what is level of significance and what is critical value

ChatGPT said:

ChatGPT

In statistical hypothesis testing, the level of significance and critical value are both key concepts for
making decisions about the validity of a hypothesis.

1. Level of Significance (α)

The level of significance, denoted by α\alphaα, is the probability of rejecting the null hypothesis
when it is actually true. This is also called the probability of a Type I error. Commonly used levels of
significance are 0.05 (5%), 0.01 (1%), and 0.10 (10%).

 Interpretation: If you set α=0.05\alpha = 0.05α=0.05, you’re accepting a 5% risk of

 Selection: The choice of α\alphaα depends on the field of study and how much risk one is
willing to take of a false positive result.

2. Critical Value

The critical value is the threshold that the test statistic must exceed in order for us to reject the null
hypothesis. It’s determined by the level of significance and the type of test being conducted (e.g.,
one-tailed or two-tailed test).

 For a two-tailed test: If the level of significance is α\alphaα, the critical values will be the
values that divide the middle 1−α1 - \alpha1−α region from the outer α/2\alpha / 2α/2
regions in each tail.

 For a one-tailed test: The critical value will mark the cutoff point for the α\alphaα region in
only one tail of the distribution.

In essence:

 If the calculated test statistic exceeds the critical value, the null hypothesis is rejected.

 The critical value is based on the distribution of the test statistic (e.g., Z-distribution, T-
distribution) and is often found in statistical tables or software.

Example

For a Z-test with α=0.05\alpha = 0.05α=0.05 in a two-tailed test:

 The critical values might be approximately ±1.96, meaning that if the test statistic is less than
-1.96 or greater than 1.96, the null hypothesis would be rejected at the 5% level of
significance.

4o

You said:

explain with 5 examples how to calculate critical value

ChatGPT said:
ChatGPT

Here are five examples of how to calculate the critical value based on different types of statistical
tests. Each example uses a different distribution or scenario to show the process for finding the
critical value.

1. Z-Test (Two-Tailed) with a 5% Significance Level

 Scenario: Suppose we want to test if the mean of a population is different from a known
value.

 Significance Level (α\alphaα): 0.05

 Type of Test: Two-tailed

Steps:

1. Since it’s a two-tailed test, we divide the significance level by 2: α/2=0.025\alpha/2 =

2. Using a Z-table or statistical software, find the Z-score that corresponds to 0.025 in each tail.

3. For α=0.05\alpha = 0.05α=0.05, the critical Z-values are approximately ±1.96.

Interpretation: If the calculated Z-score is less than -1.96 or greater than 1.96, we reject the null
hypothesis.

2. Z-Test (One-Tailed) with a 1% Significance Level

 Scenario: Suppose we want to test if the mean of a population is greater than a certain
value.

 Significance Level (α\alphaα): 0.01

 Type of Test: One-tailed (right-tailed)

Steps:

1. Since it’s a one-tailed test, we use the entire significance level in the right tail, so α=0.01\
alpha = 0.01α=0.01.

2. Using a Z-table or statistical software, find the Z-score that corresponds to the 0.01
probability in the right tail.

3. For α=0.01\alpha = 0.01α=0.01, the critical Z-value is approximately 2.33.

Interpretation: If the calculated Z-score is greater than 2.33, we reject the null hypothesis.

3. T-Test with a 5% Significance Level and 10 Degrees of Freedom

 Scenario: Suppose we have a small sample size (n < 30) and we want to test if the mean of a
population is different from a hypothesized mean.

 Significance Level (α\alphaα): 0.05

 Type of Test: Two-tailed

Steps:

1. Since it’s a two-tailed test, divide the significance level by 2: α/2=0.025\alpha/2 =

2. Using a T-table, look up the critical T-value that corresponds to α/2=0.025\alpha/2 =

3. For α=0.05\alpha = 0.05α=0.05 and df=9df = 9df=9, the critical T-values are approximately
±2.262.

Interpretation: If the calculated T-statistic is less than -2.262 or greater than 2.262, we reject the null
hypothesis.

4. Chi-Square Test with a 5% Significance Level and 4 Degrees of Freedom

 Scenario: Suppose we are testing for independence in a contingency table with a Chi-square
test.

 Significance Level (α\alphaα): 0.05

 Degrees of Freedom (df): 4 (based on the number of categories minus 1 for each variable)

 Type of Test: Right-tailed

Steps:

1. Since it’s a right-tailed test, we use the entire significance level in the right tail: α=0.05\alpha
= 0.05α=0.05.

2. Using a Chi-square table, look up the critical value for α=0.05\alpha = 0.05α=0.05 with 4
degrees of freedom.

3. For α=0.05\alpha = 0.05α=0.05 and df=4df = 4df=4, the critical Chi-square value is
approximately 9.488.

Interpretation: If the calculated Chi-square statistic is greater than 9.488, we reject the null
hypothesis.

5. F-Test with a 5% Significance Level and (5, 10) Degrees of Freedom

 Scenario: Suppose we want to test if two population variances are equal using an F-test.

 Significance Level (α\alphaα): 0.05

 Degrees of Freedom (df): Numerator df = 5, Denominator df = 10

 Type of Test: Right-tailed

Steps:
 1. Since it’s a right-tailed test, use the entire significance level in the right tail: α=0.05\alpha =
0.05α=0.05.

2. Using an F-table, look up the critical F-value for α=0.05\alpha = 0.05α=0.05 with numerator
df=5df = 5df=5 and denominator df=10df = 10df=10.

3. For α=0.05\alpha = 0.05α=0.05, the critical F-value with these degrees of freedom is
approximately 3.33.

Interpretation: If the calculated F-statistic is greater than 3.33, we reject the null hypothesis.