Chapter 3
Chapter 3
Inference
BBA-VB
Chapter 3
Dr Imtiaz Husain
Hypothesis Test:
What is hypothesis testing?
Hypothesis testing formula:
Hypothesis tests
A political party claims that it has the support of 24% of the electorate. In a sample
of 1111 voters, 243 state that they support the party. Is there sufficient evidence to
reject the party’s claim, at the 5% significance level?
Since the problem is about a mean, this is a test of a single population mean.
The sample size is less than 30 and we do not know the population standard deviation, so this is a t-test. and the
proper formula is:
Step 2,
setting the level of significance, has already been determined by the problem, 0.05 for a 95 % significance
level.
The Type I error is to conclude that Jeffrey swims the 25-yard freestyle, on average, in less than 16.43 seconds
when, in fact, he actually swims the 25-yard freestyle, on average, in 16.43 seconds.
(Reject the null hypothesis when the null hypothesis is true.)
To find the critical value we need to select the appropriate test statistic. We have concluded that this is a t-test on the basis
of the sample size and that we are interested in a population mean. We can now draw the graph of the t-distribution and
mark the critical value. For this problem the degrees of freedom are n-1, or 14. Looking up 14 degrees of freedom at the
0.05 column of the t-table we find 1.761. This is the critical value and we can put this on our graph
Step 3
The calculation of the test statistic using the formula we have selected. We find that the calculated test statistic is 2.08,
meaning that the sample mean is 2.08 standard deviations away from the hypothesized mean of 16.43.
Step 4
Compare the test statistic and the critical value and mark these on the graph. We see that the test statistic is in the tail and
thus we move to step 4 and reach a conclusion. The probability that an average time of 16 minutes could come from a
distribution with a population mean of 16.43 minutes is too unlikely for us to accept the null hypothesis. We cannot
accept the null.
Step 5
Conclusions first formally and then less formally.
Less formally,
“With 95% significance we believe that the goggles improves swimming speed”
Q2.
The mean throwing distance of a football for Marco, a high school freshman quarterback, is
40 yards, with a standard deviation of two yards. The team coach tells Marco to adjust his
grip to get more distance. The coach records the distances for 20 throws. For the 20 throws,
Marco’s mean distance was 45 yards. The coach thought the different grip helped Marco
throw farther than 40 yards. Conduct a hypothesis test using a preset α = 0.05. Assume the
throw distances for footballs are normal.
First, determine what type of test this is, set up the hypothesis test, find the p-value, sketch the
graph, and state your conclusion.
Since the problem is about a mean, this is a test of a single population mean.
H0 : μ = 40
Ha : μ > 40
Because p < α, we reject the null hypothesis. There is sufficient evidence to suggest that the change in grip
improved Marco’s throwing distance.
Q3.
Jane has just begun her new job as on the sales force of a very competitive company. In a
sample of 16 sales calls it was found that she closed the contract for an average value of
108 dollars with a standard deviation of 12 dollars. Test at 5% significance that the
population mean is at least 100 dollars against the alternative that it is less than 100 dollars.
Company policy requires that new members of the sales force must exceed an average of
?100 per contract during the trial employment period. Can we conclude that Jane has met
this requirement at the significance level of 95%?
Step-1:
H0: µ ≤ 100
Ha: µ > 100
The test statistic is a Student’s t because the sample size is below 30; therefore, we cannot use the normal distribution.
Comparing the calculated value of the test statistic and the critical value of “t” at a 5% significance level,
we see that the calculated value is in the tail of the distribution. Thus, we conclude that 108 dollars per contract is
significantly larger than the hypothesized value of 100 and thus we cannot accept the null hypothesis. There is evidence
that supports Jane’s performance meets company standard
Q4.
It is believed that a stock price for a particular company will grow at a rate of ?5 per week with a standard deviation of ?1.
An investor believes the stock won’t grow as quickly. The changes in stock price is recorded for ten weeks and are as
follows: ?4, ?3, ?2, ?3, ?1, ?7, ?2, ?1, ?1, ?2. Perform a hypothesis test using a 5% level of significance. State the null and
alternative hypotheses, state your conclusion, and identify the Type I errors.
Step-1
H0: μ = 5
Ha: μ < 5
Because p < α, we reject the null hypothesis. There is sufficient evidence to suggest that the stock price of the company
grows at a rate less than ?5 a week.
Because p < α, we reject the null hypothesis. There is sufficient evidence to suggest that the stock price of the company
grows at a rate less than ?5 a week.
Type I Error: To conclude that the stock price is growing slower than ?5 a week when, in fact, the stock price is growing at
?5 a week (reject the null hypothesis when the null hypothesis is true).
Q5. A beverage dispensing machine is supposed to deliver 20 fluid ounces of beer. The
amount dispensed by the machine is thought to be Normally distributed. Eight samples are
measured from the machine, with the following results:
20.89, 20.90, 20.87, 20.94, 20.92, 20.90, 20.93, and 20.93.
The sample mean is given by ˉx = 20.91, and the sample standard deviation is given by
s = 0.023904.
Test the hypothesis that the mean amount dispensed by the machine is indeed 20 fluid
ounces.
Thank You