Fundamentals of

Hypothesis Testing:
One-Sample Tests
Learning Outcomes

In this session, you learn:

• The basic principles of hypothesis testing
• How to use hypothesis testing to test a mean
• The assumptions of each hypothesis-testing procedure, how
to evaluate them, and the consequences if they are seriously
violated
What is a Hypothesis?
• A hypothesis is a claim
(assertion) about a
population parameter:

• population mean
Example: The mean monthly cell phone bill
in this city is μ = $42
• population proportion

Example: The proportion of adults in this

city with cell phones is π = 0.68
The Null Hypothesis, H0
• States the claim or assertion to be tested
Example: The mean diameter of a manufactured bolt
is 30mm ( H0 ): μ = 30
• Is always about a population parameter,
not about a sample statistic

H0 : μ = 30 H 0 : X = 30
The Null Hypothesis, H0
(continued)

• Begin with the assumption that the null

hypothesis is true
• Similar to the notion of innocent until
proven guilty

• Refers to the status quo or historical value

• Always contains “=“, or “≤”, or “≥” sign
• May or may not be rejected
The Alternative Hypothesis, H1
• Is the opposite of the null hypothesis
• e.g., The average diameter of a manufactured bolt is
not equal to 30mm ( H1: μ ≠ 30 )
• Challenges the status quo
• Never contains the “=“, or “≤”, or “≥” sign
• May or may not be proven
• Is generally the hypothesis that the researcher
is trying to prove
The Hypothesis Testing Process
• Claim: The population mean age is 50.
• H0: μ = 50, H1: μ ≠ 50
• Sample the population and find the sample mean.

Population

Sample
 The Hypothesis Testing Process
(continued)
• Suppose the sample mean age was X = 20.

• This is significantly lower than the claimed mean

population age of 50.

• If the null hypothesis were true, the probability of getting

such a different sample mean would be very small, so you
reject the null hypothesis .

• In other words, getting a sample mean of 20 is so unlikely if

the population mean was 50, you conclude that the
population mean must not be 50.
 The Hypothesis Testing Process (continued)

Sampling
Distribution of X

X
20 μ = 50
If H0 is true ... then you reject
If it is unlikely that you
the null hypothesis
would get a sample
that μ = 50.
mean of this value ... ... When in fact this were
the population mean…
The Test Statistic and Critical Values

• If the sample mean is close to the stated population

mean, the null hypothesis is not rejected.

• If the sample mean is far from the stated population

mean, the null hypothesis is rejected.

• How far is “far enough” to reject H0?

• The critical value of a test statistic creates a “line in the

sand” for decision making -- it answers the question of
how far is far enough.
The Test Statistic and Critical Values
Sampling Distribution of the test statistic

Region of Region of
Rejection Rejection
Region of
Non-Rejection

Critical Values

“Too Far Away” From Mean of Sampling Distribution

Possible Errors in Hypothesis Test Decision Making
• Type I Error
• Reject a true null hypothesis
• Considered a serious type of error
• The probability of a Type I Error is 
• Called level of significance of the test
• Set by researcher in advance
• Type II Error
• Failure to reject a false null hypothesis
• The probability of a Type II Error is β
Possible Errors in Hypothesis Test Decision Making
(continued)

Possible Hypothesis Test Outcomes

Actual Situation

Decision H0 True H0 False

Do Not No Error Type II Error

Reject H0 Probability 1 - α Probability β
Reject H0 Type I Error No Error
Probability α Power 1 - β
Possible Errors in Hypothesis Test Decision Making
(continued)

• The confidence coefficient (1-α) is the probability of not rejecting H0

when it is true.

• The confidence level of a hypothesis test is (1-α)*100%.

• The power of a statistical test (1-β) is the probability of rejecting H0

when it is false.
 Type I & II Error Relationship
▪ Type I and Type II errors cannot happen at
the same time
▪ A Type I error can only occur if H0 is true
▪ A Type II error can only occur if H0 is false

If Type I error probability () , then

Type II error probability (β)
 Factors Affecting Type II Error
• All else equal,
• β when the difference between hypothesized
parameter and its true value

• β when 
• β when σ
• β when n
Level of Significance and the Rejection Region
H0: μ = 30 Level of significance = 
H1: μ ≠ 30
 /2  /2

30

Critical values

Rejection Region

This is a two-tail test because there is a rejection region in both tails

Hypothesis Tests for the Mean

Hypothesis
Tests for 

 Known  Unknown
(Z test) (t test)
Z Test of Hypothesis for the Mean (σ Known)
• Convert sample statistic ( X ) to a ZSTAT test statistic
Hypothesis
Tests for 

σKnown
Known σUnknown
Unknown
(Z test) (t test)
The test statistic is:
X −μ
ZSTAT =
σ
n
Critical Value Approach to Testing

• For a two-tail test for the mean, σ known:

• Convert sample statistic ( X ) to test statistic (ZSTAT)
• Determine the critical Z values for a specified
level of significance  from a table or computer
• Decision Rule: If the test statistic falls in the rejection
region, reject H0 ; otherwise do not reject H0
 Two-Tail Tests
H0: μ = 30
H1: μ  30

◼ There are two cutoff

values (critical /2 /2
values), defining the
regions of rejection 30 X
Reject H0 Do not reject H0 Reject H0

-Zα/2 0 +Zα/2 Z

Lower Upper
critical critical
value value
6 Steps in Hypothesis Testing
1. State the null hypothesis, H0 and the alternative
hypothesis, H1
2. Choose the level of significance, , and the sample size,
n
3. Determine the appropriate test statistic and sampling
distribution
4. Determine the critical values that divide the rejection
and nonrejection regions
6 Steps in Hypothesis Testing
(continued)

5. Collect data and compute the value of the test

statistic
6. Make the statistical decision and state the
managerial conclusion. If the test statistic falls into
the nonrejection region, do not reject the null
hypothesis H0. If the test statistic falls into the
rejection region, reject the null hypothesis.
Express the managerial conclusion in the context
of the problem
 Hypothesis Testing Example
Test the claim that the true mean diameter
of a manufactured bolt is 30mm.
(Assume σ = 0.8)
1. State the appropriate null and alternative
hypotheses
◼ H0: μ = 30 H1: μ ≠ 30 (This is a two-tail test)
2. Specify the desired level of significance and the
sample size
◼ Suppose that  = 0.05 and n = 100 are chosen

for this test

 Hypothesis Testing Example (continued)

3. Determine the appropriate technique

◼ σ is assumed known so this is a Z test.

4. Determine the critical values

◼ For  = 0.05 the critical Z values are ±1.96

5. Collect the data and compute the test statistic

◼ Suppose the sample results are

n = 100, X = 29.84 (σ = 0.8 is assumed known)

So the test statistic is:
X−μ 29.84 − 30 − 0.16
Z STAT = = = = −2.0
σ 0.8 0.08
n 100
 Hypothesis Testing Example (continued)

• 6. Is the test statistic in the rejection region?

/2 = 0.025 /2 = 0.025

Reject H0 if Reject H0 Do not reject H0 Reject H0

ZSTAT < -1.96 or -Zα/2 = -1.96 0 +Zα/2 = +1.96
ZSTAT > 1.96;
otherwise do
not reject H0 Here, ZSTAT = -2.0 < -1.96, so the
test statistic is in the rejection
region
 Hypothesis Testing Example (continued)

6 (continued). Reach a decision and interpret the result

 = 0.05/2  = 0.05/2

Reject H0 Do not reject H0 Reject H0

-Zα/2 = -1.96 0 +Zα/2= +1.96

-2.0

Since ZSTAT = -2.0 < -1.96, reject the null hypothesis

and conclude there is sufficient evidence that the mean
diameter of a manufactured bolt is not equal to 30
 p-Value Approach to Testing

• p-value: Probability of obtaining a test statistic

equal to or more extreme than the observed
sample value given H0 is true
• The p-value is also called the observed level of
significance

• It is the smallest value of  for which H0 can be

rejected
p-Value Approach to Testing: Interpreting the p-value

• Compare the p-value with 

• If p-value <  , reject H0
• If p-value   , do not reject H0

• Remember
• If the p-value is low then H0 must go
The 5 Step p-value approach to Hypothesis Testing

1. State the null hypothesis, H0 and the alternative hypothesis, H1

2. Choose the level of significance, , and the sample size, n

3. Determine the appropriate test statistic and sampling distribution

4. Collect data and compute the value of the test statistic and the p-
value

5. Make the statistical decision and state the managerial conclusion. If

the p-value is < α then reject H0, otherwise do not reject H0. State the
managerial conclusion in the context of the problem
 p-value Hypothesis Testing Example

Test the claim that the true mean

diameter of a manufactured bolt is 30mm.
(Assume σ = 0.8)
1. State the appropriate null and alternative
hypotheses
◼ H0: μ = 30 H1: μ ≠ 30 (This is a two-tail test)
2. Specify the desired level of significance and the
sample size
◼ Suppose that  = 0.05 and n = 100 are chosen

for this test

 p-value Hypothesis Testing Example
(continued)

3. Determine the appropriate technique

◼ σ is assumed known so this is a Z test.

4. Collect the data, compute the test statistic and the

p-value
◼ Suppose the sample results are

n = 100, X = 29.84 (σ = 0.8 is assumed known)

So the test statistic is:

X − μ 29.84 − 30 − 0.16
Z STAT = = = = −2.0
σ 0.8 0.08
n 100
p-Value Hypothesis Testing Example:
Calculating the p-value
(continued)

4. (continued) Calculate the p-value.

• How likely is it to get a ZSTAT of -2 (or something further from the
mean (0), in either direction) if H0 is true?

P(Z < -2.0) = 0.0228 P(Z > 2.0) = 0.0228

0 Z

-2.0 2.0
p-value = 0.0228 + 0.0228 = 0.0456
p-value Hypothesis Testing Example
(continued)

• 5. Is the p-value < α?

• Since p-value = 0.0456 < α = 0.05 Reject H0
• 5. (continued) State the managerial conclusion in
the context of the situation.
• There is sufficient evidence to conclude the average diameter of a
manufactured bolt is not equal to 30mm.
 Connection Between Two Tail Tests
and Confidence Intervals
◼ For X = 29.84, σ = 0.8 and n = 100, the 95%
confidence interval is:

0.8 0.8
29.84 - (1.96) to 29.84 + (1.96)
100 100

29.6832 ≤ μ ≤ 29.9968

◼ Since this interval does not contain the hypothesized

mean (30), we reject the null hypothesis at  = 0.05
Do You Ever Truly Know σ?
• Probably not!

• In virtually all real world business situations, σ is not known.

• If there is a situation where σ is known then µ is also known (since to calculate σ

you need to know µ.)

• If you truly know µ there would be no need to gather a sample to estimate it.
Hypothesis Testing:
σ Unknown
• If the population standard deviation is unknown, you instead
use the sample standard deviation S.

• Because of this change, you use the t distribution instead of the

Z distribution to test the null hypothesis about the mean.

• When using the t distribution you must assume the population

you are sampling from follows a normal distribution.

• All other steps, concepts, and conclusions are the same.

t Test of Hypothesis for the Mean (σ Unknown)
◼ Convert sample statistic ( X ) to a tSTAT test statistic
Hypothesis
Tests for 

σKnown
Known σUnknown
Unknown
(Z test) (t test)
The test statistic is:

X −μ
t STAT =
S
n
 Example: Two-Tail Test
( Unknown)
The average cost of a hotel
room in New York is said to be
$168 per night. To determine if
this is true, a random sample of
25 hotels is taken and resulted
in an X of $172.50 and an S of
$15.40. Test the appropriate
hypotheses at  = 0.05. H0: μ = 168
H1: μ  168
(Assume the population distribution is normal)
 Example Solution:
Two-Tail t Test

H0: μ = 168 /2=.025 /2=.025

H1: μ  168

•  = 0.05 Reject H0 Do not reject H0 Reject H0

t 24,0.025
-t 24,0.025 0
• n = 25, df = 25-1=24 -2.0639 2.0639
1.46
•  is unknown, so
X−μ 172.50 − 168
use a t statistic t STAT = = = 1.46
S 15.40
• Critical Value: n 25

±t24,0.025 = ± 2.0639 Do not reject H0: insufficient evidence that true

mean cost is different from $168
To Use the t-test Must Assume the Population Is
Normal
• As long as the sample size is not very small and the
population is not very skewed, the t-test can be
used.
• To evaluate the normality assumption can use:
• How closely sample statistics match the normal
distribution’s theoretical properties.
• A histogram or stem-and-leaf display or boxplot or a
normal probability plot.
• Statistical tests to use on evaluating normality.
 Connection of Two Tail Tests to
Confidence Intervals
◼ For X = 172.5, S = 15.40 and n = 25, the 95%
confidence interval for µ is:

172.5 - (2.0639) 15.4/ 25 to 172.5 + (2.0639) 15.4/ 25

166.14 ≤ μ ≤ 178.86

◼ Since this interval contains the Hypothesized mean (168),

we do not reject the null hypothesis at  = 0.05
One-Tail Tests
• In many cases, the alternative hypothesis focuses
on a particular direction

This is a lower-tail test since the

H0: μ ≥ 3
alternative hypothesis is focused on
H1: μ < 3 the lower tail below the mean of 3

H0: μ ≤ 3 This is an upper-tail test since the

alternative hypothesis is focused on
H1: μ > 3
the upper tail above the mean of 3
Lower-Tail Tests
H0: μ ≥ 3
◼ There is only one H1: μ < 3
critical value, since
the rejection area is
in only one tail 

Reject H0 Do not reject H0

Z or t
-Zα or -tα 0

μ X

Critical value
Upper-Tail Tests
H0: μ ≤ 3
◼ There is only one
critical value, since H1: μ > 3
the rejection area is
in only one tail 

Do not reject H0 Reject H0

Z or t Zα or tα
0
_
X μ

Critical value
 Example: Upper-Tail t Test
for Mean ( unknown)
A phone industry manager thinks that
customer monthly cell phone bills have
increased, and now average over $52 per
month. The company wishes to test this claim.
(Assume a normal population)

Form hypothesis test:

H0: μ ≤ 52 the average is not over $52 per month
H1: μ > 52 the average is greater than $52 per month
(i.e., sufficient evidence exists to support the
manager’s claim)
 Example: Find Rejection Region
(continued)

• Suppose that  = 0.10 is chosen for this test and n =

25.
Find the rejection region: Reject H0

 = 0.10

Do not reject H0 Reject H0

0 1.318

Reject H0 if tSTAT > 1.318

 Example: Test Statistic (continued)

Obtain sample and compute the test statistic

Suppose a sample is taken with the following results:

n = 25, X = 53.1, and S = 10
• Then the test statistic is:

X−μ 53.1 − 52
t STAT = = = 0.55
S 10
n 25
Example: Decision (continued)

Reach a decision and interpret the result:

Reject H0

 = 0.10

Do not reject H0 Reject H0

1.318
0
tSTAT = 0.55

Do not reject H0 since tSTAT = 0.55 ≤ 1.318

there is not sufficient evidence that the
mean bill is over $52
 Example: Utilizing The p-value for
The Test
• Calculate the p-value and compare to  (p-value below
calculated using excel spreadsheet on next page)
p-value = .2937

Reject H0
 = .10

0
Do not reject Reject
H0 1.318 H0
tSTAT = .55

Do not reject H0 since p-value = .2937 >  = .10

 Questions To Address In The
Planning Stage
• What is the goal of the survey, study, or experiment?
• How can you translate this goal into a null and an alternative hypothesis?
• Is the hypothesis test one or two tailed?
• Can a random sample be selected?
• What types of data will be collected? Numerical? Categorical?
• What level of significance should be used?
• Is the intended sample size large enough to achieve the desired power?
• What statistical test procedure should be used?
• What conclusions & interpretations can you reach from the results of the
planned hypothesis test?

Failing to consider these questions can lead to bias or incomplete

results
Statistical Significance vs Practical Significance
• Statistically significant results (rejecting the null hypothesis) are not
always of practical significance
• This is more likely to happen when the sample size gets very large
• Practically significant results might be found to be statistically
insignificant (failing to reject the null hypothesis)
• This is more likely to happen when the sample size is relatively small
Session Summary
In this session we discussed
• Hypothesis testing methodology
• Performing a Z Test for the mean (σ known)
• Critical value and p–value approaches to
hypothesis testing
• Performing one-tail and two-tail tests
• Performing a t test for the mean (σ unknown)
• Statistical and practical significance