© 2000 Prentice-Hall, Inc.

BUSINESS
STATISTICS
Hypothesis Testing: One
Sample

8-1
 Hypothesis Testing
© 2000 Prentice-Hall, Inc.
I believe the
population Reject
mean age is 50 Reject
hypothesis!
hypothesis!
Population (hypothesis). Not
Notclose.
close.

 

 
 Random
 sample
Mean 
X = 20
8-2
 What’s a Hypothesis?
© 2000 Prentice-Hall, Inc.

1. A Belief about a I believe the mean GPA

Population Parameter of this class is 3.5!

 Parameter Is
Population Mean,
Proportion, Variance
 Must Be Stated
Before Analysis

© 1984-1994 T/Maker Co.

8-3
 Null Hypothesis
© 2000 Prentice-Hall, Inc.

1. What Is Tested
2. Has Serious Outcome If Incorrect
Decision Made
3. Always Has Equality Sign: , , or 
4. Designated H0
5. Specified as H0:   Some Numeric Value
 Specified with = Sign Even if , or 
 Example, H0:   3
8-4
 Alternative Hypothesis
© 2000 Prentice-Hall, Inc.

1. Opposite of Null Hypothesis

2. Always Has Inequality Sign: ,, or 
3. Designated Ha
4. Specified Ha:  < Some Value
 Example, Ha:  < 3

8-5
 Basic Idea
© 2000 Prentice-Hall, Inc.

Sampling Distribution
It is unlikely
that we would ... therefore,
get a sample we reject the
mean of this hypothesis
value ... that  = 50.

... if in fact this were

the population mean

20
20 
 == 50
50 SSam
ample
ple M
M ean
ean
H
H00
8-6
 Level of Significance
© 2000 Prentice-Hall, Inc.

1. Probability
2. Defines Unlikely Values of Sample
Statistic if Null Hypothesis Is True
 Called Rejection Region of Sampling
Distribution
3. Designated (alpha)
 Typical Values Are .01, .05, .10
4. Selected by Researcher at Start

8-7
 Rejection Region
© 2000 Prentice-Hall, Inc.
(One-Tail Test)
Sampling Distribution Level of Confidence
Rejection
Rejection
Region
Region
1-

Nonrejection
Nonrejection
Region
Region

Ho
Ho Sa
Sammple
ple Sta
Statistic
tistic
Critica
Criticall Va
Value
lue
Va
Value
lue Observed sample statistic
8-8
 Rejection Region
© 2000 Prentice-Hall, Inc.
(One-Tail Test)
Sampling Distribution Level of Confidence
Rejection
Rejection
Region
Region
1-

Nonrejection
Nonrejection
Region
Region

Ho
Ho Sa
Sammple
ple Sta
Statistic
tistic
Critica
Criticall Va
Value
lue
Va
Value
lue
8-9
 Rejection Regions
© 2000 Prentice-Hall, Inc.
(Two-Tailed Test)
Sampling Distribution Level of Confidence
Rejection
Rejection Rejection
Rejection
Region
Region Region
Region
1-
1/2 
1/2  1/2 
1/2 
Nonrejection
Nonrejection
Region
Region

Ho
Ho Sa
Sammple
ple Sta
Statistic
tistic
Critica
Criticall Va lue Critica
Value Criticall
Va
Value
lue Va
Value
lue
8 - 10
 Rejection Regions
© 2000 Prentice-Hall, Inc.
(Two-Tailed Test)
Sampling Distribution Level of Confidence
Rejection
Rejection Rejection
Rejection
Region
Region Region
Region
1-
1/2 
1/2  1/2 
1/2 
Nonrejection
Nonrejection
Region
Region

Ho
Ho Sa
Sammple
ple Sta
Statistic
tistic
Critica
Criticall Va lue Critica
Value Criticall
Va
Value
lue Va
Value
lue
Observed sample statistic
8 - 11
 Rejection Regions
© 2000 Prentice-Hall, Inc.
(Two-Tailed Test)
Sampling Distribution Level of Confidence
Rejection
Rejection Rejection
Rejection
Region
Region Region
Region
1-
1/2 
1/2  1/2 
1/2 
Nonrejection
Nonrejection
Region
Region

Ho
Ho Sa
Sammple
ple Sta
Statistic
tistic
Critica
Criticall Va lue Critica
Value Criticall
Va
Value
lue Va
Value
lue
8 - 12
 Errors in
© 2000 Prentice-Hall, Inc.
Making Decision
1. Type I Error
 Reject True Null Hypothesis
 Has Serious Consequences
 Probability of Type I Error Is (Alpha)
 Called Level of Significance

2. Type II Error
 Do Not Reject False Null Hypothesis
 Probability of Type II Error Is (Beta)
8 - 13
 Decision Results
© 2000 Prentice-Hall, Inc.

H0: Innocent
Jury Trial H00 Test
Actual Situation Actual Situation
Verdict Innocent Guilty Decision H00 True H00
False

Accept Type II
Innocent Correct Error 1-
H00 Error
()
Reject Type I Power
Guilty Error Correct Error ()
H00 (1 - )

8 - 14
  &  Have an
© 2000 Prentice-Hall, Inc.
Inverse Relationship
You can’t reduce both
errors simultaneously!




8 - 15
 H0 Testing Steps
© 2000 Prentice-Hall, Inc.

 State H0  Set up critical values

 State Ha  Collect data

 Choose 
 Compute test statistic

 Choose n
 Make statistical decision

 Choose test
 Express decision

8 - 16
 One Population Tests
© 2000 Prentice-Hall, Inc.

One
One
Population
Population

M
Mean
ean Proportion
Proportion Variance
Variance

ZZ Test
Test tt Test
Test ZZ Test
Test 22 Test
Test
(1
(1 && 22 (1
(1 && 22 (1
(1 && 22 (1
(1 && 22
ta
tail)
il) ta
tail)
il) ta
tail)
il) ta
tail)
il)

8 - 17
© 2000 Prentice-Hall, Inc.

Two-Tailed Z Test
of Mean ( Known)

8 - 18
 Two-Tailed Z Test
© 2000 Prentice-Hall, Inc.
for Mean ( Known)
1. Assumptions
 Population Is Normally Distributed
 If Not Normal, Can Be Approximated by
Normal Distribution (n  30)
2. Alternative Hypothesis Has  Sign
3. Z-Test Statistic
X  x X  
Z 
x 
n
8 - 19
 Two-Tailed Z Test
© 2000 Prentice-Hall, Inc.
Example
Does an average box of
cereal contain 368 grams
of cereal? A random
sample of 25 boxes
showedX = 372.5. The
company has specified 
to be 15 grams. Test at
the .05 level. 368 gm.

8 - 20
 Two-Tailed Z Test
© 2000 Prentice-Hall, Inc.
Solution
H0:  = 368 Test Statistic:
Ha:   368 X   372.5  368
Z    1.50
  .05  15
n  25 n 25
Critical Value(s):
Decision:
R eject H 0 R eject H 0 Do not reject at  = .05
.025 .025 Conclusion:
No evidence
-1.96 0 1.96 Z average is not 368
8 - 21
 Two-Tailed Z Test
© 2000 Prentice-Hall, Inc.
Thinking Challenge
You’re a Q/C inspector. You want to
find out if a new machine is making
electrical cords to customer
specification: average breaking
strength of 70 lb. with  = 3.5 lb.
You take a sample of 36 cords &
compute a sample mean of 69.7 lb.
At the .05 level, is there evidence
that the machine is not meeting the
average breaking strength?
8 - 22
 Two-Tailed Z Test
© 2000 Prentice-Hall, Inc.
Solution*
H0:  = 70 Test Statistic:
Ha:   70 X   69.7  70
Z    .51
 = .05  3.5
n = 36 n 36
Critical Value(s):
Decision:
R eject H 0 R eject H 0 Do not reject at  = .05
.025 .025 Conclusion:
No evidence
-1.96 0 1.96 Z average is not 70
8 - 23
© 2000 Prentice-Hall, Inc.

One-Tailed Z Test
of Mean ( Known)

8 - 24
 One-Tailed Z Test
© 2000 Prentice-Hall, Inc.
for Mean ( Known)
1. Assumptions
 Population Is Normally Distributed
 If Not Normal, Can Be Approximated by
Normal Distribution (n  30)
2. Alternative Hypothesis Has < or > Sign

8 - 25
 One-Tailed Z Test
© 2000 Prentice-Hall, Inc.
for Mean ( Known)
1. Assumptions
 Population Is Normally Distributed
 If Not Normal, Can Be Approximated by
Normal Distribution (n  30)
2. Alternative Hypothesis Has or > Sign
3. Z-test Statistic
X  x X  
Z 
x 
n
8 - 26
 One-Tailed Z Test
© 2000 Prentice-Hall, Inc.
for Mean Hypotheses
H0:=0 Ha: < 0 H0:=0 Ha: > 0

RReject
eject HH00 RReject
eject HH00


 


00 ZZ 00 ZZ
Must be significantly Small values satisfy
below  H0 . Don’t reject!

8 - 27
 One-Tailed Z Test
© 2000 Prentice-Hall, Inc.
Example
Does an average box of
cereal contain more than
368 grams of cereal? A
random sample of 25
boxes showed X = 372.5.
The company has
specified  to be 15
grams. Test at the .05 368 gm.
level.

8 - 28
 One-Tailed Z Test
© 2000 Prentice-Hall, Inc.
Solution
H0:  = 368 Test Statistic:
Ha:  > 368 X   372.5  368
Z    1.50
 = .05  15
n = 25 n 25
Critical Value(s):
Decision:
R eject Do not reject at  = .05
.05 Conclusion:
No evidence average
0 1.645 Z is more than 368
8 - 29
 One-Tailed Z Test
© 2000 Prentice-Hall, Inc.
Thinking Challenge
You’re an analyst for Ford. You
want to find out if the average
miles per gallon of Escorts is at
least 32 mpg. Similar models
have a standard deviation of 3.8
mpg. You take a sample of 60
Escorts & compute a sample
mean of 30.7 mpg. At the .01
level, is there evidence that the
miles per gallon is at least 32?
8 - 30
 One-Tailed Z Test
© 2000 Prentice-Hall, Inc.
Solution*
H0:  = 32 Test Statistic:
Ha:  < 32 X   30.7  32
Z   2.65
 = .01  3.8
n = 60 n 60
Critical Value(s):
Decision:
R eject Reject at  = .01
.01 Conclusion:
There is evidence
-2.33 0 Z average is less than 32
8 - 31
© 2000 Prentice-Hall, Inc.

Two-Tailed t Test
of Mean ( Unknown)

8 - 32
 t Test for Mean
© 2000 Prentice-Hall, Inc.
( Unknown)
1. Assumptions
 Population Is Normally Distributed
 If Not Normal, Only Slightly Skewed &
Large Sample (n  30) Taken
2. Parametric Test Procedure
3. t Test Statistic
X 
t
S
n
8 - 33
 Two-Tailed t Test
© 2000 Prentice-Hall, Inc.
Finding Critical t Values
Given: n = 3;  = .10 Critical Values of t Table
 (Portion)
df = n - 1 = 2 
v t.10 t.05 t.025
 1 3.078 6.314 12.706
 /2 = .05
2 1.886 2.920 4.303
-2.920 0 2.920 t
3 1.638 2.353 3.182
 /2 = .05
8 - 34 
 Two-Tailed t Test
© 2000 Prentice-Hall, Inc.
Example
Does an average box of
cereal contain 368
grams of cereal? A
random sample of 36
boxes had a mean of
372.5 & a standard
deviation of 12 grams.
Test at the .05 level. 368 gm.

8 - 35
 Two-Tailed t Test
© 2000 Prentice-Hall, Inc.
Solution
H0:  = 368 Test Statistic:
Ha:   368 X   372.5  368
t   2.25
 = .05 S 12
df = 36 - 1 = 35 n 36
Critical Value(s):
Decision:
R eject H 0 R eject H 0 Reject at  = .05
.025 .025 Conclusion:
There is evidence pop.
-2.0301 0 2.0301 t average is not 368
8 - 36
 Two-Tailed t Test
© 2000 Prentice-Hall, Inc.
Thinking Challenge
You work for the FTC. A
manufacturer of detergent
claims that the mean weight
of detergent is 3.25 lb. You
take a random sample of 64
containers. You calculate the
sample average to be 3.238
lb. with a standard deviation
3.25 lb.
of .117 lb. At the .01 level, is
the manufacturer correct?
8 - 37
 Two-Tailed t Test
© 2000 Prentice-Hall, Inc.
Solution*
H0:  = 3.25 Test Statistic:
Ha:   3.25 X   3.238  3.25
t    .82
  .01 S .117
df  64 - 1 = 63 n 64
Critical Value(s):
Decision:
R eject H 0 R eject H 0 Do not reject at  = .01
.005 .005 Conclusion:
There is no evidence
-2.6561 0 2.6561 t average is not 3.25
8 - 38
© 2000 Prentice-Hall, Inc.

One-Tailed t Test
of Mean ( Unknown)

8 - 39
 One-Tailed t Test
© 2000 Prentice-Hall, Inc.
Example
Is the average capacity of
batteries at least 140
ampere-hours? A random
sample of 20 batteries had
a mean of 138.47 & a
standard deviation of 2.66.
Assume a normal
distribution. Test at the .05
level.

8 - 40
 One-Tailed t Test
© 2000 Prentice-Hall, Inc.
Solution
H0:  = 140 Test Statistic:
Ha:  < 140 X   138.47  140
t    2.57
 = .05 S 2.66
df = 20 - 1 = 19 n 20
Critical Value(s):
Decision:
R eject Reject at  = .05
.05 Conclusion:
There is evidence pop.
-1.7291 0 t average is less than 140
8 - 41
 One-Tailed t Test
© 2000 Prentice-Hall, Inc.
Thinking Challenge
You’re a marketing analyst for
Wal-Mart. Wal-Mart had teddy
bears on sale last week. The
weekly sales ($ 00) of bears
sold in 10 stores was: 8 11 0
4 7 8 10 5 8 3 .
At the .05 level, is there
evidence that the average bear
sales per store is more than 5
($ 00)?
8 - 42
 One-Tailed t Test
© 2000 Prentice-Hall, Inc.
Solution*
H0:  = 5 Test Statistic:
Ha:  > 5 t = 1.31
 = .05
df = 10 - 1 = 9
Critical Value(s): Decision:
R eject Do not reject at  = .05
.05 Conclusion:
There is no evidence
0 1.8331 t average is more than 5
8 - 43
© 2000 Prentice-Hall, Inc.

Z Test of Proportion

8 - 44
 Qualitative Data
© 2000 Prentice-Hall, Inc.

1. Qualitative Random Variables Yield

Responses That Classify
 e.g., Gender (Male, Female)
2. Measurement Reflects # in Category
3. Nominal or Ordinal Scale
4. Examples
 Do You Own Savings Bonds?
 Do You Live On-Campus or Off-Campus?

8 - 45
 Proportions
© 2000 Prentice-Hall, Inc.

1. Involve Qualitative Variables

2. Fraction or % of Population in a Category
3. If Two Qualitative Outcomes, Binomial
Distribution
 Possess or Don’t Possess Characteristic
4. Sample Proportion (p)
x number of successes
p 
n sample size
8 - 46
 One-Proportion Z Test
© 2000 Prentice-Hall, Inc.
Thinking Challenge
You’re an accounting
manager. A year-end audit
showed 4% of transactions
had errors. You implement
new procedures. A random
sample of 500 transactions
had 25 errors. Has the
proportion of incorrect
transactions changed at
the .05 level?
8 - 47
 One-Proportion Z Test
© 2000 Prentice-Hall, Inc.
Solution*
H0: II = .04 Test Statistic:
Ha: II  .04 25
 .04
p  500
 = .05 Z    1.14
  (1   ) .04  (1  .04 )
n = 500 n 500
Critical Value(s):
Decision:
R eject H 0 R eject H 0 Do not reject at  = .05
.025 .025 Conclusion:
There is evidence
-1.96 0 1.96 Z proportion is still 4%
8 - 48
 One-Proportion Z Test
© 2000 Prentice-Hall, Inc.
Example
The present packaging
system produces 10%
defective cereal boxes.
Using a new system, a
random sample of 200
boxes had11 defects.
Does the new system
produce fewer defects?
Test at the .05 level.

8 - 49
 One-Proportion Z Test
© 2000 Prentice-Hall, Inc.
Solution
H0: II = .10 Test Statistic:
Ha: II < .10 11
 .10
p 
 = .05 Z  200   2.12
  (1   ) .10  (1  .10 )
n = 200 n 200
Critical Value(s):
Decision:
R eject Reject at  = .05
.05
Conclusion:
There is evidence new
-1.645 0 Z system < 10% defective
8 - 50