 A hypothesis is a statement or assertion about the state of nature

(about the true value of an unknown population parameter):

The accused is innocent
 µ =100
 Every hypothesis implies its contradiction or alternative:
The accused is guilty
 µ ≠ 100
 A hypothesis is either true or false, and you may fail to reject it or you
may reject it on the basis of information:
Trial testimony and evidence
Sample data
One hypothesis is maintained to be true until a
decision is made to reject it as false:
Guilt is proven “beyond a reasonable doubt”
The alternative is highly improbable
A decision to fail to reject or reject a
hypothesis may be:
 Correct
A true hypothesis may not be rejected
» An innocent defendant may be acquitted
A false hypothesis may be rejected
» A guilty defendant may be convicted
Incorrect
A true hypothesis may be rejected
» An innocent defendant may be convicted
A false hypothesis may not be rejected
» A guilty defendant may be acquitted
A null hypothesis, denoted by H0, is an assertion about
one or more population parameters. This is the assertion
we hold to be true until we have sufficient statistical
evidence to conclude otherwise.
H0: µ =100
The alternative hypothesis, denoted by H1, is the
assertion of all situations not covered by the null
hypothesis.
H1: µ ≠ 100

•• HH00and
andHH1are:
1
are:
–– Mutually
Mutuallyexclusive
exclusive
–– Only
Onlyoneonecan
canbe
betrue.
true.
–– Exhaustive
Exhaustive
Togetherthey
–– Together theycover
coverall
allpossibilities,
possibilities,so
soone
oneor
orthe
theother
othermust
mustbe
be
true.
true.
The null hypothesis:
Often represents the status situation or an
existing belief.
Is maintained, or held to be true, until a
test leads to its rejection in favor of the
alternative hypothesis.
Is accepted as true or rejected as false on
the basis of a consideration of a test
statistic.
A test statistic is a sample statistic computed
from sample data. The value of the test statistic is
used in determining whether or not we may reject
the null hypothesis.
The decision rule of a statistical hypothesis test is
a rule that specifies the conditions under which the
null hypothesis may be rejected.

ConsiderHH00::µµ =100
Consider =100.. We
Wemay
mayhave
haveaadecision
decisionrule
rulethat
thatsays:
says:“Reject
“Reject
HH00ifif the
thesample
samplemean
meanisisless
lessthan
than95
95or
ormore
morethan
than105.”
105.”

Inaacourtroom
In courtroomwe
wemay
maysay:
say:“The
“Theaccused
accusedisisinnocent
innocentuntil
untilproven
proven
guiltybeyond
guilty beyondaareasonable
reasonabledoubt.”
doubt.”
A contingency
A contingency tabletable illustrates
illustrates the
the possible
possible outcomes
outcomes
of aa statistical
of statistical hypothesis
hypothesis test.
test.
1) As part of a survey to determine the extent of required in-cabin storage capacity, a
researcher needs to test the null hypothesis that the average weight of carry-on baggage per
person is µ 0 = 12 pounds, versus the alternative hypothesis that the average weight is not
12 pounds. The analyst wants to test the null hypothesis at α = 0.05.
2) An insurance company believes that, over the last few years, the average liability
insurance per board seat in companies defined as “small companies” has been $2000.
Using α = 0.01, test this hypothesis using n=100, x bar =2700 and s = 947

n = 144

x = 14.6

s = 7.8
• There are two possible states of nature:
– H0 is true
– H0 is false
• There are two possible decisions:
– Fail to reject H0 as true
– Reject H0 as false
• A decision may be correct in two ways:
– Fail to reject a true H0
– Reject a false H0
• A decision may be incorrect in two ways:
– Type I Error: Reject a true H0
• The Probability of a Type I error is denoted
by α .
– Type II Error: Fail to reject a false H0
• The Probability of a Type II error is denoted
by β .
A decision may be incorrect in two ways:
Type I Error: Reject a true H0
The Probability of a Type I error is denoted by α .
 α is called the level of significance of the test
Type II Error: Accept a false H0
The Probability of a Type II error is denoted by β .
 1 - β is called the power of the test.
 α and β are conditional probabilities:

α = P(RejectH 0 H 0 is true)

β = P(A cceptH 0 H 0 is false)

Type I error ≡ { reject H0|H0 is true }
Type II error ≡ { do not reject H0|H0 is false}
α = Prob{Type I error}
β = Prob{Type II error}
Power of a statistical test:
Prob{reject H0 — H0 is false }= 1− β
Example 1.
H0: Innocent
H1: Guilty
α = Prob{sending an innocent person to jail}
β = Prob{letting a guilty person go free}
Example 2.
H0: New drug is not acceptable
H1: New drug is acceptable
α = Prob{marketing a bad drug}
β = Prob{not marketing an acceptable drug}
AAcompany
companythatthatdelivers
deliverspackages
packageswithin
withinaalarge
largemetropolitan
metropolitan
areaclaims
area claimsthat
thatitittakes
takesan
anaverage
averageofof28
28minutes
minutesfor
foraapackage
packagetoto
bedelivered
be deliveredfrom
fromyouryourdoor
doorto
tothe
thedestination.
destination. Suppose
Supposethat
thatyou
you
wantto
want tocarry
carryout
outaahypothesis
hypothesistest
testof
ofthis
thisclaim.
claim.
s 5
Set the null and alternative hypotheses: x ± z = 315
. ± 196
.
n 100
. 025

H0: µ = 28
H1: µ ≠ 28
. ± .98 = [ 3052
= 315 . , 32.48]
Collect sample data: We can be 95% sure that the average time for
n = 100 all packages is between 30.52 and 32.48
x = 31.5 minutes.
s=5
Since the asserted value, 28 minutes, is not
Construct a 95% confidence interval for in this 95% confidence interval, we may
the average delivery times of all packages: reasonably reject the null hypothesis.
 95% confidence
Population interval around
mean under H0 observed sample mean

µ = 28 30.52 x = 31.5 32.48

It seems reasonable to reject the null hypothesis, H0: µ = 28, since the
hypothesized value lies outside the 95% confidence interval. If we’re 95% sure
that the population mean is between 30.52 and 32.58 minutes, it’s very unlikely
that the population mean is actually be 28 minutes.

Note that the population mean may be 28 (the null hypothesis might be true), but
then the observed sample mean, 31.5, would be a very unlikely occurrence.
There’s still the small chance (α = .05) that we might reject the true null
hypothesis.
α represents the level of significance of the test.
 If the observed sample mean falls within the nonrejection region, then you fail
to reject the null hypothesis as true. Construct a 95% nonrejection region
around the hypothesized population mean, and compare it with the 95%
confidence interval around the observed sample mean:

s 5 s 5
µ 0 ± z.025 = 28 ± 1.96 95% non- 95% Confidence x ± z .025 = 315
. ± 1.96
n 100 rejection region Interval n 100
around the around the
= 28±.98 = [ 27,02 ,28.98] population Mean Sample Mean . ±.98 = [ 30.52 ,32.48]
= 315

27.02 µ 0=28 28.98 30.52 x= 31.5 32.48

The nonrejection region and the confidence interval are the same width, but
centered on different points. In this instance, the nonrejection region does not
include the observed sample mean, and the confidence interval does not include
the hypothesized population mean.
The rejection region of a statistical
hypothesis test is the range of numbers that will
lead us to reject the null hypothesis in case the
test statistic falls within this range. The
rejection region, also called the critical region,
is defined by the critical points. The rejection
region is defined so that, before the sampling
takes place, our test statistic will have a
probability α of falling within the rejection
region if the null hypothesis is true.
The nonrejection region is the range of values (also
determined by the critical points) that will lead us not to
reject the null hypothesis if the test statistic should fall
within this region. The nonrejection region is designed
so that, before the sampling takes place, our test
statistic will have a probability 1-α of falling within the
nonrejection region if the null hypothesis is true

In a two-tailed test, the rejection region consists of

the values in both tails of the sampling distribution.
 T he Hypothesized Sampling Distribution of the Mean
If the null hypothesis were
0.8
true, then the sampling 0.7 .95

distribution of the mean 0.6

0.5

would look something 0.4

like this: 0.3

0.2
.025 .025

0.1

We will find 95% of the 0.0

sampling distribution between 27.02 µ 0=28 28.98

the critical points 27.02 and 28.98,

and 2.5% below 27.02 and 2.5% above 28.98 (a two-tailed test).
The 95% interval around the hypothesized mean defines the
nonrejection region, with the remaining 5% in two rejection
regions.
 The Hypothesized Sampling Distribution of the Mean
0.8
0.7 .95
0.6
0.5
0.4
0.3
.025 .025
0.2
0.1
0.0

27.02 µ 0=28 28.98

x= 31.5

Lower Rejection Nonrejection Upper Rejection

Region Region Region

Construct a (1-α ) nonrejection region around

the hypothesized population mean.
Do not reject H0 if the sample mean falls within the
nonrejection region (between the critical points).
Reject H0 if the sample mean falls outside the nonrejection
region.
The test statistic (the sample mean) can be standardized,
expressed as a number of standard errors from the
hypothesized population mean:
x − µ0
z=
σ
n

In the same way, the critical points in a hypothesis test can

be expressed in terms of values of the standard normal
random variable:
±zα
2
Null Hypothesis H0: µ = µ0

Alternative Hypothesis H0: µ ≠ µ0

Critical Points of z
Significance Level of α (often 0.05 or 0.01) α α zα
the Test 2 2

0.01 0.005 2.576

Test Statistic x − µ0 (assuming σ is unknown,
z= 0.02 0.010 2.326
s otherwise substitute σ for s)
n 0.05 0.025 1.960
Critical Points The bounds ±zα that capture an area of (1-α)
2
0.10 0.050 1.645
Decision Rule Reject the null hypothesis if 0.20 0.100 1.282
either z > z a or z < -z a
2 2
 Thecritical
The criticalpoints,
points,nonrejection
nonrejectionregion,
region, The Hypothesized Sampling Distribution of the Mean
rejectionregion,
rejection region,and
andtest
teststatistic
statisticcan
canall
allbe
be 0.8

expressedininterms
expressed termsofofvalues
valuesofofthe
thestandard
standard 0.7 .95
0.6
normalrandom
normal randomvariable,
variable,z.z. 0.5
0.4
0.3
Foraa5%
For 5%test,
test,the
thecritical
criticalvalues
valuesof are±±1.96
ofzzare 1.96 0.2
.025 .025

0.1
0.0
Thenonrejection
The nonrejectionregion
regionis:
is: 27.02 µ 0=28 28.98
x

[-1.96≤≤ zz≤≤ 1.96]

[-1.96 1.96] x= 31.5

Lower Rejection Nonrejection Upper Rejection

Region Region Region
Thetwo
The tworejection
rejectionregions
regionsare:
are: z

[z[z<< −1.96]
−1.96]and
and[z[z>> 1.96]
1.96] -1.96 0 1.96
z= 7

InInthis
thisexample,
example,the
thetest
teststatistic
statisticis:
is: Thetest
The teststatistic
statisticfalls
fallsin
inthe
the
x − µ 0 315
. − 28 3.5
z=
s
=
5
=
.5
=7 upperrejection
upper rejectionregion,
region,sosothe
the
n 100 nullhypothesis
null hypothesisisisrejected.
rejected.
AsAspart
partofofaasurvey
surveytotodetermine
determinethetheextent
extentofofrequired
requiredin-cabin
in-cabinstorage
storagecapacity,
capacity,aa
researcherneeds
researcher needstototest
testthe
thenull
nullhypothesis
hypothesisthatthatthe
theaverage
averageweight
weightofofcarry-on
carry-onbaggage
baggage
per personisisµµ 0==12
perperson 12pounds,
pounds,versus
versusthe
thealternative
alternativehypothesis
hypothesisthat
thatthe
theaverage
averageweight
weight
0
isisnot
not12
12pounds.
pounds. The
Theanalyst
analystwants
wantstototest
testthe
thenull hypothesisatatαα ==0.05.
nullhypothesis 0.05.

HH0:0:µµ ==12
12 The Standard Normal Distribution

HH1:1:µµ ≠≠ 12
12 0.8
0.7 .95
0.6
0.5
Forαα ==0.05,
For 0.05,critical
criticalvalues
valuesofofzzare
are±1.96
±1.96 0.4

x − µ0
0.3
.025 .025

Thetest
teststatistic
statisticis:
is: z = 0.2

The s 0.1
0.0

n -1.96 0 1.96 z

Donot
Do notreject
rejectHH0if: [-1.96≤≤ zz≤≤1.96]
if:[-1.96 1.96]
0
Lower Rejection Nonrejection Upper Rejection
Region Region Region
RejectHH0if:
Reject if:[z[z<-1.96] or [z[z>1.96]
<-1.96]or >1.96]
0
 The Standard Normal Distribution
0.8

n = 144 0.7 .95

0.6
0.5
x = 14.6
0.4
0.3
s = 7.8 0.2
.025 .025

0.1

x −µ0 14.6 - 12 0.0

z= =
s 7.8 -1.96 0 1.96 z
n 144
4
Lower Rejection Nonrejection Upper Rejection
2.6 Region
= =4 Region Region
0.65

Sincethe
Since thetest
teststatistic
statisticfalls
fallsininthe
theupper
upperrejection
rejectionregion,
region,HH0isisrejected,
rejected,and
andwe
wemay
may
0
concludethat
conclude thatthe
theaverage
averageamount
amountofofcarry-on
carry-onbaggage
baggageisismore
morethanthan12
12pounds.
pounds.
 Aninsurance
An insurancecompany
companybelieves
believesthat,
that,over
overthe
thelast
lastfew
fewyears,
years,the
theaverage
averageliability
liability
insuranceper
insurance perboard
boardseat
seatinincompanies
companiesdefined
definedasas“small
“smallcompanies”
companies”hashasbeen
been$2000.
$2000.
Usingαα ==0.01,
Using 0.01,test
testthis
thishypothesis
hypothesisusing
usingn=100,
n=100,xxbar
bar=2700
=2700and
andss==947
947

HH0:0:µµ
n = 100
==2000
2000
x = 2700
HH1:1:µµ ≠≠ 2000
2000 s = 947

Forαα ==0.01,
For 0.01,critical
criticalvalues
valuesof
ofzzare
are±2.576
±2.576 x − µ0 2700 - 2000
z= =
x − µ0 s 947
Thetest
teststatistic
statisticis:
is: z=
The s n 100
n
700
= = 7 .39 ⇒ Reject H
Donot
Do notreject
rejectHH0if: [-2.576≤≤ zz ≤≤ 2.576]
if:[-2.576 2.576] 94.7 0
0

RejectHH0if:
Reject if:[z[z<-2.576] or [z[z>2.576]
<-2.576]or >2.576]
0
 The Standard Normal Distribution Sincethe
Since thetest
teststatistic
statisticfalls
fallsin
in
0.8
0.7 .99
theupper
the upperrejection
rejectionregion,
region,HH00
isisrejected,
rejected,andandwe
wemay
may
0.6
0.5

concludethat thatthe
theaverage
average
0.4
0.3
.005 .005
conclude
0.2
0.1 insuranceliability
insurance liabilityper
perboard
board
0.0

-2.576 2.576 z
seatin
seat in“small
“smallcompanies”
companies”isis
0

7.39 morethan
more than$2000.
$2000.
Lower Rejection Nonrejection Upper Rejection
Region Region Region
 Theaverage
The averagetimetimeitittakes
takesaacomputer
computertotoperform
performaacertain
certaintask
taskisisbelieved
believedtotobe
be3.24
3.24
seconds. ItItwas
seconds. wasdecided
decidedtototesttestthe
thestatistical
statisticalhypothesis
hypothesisthat
thatthe
theaverage
averageperformance
performance
timeofofthe
time thetask
taskusing
usingthe thenew
newalgorithm
algorithmisisthe
thesame,
same,against
againstthe
thealternative
alternativethat
thatthe
the
averageperformance
average performancetime timeisisno
nolonger
longerthe
thesame,
same,atatthe
the0.05
0.05level
levelofofsignificance.
significance.

HH0:0:µµ ==3.24
3.24
n = 200
HH1:1:µµ ≠≠ 3.24
3.24 x = 3.48
s = 2.8
Forαα ==0.05,
For 0.05,critical
criticalvalues
valuesof
ofzzare
are±1.96
±1.96
x − µ0
x − µ0 3.48- 3.24
z= z= =
Thetest
The teststatistic
statisticis:
is: s s 2.8
n n 200

Donot
Do notreject
rejectHH0if: [-1.96≤≤ zz≤≤1.96]
if:[-1.96 1.96] 0.24
0 = = 1.21 ⇒ Do not reject H
0.20 0
RejectHH0if:
Reject if:[z[z<<-1.96] or [z[z>1.96]
-1.96]or >1.96]
0
 The Standard Normal Distribution
Sincethe
Since thetest
teststatistic
statisticfalls
fallsin
in
thenonrejection
nonrejectionregion,
region,HH00isis
0.8
0.7
0.6
.95 the
0.5 notrejected,
not rejected,and
andwewemay
may
0.4
0.3
.025 .025
concludethat
conclude thatthe
theaverage
average
performancetimetimehas
hasnot
not
0.2
0.1
performance
changedfrom
from3.24
3.24seconds.
seconds.
0.0

-1.96 0 1.96 z changed

1.21

Lower Rejection Nonrejection Upper Rejection

Region Region Region
 Whenthe
When thepopulation
populationisisnormal,
normal,the
thepopulation
populationstandard deviation, σσ , ,isisunknown
standarddeviation, unknown
andthe
and thesample
samplesize
sizeisissmall,
small,the
thehypothesis
hypothesistest
testisisbased
basedon
onthe
thettdistribution,
distribution, with
with
(n-1)degrees
(n-1) degreesof
offreedom,
freedom,rather
ratherthan
thanthe
thestandard
standardnormal
normaldistribution.
distribution.

Small - sample test statistic for the population mean, µ :

x -µ 0
t=
s
n
When the population is normally distributed and the null
hypothesis is true, the test statistic has a t distribution with
n -1 degrees of freedom
 Accordingtotothe
According theGRADA
GRADANational
NationalLand
LandAgency,
Agency,average
averageland
landprices
pricesinincentral
centralACCRA
ACCRA
soared49%
soared 49%ininthe
thefirst
firstsix
sixmonths
monthsof of2009.
2009. STX
STXananinternational
internationalreal
realestate
estateinvestment
investment
companywants
company wantstototest
testthis
thisclaim
claimagainst
againstthe
thealternative
alternativethat
thatthe
theaverage
averageprice
pricedid
didnot
notrise
rise
by49%,
by 49%,atat(a)
(a)0.01,
0.01,(b)
(b) 0.05
0.05level
levelof
ofsignificance.
significance.

HH0:0:µµ ==49
49 n = 18

HH1:1:µµ ≠≠ 49
49 x = 38
s = 14
nn==18 18
Forαα ==0.01
For 0.01and
and(18-1)
(18-1)==17
17df
df, , x − µ0 38 - 49
criticalvalues
critical valuesof
ofttare
are±2.898
±2.898 t = =
s 14
x − µ0
Thetest
teststatistic
statisticis:
is: t= n 18
The s
n -11
= −3.33 ⇒ Reject H
Donot
Do notreject
rejectHH0if: [-2.898≤≤ tt ≤≤ 2.898]
if:[-2.898 2.898] =
3.3 0
0

RejectHH0if:
Reject if:[t[t<<-2.898] or [t[t>> 2.898]
-2.898]or 2.898]
0
 df t0.100 t0.050 t0.025 t0.010 t0.005
t D is trib utio n: d f = 1 0
--- ----- ----- ------ ------ ------
1 3.078 6.314 12.706 31.821 63.657
0 .4
2 1.886 2.920 4.303 6.965 9.925
3 1.638 2.353 3.182 4.541 5.841
4 1.533 2.132 2.776 3.747 4.604
0 .3
5 1.476 2.015 2.571 3.365 4.032
6 1.440 1.943 2.447 3.143 3.707 Area = 0.10 Area = 0.10

}
7 1.415 1.895 2.365 2.998 3.499

f(t)
0 .2
8 1.397 1.860 2.306 2.896 3.355
9 1.383 1.833 2.262 2.821 3.250
10 1.372 1.812 2.228 2.764 3.169 0 .1
11 1.363 1.796 2.201 2.718 3.106
12 1.356 1.782 2.179 2.681 3.055
13 1.350 1.771 2.160 2.650 3.012 0 .0
14 1.345 1.761 2.145 2.624 2.977 -1.372 0 1.372
-2.228 2.228

}
15 1.341 1.753 2.131 2.602 2.947 t
16 1.337 1.746 2.120 2.583 2.921
17 1.333 1.740 2.110 2.567 2.898 Area = 0.025 Area = 0.025
18 1.330 1.734 2.101 2.552 2.878
19 1.328 1.729 2.093 2.539 2.861
20
21
1.325
1.323
1.725
1.721
2.086
2.080
2.528
2.518
2.845
2.831
Wheneverσσ isisnot
Whenever notknown
known(and
(andthe
thepopulation
populationisis
22
23
1.321
1.319
1.717
1.714
2.074
2.069
2.508
2.500
2.819
2.807
assumednormal),
assumed normal),thethecorrect
correctdistribution
distributiontotouse
useisis
24
25
1.318
1.316
1.711
1.708
2.064
2.060
2.492
2.485
2.797
2.787
thet tdistribution
the distributionwith
withn-1
n-1degrees
degreesofoffreedom.
freedom.
26
27
1.315
1.314
1.706
1.703
2.056
2.052
2.479
2.473
2.779
2.771
Note,however,
Note, however,that
thatfor
forlarge
largedegrees
degreesofoffreedom,
freedom,
28
29
1.313
1.311
1.701
1.699
2.048
2.045
2.467
2.462
2.763
2.756
thet tdistribution
the distributionisisapproximated
approximatedwellwellbybythe
theZZ
30
40
1.310
1.303
1.697
1.684
2.042
2.021
2.457
2.423
2.750
2.704
distribution.
distribution.
60 1.296 1.671 2.000 2.390 2.660
120 1.289 1.658 1.980 2.358 2.617
∞ 1.282 1.645 1.960 2.326 2.576
Canon, Inc,. has introduced a copying machine that features two-color copying
capability in a compact system copier. The average speed of the standard compact
system copier is 27 copies per minute. Suppose the company wants to test whether
the new copier has the same average speed as its standard compact copier. Conduct a
test at an α = 0.05 level of significance. n=24, x-bar=24.6, s=7.4
2) According to the GRADA National Land Agency, average land prices in central
ACCRA soared 49% in the first six months of 2009. STX an international real estate
investment company wants to test this claim against the alternative that the average
price did not rise by 49%, at (a) 0.01, (b) 0.05 level of significance.

n = 24
x = 24.6
s = 7.4
 The t Distribution Sincethe
Since thetest
teststatistic
statisticfalls
fallsin
in
0.8
0.7 .99
therejection
the rejectionregion,
region,HH0isis
0.6
0
0.5 rejected,and
rejected, andwewemay
mayconclude
conclude
0.4
0.3
.005 .005
thatthe
that theaverage
averageprice
pricehas
hasnot
not
risenby
by49%.
49%. Since
Sincethethetest
test
0.2
0.1
risen
statisticisisin
inthe
thelower
lower
0.0

-2.898 0 2.898 t statistic

−3.33 rejectionregion,
rejection region,wewemaymay
Lower Rejection
Region
Nonrejection
Region
Upper Rejection
Region concludethat
conclude thatthe
theaverage
average
pricehas
price hasrisen
risenby
byless
lessthan
than
49%.
49%.
 Canon,Inc,.
Canon, Inc,.has
hasintroduced
introducedaacopying
copyingmachine
machinethat
thatfeatures
featurestwo-color
two-colorcopying
copyingcapability
capability
ininaacompact
compactsystem
systemcopier.
copier. The
Theaverage
averagespeed
speedofofthe
thestandard
standardcompact
compactsystem
systemcopier
copierisis
2727copies
copiesper
perminute.
minute. Suppose
Supposethethecompany
companywants
wantstototest
testwhether
whetherthe
thenewnewcopier
copierhas
hasthe
the
sameaverage
same averagespeed
speedasasits
itsstandard
standardcompact
compactcopier.
copier. Conduct
Conductaatest anαα ==0.05
testatatan 0.05 level
level
ofofsignificance.
significance.n=24,
n=24,x-bar=24.6,
x-bar=24.6,s=7.4
s=7.4

HH0:0:µµ ==27
27
HH1:1:µµ ≠≠ 27
27 n = 24
nn==24 24 x = 24.6
s = 7.4
Forαα ==0.05
For 0.05and
and(24-1)
(24-1)==23
23df
df, ,
criticalvalues
critical valuesof
ofttare
are±2.069
±2.069 t=
x−µ
0 24.6 - 27
x−µ s = 7.4
t= 0
n 24
s
Thetest
The teststatistic
statisticis:
is:
n = - 2.4 = −1.59 ⇒ Do not reject H
1.51 0
Donot
Do notreject
rejectHH0if: [-2.069≤≤ tt ≤≤ 2.069]
if:[-2.069 2.069]
0
RejectHH0if:
Reject if:[t[t<<-2.069]
-2.069]or or [t[t>> 2.069]
2.069]
0
 The t Distribution
Sincethe
Since thetest
teststatistic
statisticfalls
fallsin
in
thenonrejection
nonrejectionregion,
region,HH00isis
0.8
0.7
0.6
.95 the
0.5 notrejected,
not rejected,and
andwewemay
maynotnot
0.4
0.3
.025 .025
concludethat
conclude thatthe
theaverage
average
speedisisdifferent
differentfrom
from2727
0.2
0.1
speed
copiesper
perminute.
minute.
0.0

-2.069 0 2.069 t copies

−1.59

Lower Rejection Nonrejection Upper Rejection

Region Region Region
While the null hypothesis is maintained to be true throughout a hypothesis test,
until sample data lead to a rejection, the aim of a hypothesis test is often to
disprove the null hypothesis in favor of the alternative hypothesis. This is
because we can determine and regulate α , the probability of a Type I error,
making it as small as we desire, such as 0.01 or 0.05. Thus, when we reject a
null hypothesis, we have a high level of confidence in our decision, since we
know there is a small probability that we have made an error.

A given sample mean will not lead to a rejection of a null hypothesis unless it
lies in outside the nonrejection region of the test. That is, the nonrejection
region includes all sample means that are not significantly different, in a
statistical sense, from the hypothesized mean. The rejection regions, in turn,
define the values of sample means that are significantly different, in a statistical
sense, from the hypothesized mean.
When the sample size is large (both np> 5 and nq > 5), the
distribution of the sample proportion may be approximated by a
normal distribution with mean p and variance pq.

Large - sample test statistic for the population proportion, p:

p − p0
z=
p0 q 0
n
where q 0 = (1 − p0 )
 Aninvestment
An investmentanalyst
analystfor
forGoldman
GoldmanSachs
Sachsand
andCompany
Companywanted
wantedtototest
testthe
thehypothesis
hypothesis
madeby
made byBritish
Britishsecurities
securitiesexperts
expertsthat
that70%
70%of ofall
allforeign
foreigninvestors
investorsininthe
theBritish
Britishmarket
market
wereAmerican.
were American. The Theanalyst
analystgathered
gatheredaarandom
randomsample
sampleofof210
210accounts
accountsofofforeign
foreign
investorsininLondon
investors Londonandandfound
foundthat
that130
130were
wereowned
ownedby byU.S.
U.S.citizens.
citizens. At theαα ==0.05
Atthe 0.05
levelofofsignificance,
level significance,isisthere
thereevidence
evidencetotoreject
rejectthe
theclaim
claimofofthe
theBritish
Britishsecurities
securitiesexperts?
experts?

n = 210
HH0:0:pp==0.70
0.70
130
HH1:1:pp≠≠ 0.70
0.70 p =
210
= 0.619

nn==210210
Forαα ==0.05
For 0.05critical
criticalvalues
valuesof ofzzare
are±1.96
±1.96 p - p
0 0.619 - 0.70
z= =
Thetest
The teststatistic is: z = p − p 0
statisticis: p q (0.70)(0.30)
p0 q 0 0 0
n 210
n
Donot
Do notreject
rejectHH0if: [-1.96≤≤ zz ≤≤ 1.96]
if:[-1.96 1.96] -0.081
0 = = −2.5614 ⇒ Reject H
RejectHH0if:
Reject if:[z[z<<-1.96]
-1.96]oror [z[z>> 1.96]
1.96] 0.0316 0
0
Null Hypothesis H0: p=p0

Alternative Hypothesis H0: p≠p0

Critical Points of z
α α zα
Significance Level of α (often 0.05 or 0.01)
2 2
the Test
0.01 0.005 2.576
Test Statistic p − p 0 [where q 0 = (1-p0)] 0.02 0.010 2.326
z=
p0 q 0
0.05 0.025 1.960
n
Critical Points The bounds ±zα that capture an area of (1-α) 0.10 0.050 1.645
2 0.20 0.100 1.282
Decision Rule Reject the null hypothesis if
either z > z a or z < -z a
2 2
In a one-tailed test, the question of interest is whether the
population parameter is greater than (or less than) a
hypothesized value. In quality control, it is more meaningful to
test the null hypothesis that the proportion of defective items
produced is less than or equal to 0.10 versus the alternative that
the proportion of defective items is more than 0.10.

H0: p ≤ 0.10
H1: p > 0.10

This leads to a right-tailed test, since the entire rejection

region is in the right tail of the distribution.
 Thetails
The tailsof
ofaastatistical
statisticaltest
testare
aredetermined
determinedby bythe
theneed
needfor
forananaction.
action. IfIfaction
action
isistotobe
betaken
takenififaaparameter
parameterisisgreater
greaterthan
thansome
somevalue
valuea,a,then
thenthethealternative
alternative
hypothesisisisthat
hypothesis thatthe
theparameter
parameterisisgreater
greaterthan
thana,a,and
andthe
thetest
testisisaaright-tailed
right-tailed
test.
test. HH0:0:µµ ≤≤ 50
50
HH1:1:µµ >> 50
50

IfIfaction
actionisistotobe
betaken
takenififaaparameter
parameterisisless
lessthan
thansome
somevalue
valuea,a,then
thenthe
the
alternativehypothesis
alternative hypothesisisisthat
thatthe
theparameter
parameterisisless
lessthan
thana,a,and
andthe
thetest
testisisaa
left-tailedtest.
left-tailed test. HH0:0:µµ ≥≥ 5050
HH1:1:µµ << 50
50

IfIfaction
actionisistotobe
betaken
takenififaaparameter
parameterisiseither
eithergreater
greaterthan
thanor
orless
lessthan
thansome
some
valuea,a,then
value thenthethealternative
alternativehypothesis
hypothesisisisthat
thatthe
theparameter
parameterisisnot
notequal
equaltotoa,a,
andthe
and thetest
testisisaatwo-tailed test. HH:0:µµ == 50
two-tailedtest. 50
0
HH1:1:µµ ≠≠ 50
50
Null Hypothesis H0: µ ≤ µ0 Critical Points of z
(One-Tailed Test)
Alternative Hypothesis H0: µ >µ0 α zα

Significance Level of α (often 0.05 or 0.01)

0.005 2.576
the Test 0.010 2.326
Test Statistic x − µ0 (assuming σ is unknown, 0.025 1.960
z=
s otherwise substitute σ for s) 0.050 1.645
n 0.100 1.282
Critical Points The bound zα that captures an area of α to
its right
Decision Rule Reject the null hypothesis if z > zα
InInaaright-tailed
right-tailedtest,
test,there
thereisisaasingle
singlepositive
positive Critical Point for a Right-Tailed Test
criticalvalue,
critical value,zzα, ,which
whichplaces
placesthetheentire
entire
α 0 .4

rejectionregion
rejection regionininthe
theupper
uppertail.
tail.
0 .3 (1-α )

Foraa5%
For 5%right-tailed
right-tailedtest,
test,the
thecritical
criticalvalue
valueofofzz

f(z)
0 .2

1.645
isis1.645 0 .1 α

Thenonrejection
The nonrejectionregion
regionis:
is: 0 .0

[z[z≤≤ 1.645]
1.645] -5 0 5

z zα

Nonrejection Rejection
Therejection
The rejectionregion
regionis:
is: Region Region

[z[z>> 1.645]
1.645]

Thetest
The teststatistic
statisticis:
is:
x − µ0
z=
s
n
 TheEPA
The EPAsetssetslimits
limitsononthe
theconcentrations
concentrationsofofpollutants
pollutantsemitted
emittedby byvarious
variousindustries.
industries. Suppose
Supposethat
thatthe
the
upperallowable
upper allowablelimitlimitononthe
theemission
emission ofofvinyl
vinylchloride
chlorideisisset
setatatan
anaverage
averageofof55 55ppm
ppmwithin
withinaarange
rangeofoftwo
two
milesaround
miles aroundthe theplant
plantemitting
emittingthis
thischemical.
chemical. ToTocheck
checkcompliance
compliancewith withthis
thisrule,
rule,the
theEPA
EPAcollects
collectsaa
randomsample
random sampleofof100 100readings
readingsatatdifferent
differenttimes
timesand
anddates
dateswithin
withinthe thetwo-mile
two-milerange
rangearound
aroundthe
theplant.
plant.
Thefindings
The findingsarearethat
thatthe
thesample
sampleaverage
averageconcentration
concentrationisis6060ppm
ppmand andthe
thesample
samplestandard
standarddeviation
deviationisis20
20
ppm. IsIsthere
ppm. thereevidence
evidencetotoconclude
concludethat
thatthe
theplant
plantininquestion
questionisisviolating
violatingthethelaw?
law?

HH0:0:µµ ≤≤ 55 55 n = 100
x = 60
HH1:1:µµ >55
>55 s = 20
nn==100100
Forαα ==0.01,
For 0.01,the
thecritical
criticalvalue
value x − µ0 60 - 55
z= =
ofzzisis2.326
of 2.326 s 20
x − µ0 n 100
z=
Thetest
The teststatistic
statisticis:
is: s
n 5
= = 2.5 ⇒ Reject H
Donot
Do notreject
rejectHH0if:if:[z[z≤≤ 2.326]
2.326] 2 0
0
if:[z[z>2.326]
RejectHH0if:
Reject >2.326]
0
 Critical Point for a Right-Tailed Test Sincethe
Since thetest
teststatistic
statisticfalls
fallsin
in
0 .4
therejection
the rejectionregion,
region,HH00isis
0.99
rejected,and
andwewemay
mayconclude
conclude
0 .3

rejected,
f(z)

thatthe
theaverage
averageconcentration
concentration
0 .2

that
0 .1 0.01
ofvinyl
of vinylchloride
chlorideisismore
morethan
than
0 .0
-5 0 5 55ppm.
55 ppm.
z 2.326
2.5

Nonrejection Rejection
Region Region
Null Hypothesis H0: µ ≥ µ0 Critical Points of z
(One-Tailed Test)
Alternative Hypothesis H0: µ < µ0
α -zα

Significance Level of α ( often 0.05 or 0.01)

0.005 -2.576
the Test 0.010 -2.326
Test Statistic x − µ0 (assuming σ is unknown, 0.025 -1.960
z=
s otherwise substitute σ for s) 0.050 -1.645
n
Critical Points The bound -zα that captures an area of α to
0.100 -1.282
its left
Decision Rule Reject the null hypothesis if z < -zα
 Inaaleft-tailed
In left-tailedtest,
test,there
thereisisaasingle
singlenegative
negative Critical Point for a Left-Tailed Test
criticalvalue,
critical value,-z-zα, ,which
whichplaces
placesthetheentire
entire
α 0 .4

rejectionregion
rejection regionininthe
thelower
lowertail.
tail.
0 .3 (1-α )

Foraa5%
For 5%left-tailed
left-tailedtest,
test,the
thecritical
criticalvalue
valueofofzzisis

f(z)
0 .2

-1.645
-1.645
0 .1 α

Thenonrejection
The nonrejectionregion
regionis:
is: 0 .0

[z[z≥≥ −−1.645] -5 0 5
1.645] -zα z

Rejection Nonrejection
Therejection
The rejectionregion
regionis:
is: Region Region

[z[z<< −−1.645]
1.645]

Thetest
teststatistic
statisticis:
is: x − µ0
The z=
s
n
A certain kind of packaged food bears the following statement on the package: “Average net weight 12 oz.”
Suppose that a consumer group has been receiving complaints from users of the product who believe that they are
getting smaller quantities than the manufacturer states on the package. The consumer group wants, therefore, to
test the hypothesis that the average net weight of the product in question is 12 oz. versus the alternative that the
packages are, on average, underfilled. A random sample of 144 packages of the food product is collected, and it is
found that the average net weight in the sample is 11.8 oz. and the sample standard deviation is 6 oz. Given these
findings, is there evidence the manufacturer is underfilling the packages?

HH0:0:µµ ≥≥ 12 12 n = 144
x = 11.8
HH1:1:µµ << 1212
s = 6
nn==144144
Forαα ==0.05,
For 0.05,the
thecritical
criticalvalue
value
ofzzisis-1.645
-1.645 x−µ
of z= 0 = 11.8 -12
x − µ0 s 6
z=
Thetest
teststatistic
statisticis:
is: s n 144
The
n
Donot
notreject
rejectHH0if:if:[z[z≥≥-1.645]
-1.645] -.2
Do = = −0.4 ⇒ Do not reject H
0 .5 0
if:[z[z<−
RejectHH0if:
Reject <−1.645]
1.645]
0
 Critical Point for a Left-Tailed Test Sincethe
Since thetest
teststatistic
statisticfalls
fallsin
in
0.4
thenonrejection
the nonrejectionregion,
region,HH00isis
0.95
notrejected,
rejected,and
andwewemay
maynotnot
0.3

not
f(z)

concludethat
thatthe
the
0.2

0.05 conclude
0.1
manufacturerisisunderfilling
manufacturer underfilling
0.0
-5 0 5 packageson
packages onaverage.
average.
-1.645 z
-0.4

Rejection Nonrejection
Region Region
 One-Sided Confidence Interval

Nonrejection Region

AAone-sided
one-sidedconfidence
confidenceinterval
intervalcontains
containsthe
thehypothesized
hypothesized
valueof
value ofaaparameter
parameterififan
anonly
onlyififaaone-tailed
one-tailedtest
test(in
(indirection
direction
oppositeto
opposite tothe
theconfidence
confidenceinterval,
interval,using
usingthe
thecorresponding
corresponding
levelof
level significance,αα ))would
ofsignificance, wouldlead
leadto
tononrejection
nonrejectionofofthe
thenull
null
hypothesis.
hypothesis.
AAfloodlight
floodlightisissaid
saidtotolast
lastan
anaverage
averageofof65 65hours.
hours. AAcompetitor
competitorbelieves
believesthat
thatthe
theaverage
averagelife
lifeofofthe
the
floodlightisisless
floodlight lessthan
thanthat
thatstated
statedbybythe
themanufacturer
manufacturerand
andsets
setsout
outtotoprove
provethat
thatthe
themanufacturer’s
manufacturer’s
claimisisfalse.
claim false. AArandom
randomsamplesampleofof2121floodlight
floodlightelements
elementsisischosen
chosenandandshows
showsthat
thatthe
thesample
sample
averageisis62.5
average 62.5hours
hoursandandthe
thesample
samplestandard
standarddeviation Usingαα=0.01,
deviationisis3.3. Using =0.01,determine
determinewhether
whether
thereisisevidence
there evidencetotoconclude
concludethat thatthe
themanufacturer’s
manufacturer’sclaim
claimisisfalse.
false.

HH0:0:µµ ≥≥ 65
65
HH1:1:µµ << 65
65
nn==21 21
Forαα ==0.01
For 0.01anan(21-1)
(21-1)==20
20df,
df,the
the
criticalvalue
critical value-2.528
-2.528

Thetest
The teststatistic
statisticis:
is:

Donot
Do notreject
rejectHH0if:if:[t[t≥≥-2.528]
-2.528]
0
if:[z[z<< −−
RejectHH0if:
Reject 2.528]
2.528]
0
 Critical Point for a Left-Tailed Test Sincethe
Since thetest
teststatistic
statisticfalls
fallsin
in
0 .4
therejection
the rejectionregion,
region,HH00isis
0.95
rejected,andandwe wemaymayconclude
conclude
0 .3

rejected,
f(t)

thatthe
themanufacturer’s
manufacturer’sclaim claim
0 .2

0.05 that
isisfalse,
false,that
thatthe
theaverage
average
0 .1

floodlightlifelifeisisless
lessthan
than6565
0 .0
-5
-2.528
0 5
t
floodlight
-3.82 hours.
hours.
Rejection Nonrejection
Region Region
 “Afterlooking
lookingatat1349
1349hotels
hotelsnationwide,
nationwide,we’ve
we’vefoundfound1313that
thatmeet
meetour
ourstandards.”
standards.”This
Thisstatement
statementby bythe
theSmall
SmallLuxury
LuxuryHotels
Hotels
“After
Associationimplies
impliesthat
thatthe
theproportion
proportionofofallallhotels
hotelsininthe
theUnited
UnitedStates
Statesthat
thatmeet
meetthe
theassociation’s
association’sstandards
standardsisis13/1349=0.0096.
13/1349=0.0096.The The
Association
managementofofa ahotel
hotelthat
thatwas
wasdenied
deniedacceptance
acceptancetotothe theassociation
associationwanted
wantedtotoprove
provethat
thatthe
thestandards
standardsarearenotnotasasstringent
stringentasasclaimed
claimed
management
and that, in fact, the proportion of all hotels in the United States that would qualify is higher than 0.0096. The management hired an
and that, in fact, the proportion of all hotels in the United States that would qualify is higher than 0.0096. The management hired an
independentresearch
researchagency,
agency,which
whichvisited
visiteda arandom
randomsample
sampleofof600600hotels
hotelsnationwide
nationwideandandfound
foundthat
that77ofofthem
themsatisfied
satisfiedthe
theexact
exact
independent
standards set by the association. Is there evidence to conclude that the population proportion of all hotels in the country satisfying the
standards set by the association. Is there evidence to conclude that the population proportion of all hotels in the country satisfying the
standardsset
setbybythe
theSmall
SmallLuxury
Luxuryhotels
hotelsAssociation
Associationisisgreater
greaterthan
than0.0096?
0.0096?
standards

HH0:0:pp≤≤ 65
65
HH1:1:pp>> 65
65
nn==600600

Forαα ==0.10
For 0.10 the
thecritical
criticalvalue
value1.282
1.282

Thetest
The teststatistic
statisticis:
is:

Donot
Do notreject
rejectHH0if:if:[z[z≤≤1.282]
1.282]
0
if:[z[z>1.282]
RejectHH0if:
Reject >1.282]
0
 Critical Point for a Right-Tailed Test Sincethe
Since thetest
teststatistic
statisticfalls
fallsin
in
0 .4
thenonrejection
the nonrejectionregion,
region,HH00isis
0.90
notrejected,
rejected,andandwewemay
maynotnot
0 .3

not
f(z)

concludethatthatproportion
proportionof ofall
all
0 .2

conclude
0 .1 0.10
hotelsin
hotels inthe
thecountry
countrythatthatmeet
meet
0 .0
-5 0 5 theassociation’s
the association’sstandards
standardsisis
z 1.282
0.519 greaterthan
greater than0.0096.
0.0096.
Nonrejection Rejection
Region Region
 Standard Normal Distribution Standard Normal Distribution

0.4 0.4

p-value=area to
p-value=area to
0.3 right of the test statistic 0.3
right of the test statistic
=0.3018
=0.0062
f(z)

f(z)
0.2 0.2

0.1 0.1

0.0 0.0
-5 0 0.519 5 -5 0 5
z 2.5 z

Example 12 Example 8
Thep-value
The p-valueisisthe
theprobability
probabilityof
ofobtaining
obtainingaavalue
valueof
ofthe
thetest
teststatistic
statisticas
asextreme
extremeas,
as,
ormore
or moreextreme
extremethan,
than,the
theactual
actualvalue
valueobtained,
obtained,when
whenthe
thenull
nullhypothesis
hypothesisisistrue.
true.

Thep-value
The p-valueisisthe
thesmallest
smallestlevel
levelof significance,αα , ,atatwhich
ofsignificance, whichthe
thenull
nullhypothesis
hypothesis
maybe
may berejected
rejectedusing
usingthe
theobtained
obtainedvalue
valueof
ofthe
thetest
teststatistic.
statistic.
 Whenthe
When thep-value
p-valueisissmaller
smallerthan
than0.01,
0.01,the
theresult
resultisiscalled
calledvery
very
significant.
significant.

Whenthe
When thep-value
p-valueisisbetween
between0.01
0.01and
and0.05,
0.05,the
theresult
resultisiscalled
called
significant.
significant.

Whenthe
When thep-value
p-valueisisbetween
between0.05
0.05and
and0.10,
0.10,the
theresult
resultisisconsidered
considered
bysome
by someas
asmarginally
marginallysignificant
significant(and
(andby
bymost
mostasasnot
notsignificant).
significant).

Whenthe
When thep-value
p-valueisisgreater
greaterthan
than0.10,
0.10,the
theresult
resultisisconsidered
considerednot
not
significant.
significant.
 p-value=double the area to
left of the test statistic
=2(0.3446)=0.6892
0.4

f(z) 0.3

0.2

0.1

0.0
-5 0 5
-0.4 0.4
z

Example 9
Inaatwo-tailed
In two-tailedtest,
test,we
wefind
findthe
thep-value
p-valueby
bydoubling
doublingthethearea
areainin
thetail
the tailof
ofthe
thedistribution
distributionbeyond
beyondthe
thevalue
valueof
ofthe
thetest
teststatistic.
statistic.
 Thefurther
The furtheraway
awayininthe
thetail
tailof
ofthe
thedistribution
distributionthe
thetest
teststatistic
statisticfalls,
falls,the
thesmaller
smaller
isisthe
thep-value
p-valueand,
and,hence,
hence,the
themore
moreconvinced
convincedwe weare
arethat
thatthe
thenull
nullhypothesis
hypothesisisis
falseand
false andshould
shouldbe
berejected.
rejected.

Inaaright-tailed
In right-tailedtest,
test,the
thep-value
p-valueisisthe
thearea
areatotothe
theright
rightof
ofthe
thetest
teststatistic
statisticififthe
the
teststatistic
test statisticisispositive.
positive.

Inaaleft-tailed
In left-tailedtest,
test,the
thep-value
p-valueisisthe
thearea
areatotothe
theleft
leftof
ofthe
thetest
teststatistic
statisticififthe
the
teststatistic
test statisticisisnegative.
negative.

Inaatwo-tailed
In two-tailedtest,
test,the
thep-value
p-valueisistwice
twicethe
thearea
areatotothe
theright
rightof
ofaapositive
positivetest
test
statisticor
statistic ortotothe
theleft
leftof
ofaanegative
negativetest
teststatistic.
statistic.

Foraagiven
For givenlevel
levelof significance, αα ::
ofsignificance,
Rejectthe
Reject thenull
nullhypothesis
hypothesisififand onlyifif αα ≥≥ p-value
andonly p-value