evidence against it.
Step 11
Step State the
State the null
null and
and alternate
alternate hypotheses
hypotheses
Step 22
Step Select the
Select the level
level of
of significance
significance
Step 33
Step Identify the
Identify the test
test statistic
statistic
Step 44
Step State the
State the decision
decision rule
rule
Step 55
Step Compute the
Compute the value
value of
of the
the test
test statistic
statistic
and make
and make aa decision
decision
DoNOT
Do NOTreject
rejectH
H00 RejectH
Reject H00and
andaccept
acceptH
H11
Copyright © 2003 McGraw-Hill Ryerson Limited. All rights reserved.
10 - 7
Let’s
Let’s look
look at
at the
the Canadian
Canadian legal
legal system
systemfor
for an
an analogy...
analogy...
Two hypotheses:
1. …the accused person is innocent
2. …the accused person is guilty
After
Afterhearing
hearingfrom
fromboth
boththe
theprosecution
prosecutionand
andthe
thedefence,
defence,
aadecision
decisionisismade,
made,declaring
declaringthe
theaccused
accusedeither:
either:
Terminology
Level of Significance
…is the probability of rejecting the null hypothesis
when it is actually true, i.e. Type I Error
Type II Error
…accepting the null hypothesis when it is
actually false.
Test Statistic
…is a value, determined from sample information,
used to determine
whether or not to reject the null hypothesis.
Critical Value
…is the dividing point between
the region where the null hypothesis is rejected
and the
region where it is not rejected.
Tests
Tests
α
1- α
=
= rejection
acceptance region
region
0 Critical z α
α
=
1- α rejection
= region
acceptance
α /2
region α /2
-zα /2 0 zα /2
Tests of Significance
1- α = 95%
acceptance = 5%
region rejection
region
0 1.65
Copyright © 2003 McGraw-Hill Ryerson Limited. All rights reserved.
10 - 17
Tests of Significance
A test is two-tailed when no direction is specified
in the alternate hypothesis, H1
Examples
Examples
5% Level of Significance
Reject H
Reject Ho when
o
z>
when z> 1.96 or
1.96 z<
or z< -
- 1.96
1.96
= 5%
= 95% rejection
acceptance region
region
0.025 0.025
1.96&
1.96 &-1.96
-1.96are
arecalled
called“critical
“criticalvalues”
values”
Copyright © 2003 McGraw-Hill Ryerson Limited. All rights reserved.
Testing for
Testing for the
the Population
Population Mean:
Mean: 10 - 19
Large Sample,
Large Sample,
Population Standard
Population Standard Deviation
Deviation
Known
Known
X −µ
z =
σ / n
Step 11
Step Statethe
State thenull
nulland
andalternate
alternatehypotheses
hypotheses H0: µ = 16
H1: µ ≠
Step 22
Step Selectthe
Select thelevel
levelof
ofsignificance
significance α
16 = 0.05
Step 33
Step Identifythe
Identify thetest
teststatistic
statistic Because we know the standard
deviation, the test statistic is Z
Step 44
Step Statethe
State thedecision
decisionrule
rule Reject H0 if z > 1.96 or z < -1.96
Step 55 Computethe
thetest
teststatistic
statistic X −µ 16 . 12 − 16 . 00
Step Compute z= =
andmake
and makeaadecision
decision σ n 0 . 5 36
= 1 . 44
Remember, use
Remember, use the
the best
best that
that you
you have!
have!
Step 11
Step Statethe
State thenull
nulland
andalternate
alternatehypotheses
hypotheses H0: µ = 400
H1: µ > 400
Step 22
Step Selectthe
Select thelevel
levelof
ofsignificance
significance α = 0.05
Step 33
Step Identifythe
Identify thetest
teststatistic
statistic Because the sample is large,
we use the test statistic Z
Step 44
Step Statethe
State thedecision
decisionrule
rule Reject H0 if z > 1.645
X −µ $ 407 − $ 400
Step 55
Step Computethe
Compute thetest
teststatistic
statistic
z= =
and make a decision
and make a decision σ n $ 38 172
= 2 . 42
Atthe
At the.05
.05significance
significancelevel,
level,
canNed
can Nedconclude
concludethat
thatthe
thenew
newmachine
machineisis
faster?
faster?
Copyright © 2003 McGraw-Hill Ryerson Limited. All rights reserved.
10 - 27
HypothesisTest
Hypothesis Test
Step 11
Step Statethe
State thenull
nulland
andalternate
alternatehypotheses
hypotheses H0: µ = 250
H1: µ > 250
Step 22
Step Selectthe
Select thelevel
levelof
ofsignificance
significance α = 0.05
Step 33
Step Identifythe
Identify thetest
teststatistic
statistic Because the sample is small and
σ is unknown, we use the t-
test
Step 44
Step State the decision rule
State the decision rule … 10 -1 = 9 degrees of freedom
Reject H0 if t > 1.833
Step 55
Step Computethe
Compute thetest
teststatistic
statistic X −µ 256 − 250
andmake
and makeaadecision
decision t= =
σ n 6 10
= 3 . 162
Reject the hypothesis. H0 . Ned can conclude
that the new machine will increase the
Copyright © 2003 McGraw-Hill Ryerson Limited. All rights reserved.
10 - 28
Previously determined…
Rock’sDiscount
Rock’s
issuesits
DiscountStore
itsown
owncredit
Storechain
creditcard.
chain
card.
α = 0.05
issues
Lisa,the
Lisa, thecredit
creditmanager,manager,
X −µ
wantstotofind
wants
meanmonthly
mean
findout
monthlyunpaid
outififthe
unpaid
the
z= = 2.42
balanceisismore
balance morethan than$400. $400. s n
Thelevel
The level
ofofsignificance
significanceisisset setatat.05. .05.
AA P(z ≥ 2.42) = .5 - .4922
randomcheck
random checkof of172 172
unpaidbalances balancesrevealed revealed = .0078
unpaid
thesample
the samplemean meantotobe be$407 $407
andthe
and thesample
samplestandard standard Since P-value is smaller than
deviationtotobe be$38. $38.
deviation
ShouldLisa Lisa α of 0.05, reject H0.
Should
concludethat
conclude thatthe the The
populationmean
population meanisisgreater greater population mean is greater
than
than
Copyright © 2003 McGraw-Hill
$400?
$400?
Ryerson Limited. All rights reserved. than $400.
10 - 30
P-Value ==
P-Value P-Value ==
P-Value
p(z ≥≥ |computed
p(z |computed value|)
value|) 2p(z ≥≥ |computed
2p(z |computed value|)
value|)
|....| means
|....| means absolute
absolute value
value of…
of…
Weightof
Weight ofEvidence
Evidenceagainst
againstHHoo
If the
If the P-value
P-value isis less
less than
than …
…
Since P-value
Since P-value isis .0078
.0078
… we
… we have
have
very strong
very strong
evidence
evidence
to conclude
to conclude thatthat the
the
population mean
population mean
Copyright © 2003 McGraw-Hill Ryerson Limited. All rights reserved.
isis greater
greater than
than
10 - 34
Single Population
Single Population Proportion:
Proportion:
Test Statistic to be used:
pˆ − p 0
z=
p 0 (1 − p 0 )
n
p^ … is the symbol for sample proportion
p … is the symbol for population proportion
p0 … represents a population proportion of interest
Step 11
Step Statethe
State thenull
nulland
andalternate
alternatehypotheses
hypotheses H0: p = .15
H1: p > .15
Step 22
Step Selectthe
Select thelevel
levelof
ofsignificance
significance α = 0.05
Step 33
Step Identifythe
Identify thetest
teststatistic
statistic We will use the z-test
Step 44
Step Statethe
State thedecision
decisionrule
rule Reject H0 if z > 1.645
Step 55
Step Computethe
Compute thetest
teststatistic
statistic
andmake
and makeaadecision
decision
45 −
z= pˆ − p 200 . 15
pˆ (1 − p )
=
.15(1 − . 15 )
= 2 . 97
n 200
Reject the hypothesis. More than 15% are
responding with a pledge, therefore, the new letter is
more
Copyright effective!
© 2003 McGraw-Hill Ryerson Limited. All rights reserved.
RelationshipBetween
Relationship BetweenHypothesis
HypothesisTesting
Testing 10 - 38
Procedureand
Procedure andConfidence
ConfidenceInterval
Interval
Estimation
Estimation
Case 1:
Case 1:
TEST
Our decision rule can be restated as:
Do not reject H0
α
=
1- α rejection
= region
Confidence
Interval
region
0
Do not reject Ho when z falls
in the confidence interval estimate
HypothesisTesting
Hypothesis TestingProcedure
Procedureand
and
ConfidenceInterval
Confidence IntervalEstimation
Estimation
Case2:
Case 2: Lower-tailed test
1- α =
confidence
level region
α
=
rejection
region
0 Do not reject
HypothesisTesting
Hypothesis TestingProcedure
Procedureand
and
ConfidenceInterval
Confidence IntervalEstimation
Estimation
Case 3:
Case 3: Upper-tailed test
1- α =
acceptance α
region =
rejection
region
Level of Significance
…is the probability of rejecting the null hypothesis
when it is actually true, i.e. Type I Error
Type II Error
…accepting the null hypothesis when it is
actually false.
ofaaType
of TypeII
IIError
Error
AAbatch
batchofof5000
5000light
lightbulbs
bulbseither
eitherbelong
belong
toaasuperior
to superiortype,
type,with
withaamean
meanlife
lifeof
of2400
2400
hours,or
hours, orto
toan
aninferior
inferiortype,
type,
withaamean
with meanlifelifeofof2000
2000hours.
hours.
(Bydefault,
(By default,
thebulbs
the bulbswill
willbe
besold
soldasas the
the
Both bulb inferiortype.)
distributions
inferior type.)
arenormal,
normal,with
withaa
Both bulb distributions are
standarddeviation
standard deviationofof300 hours. αα ==0.025.
300hours. 0.025.
Supposewe
Suppose weselect
selectaasample
sampleof of44bulbs.
bulbs.
Findthe
Find theprobability
probabilityof
ofaa
TypeII
Type IIerror.
error.
Copyright © 2003 McGraw-Hill Ryerson Limited. All rights reserved.
Superior:µµ =2400
Superior: Inferior:µµ =2000
=2400 Inferior: =2000 10 - 46
σσ =300
=300 αα =0.025
=0.025
Step 11
Step Statethe
State thenull
nulland
andalternate
alternatehypotheses
hypotheses H0: µ = 2000
H1: µ = 2400
Step 22
Step Selectthe
Select thelevel
levelof
ofsignificance
significance α = 0.025
Step 33
Step Identifythe
Identify thetest
teststatistic
statistic
Xu = 2000+1.96(300/√4) = 2294
X −µ 2294 − 2400
z= = = − 0 . 70666
σ n 300 4
AA11 == 0.2611,
0.2611,
giving
giving us us aa
left
left tail
tail area
area
of
of 0.24
0.24
The probability
The probability of
of aa Type
Type II
II error 0.24 i.ei.e..ββ =0.24
error isis 0.24 =0.24
Copyright © 2003 McGraw-Hill Ryerson Limited. All rights reserved.
10 - 50
Therefore, the
Therefore, the test’s
test’s power
power isis 1-0.24
1-0.24 == 0.76
0.76
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Test your
Test your learning
learning…
…
10 - 52
oon…
n …
k
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