Statistics for Business and Economics 7th Edition Chapter Hypothesis Testing: Single Population Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hall Ch 9-1 Chapter Goals After completing this chapter, you should be able to:  Formulate null and alternative hypotheses for applications involving        a single population mean from a normal distribution a single population proportion (large samples) the variance of a normal distribution Formulate a decision rule for testing a hypothesis Know how to use the critical value and p-value approaches to test the null hypothesis (for both mean and proportion problems) Know what Type I and Type II errors are Assess the power of a test Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hall Ch 9-2 9.1  What is a Hypothesis? A hypothesis is a claim (assumption) about a population parameter:  population mean Example: The mean monthly cell phone bill of this city is μ = $42  population proportion Example: The proportion of adults in this city with cell phones is p = 68 Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hall Ch 9-3 The Null Hypothesis, H0  States the assumption (numerical) to be tested Example: The average number of TV sets in U.S Homes is equal to three ( H0 : μ = )  Is always about a population parameter, not about a sample statistic H0 : μ = Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hall H0 : X = Ch 9-4 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 Always contains “=” , “≤” or “≥ ” sign May or may not be rejected Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hall Ch 9-5 The Alternative Hypothesis, H1  Is the opposite of the null hypothesis  e.g., The average number of TV sets in U.S homes is not equal to ( H1: μ ≠ )  Challenges the status quo  Never contains the “=”   , “≤” or “≥ ” sign May or may not be supported Is generally the hypothesis that the researcher is trying to support Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hall Ch 9-6 Hypothesis Testing Process Claim: the population mean age is 50 (Null Hypothesis: H0: μ = 50 ) Population Is X= 20 likely if μ = 50? If not likely, REJECT Null Hypothesis Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hall Suppose the sample mean age is 20: X = 20 Now select a random sample Sample Ch 9-7 Reason for Rejecting H0 Sampling Distribution of X 20 If it is unlikely that we would get a sample mean of this value μ = 50 If H0 is true if in fact this were the population mean… Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hall X then we reject the null hypothesis that μ = 50 Ch 9-8 Level of Significance, α  Defines the unlikely values of the sample statistic if the null hypothesis is true   Defines rejection region of the sampling distribution Is designated by  α , (level of significance) Typical values are 01, 05, or 10  Is selected by the researcher at the beginning  Provides the critical value(s) of the test Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hall Ch 9-9 Level of Significance and the Rejection Region Level of significance = H0: μ = H1: μ ≠ H0: μ ≤ H1: μ > H0: μ ≥ H1: μ < α α/2 Two-tail test α/2 Represents critical value Rejection region is shaded α Upper-tail test α Lower-tail test Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hall Ch 9-10 Example: Z Test for Proportion A marketing company claims that it receives 8% responses from its mailing To test this claim, a random sample of 500 were surveyed with 25 responses Test at the α = 05 significance level Check: Our approximation for P is pˆ = 25/500 = 05 nP(1 - P) = (500)(.05)(.95) = 23.75 > Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hall  Ch 9-44 Z Test for Proportion: Solution Test Statistic: H0: P = 08 H1: P ≠ α08= 05 ˆ = 05 n = 500, p z= Reject 025 025 -1.96 1.96 05 − 08 = −2.47 08(1 − 08) 500 Decision: Critical Values: ± 1.96 Reject pˆ − P0 = P0 (1− P0 ) n z -2.47 Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hall Reject H0 at α = 05 Conclusion: There is sufficient evidence to reject the company’s claim of 8% response rate Ch 9-45 p-Value Solution (continued) Calculate the p-value and compare to α (For a two sided test the p-value is always two sided) Do not reject H0 Reject H0 Reject H0 α/2 = 025 p-value = 0136: α/2 = 025 P(Z ≤ −2.47) + P(Z ≥ 2.47) 0068 0068 -1.96 = 2(.0068) = 0.0136 1.96 Z = -2.47 Z = 2.47 Reject H0 since p-value = 0136 < α = 05 Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hall Ch 9-46 9.5  Power of the Test Recall the possible hypothesis test outcomes: Actual Situation Key: Outcome (Probability)   Decision H0 True H0 False Do Not Reject H0 No error (1 - α ) Type II Error (β) Reject H0 Type I Error (α ) No Error (1-β) β denotes the probability of Type II Error – β is defined as the power of the test Power = – β = the probability that a false null hypothesis is rejected Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hall Ch 9-47 Type II Error Assume the population is normal and the population variance is known Consider the test H0 : μ = μ0 H1 : μ > μ0 The decision rule is: x − μ0 Reject H0 if z = > z α or Reject H0 if x = x c > μ0 + Z ασ/ n σ/ n If the null hypothesis is false and the true mean is μ*, then the probability of type II error is  xc − μ *   β = P(x < x c | μ = μ*) = P z <  σ / n   Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hall Ch 9-48 Type II Error Example  Type II error is the probability of failing to reject a false H0 Suppose we fail to reject H0: μ ≥ 52 when in fact the true mean is μ* = 50 α 50 Reject H0: μ ≥ 52 52 xc Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hall Do not reject H0 : μ ≥ 52 Ch 9-49 Type II Error Example (continued)  Suppose we not reject H0: μ ≥ 52 when in fact the true mean is μ* = 50 This is the range of x where H0 is not rejected This is the true distribution of x if μ = 50 50 Reject H0: μ ≥ 52 52 xc Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hall Do not reject H0 : μ ≥ 52 Ch 9-50 Type II Error Example (continued)  Suppose we not reject H0: μ ≥ 52 when in fact the true mean is μ* = 50 Here, β = P( x ≥ x c ) if μ* = 50 β α 50 Reject H0: μ ≥ 52 52 xc Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hall Do not reject H0 : μ ≥ 52 Ch 9-51 Calculating β  Suppose n = 64 , σ = , and α = 05 σ x c = μ0 − z α = 52 − 1.645 = 50.766 n 64 (for H0 : μ ≥ 52) So β = P( x ≥ 50.766 ) if μ* = 50 α 50 Reject H0: μ ≥ 52 50.766 xc Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hall 52 Do not reject H0 : μ ≥ 52 Ch 9-52 Calculating β (continued)  Suppose n = 64 , σ = , and α = 05    50.766 − 50  P( x ≥ 50.766 | μ* = 50) = P z ≥ = P(z ≥ 1.02) = − 3461 = 1539    64   Probability of type II error: α β = 1539 50 Reject H0: μ ≥ 52 52 xc Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hall Do not reject H0 : μ ≥ 52 Ch 9-53 Power of the Test Example If the true mean is μ* = 50,  The probability of Type II Error = β = 0.1539  The power of the test = – β = – 0.1539 = 0.8461 Actual Situation Key: Outcome (Probability) Decision H0 True Do Not Reject H0 No error - α = 0.95 Reject H0 Type I Error α = 0.05 H0 False Type II Error β = 0.1539 No Error - β = 0.8461 (The value of β and the power will be different for each μ*) Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hall Ch 9-54 Hypothesis Tests of one Population Variance 9.6  Goal: Test hypotheses about the population variance, σ2  If the population is normally distributed, χ n −1 (n − 1)s = σ2 has a chi-square distribution with (n – 1) degrees of freedom Statistics for Business and Economics, 6e © 2007 Pearson Education, Inc Chap 11-55 Hypothesis Tests of one Population Variance (continued) The test statistic for hypothesis tests about one population variance is χ n −1 (n − 1)s2 = σ0 Statistics for Business and Economics, 6e © 2007 Pearson Education, Inc Chap 11-56 Decision Rules: Variance Population variance Lower-tail test: Upper-tail test: Two-tail test: H0: σ2 ≥ σ02 H1: σ2 < σ02 H0: σ2 ≤ σ02 H1: σ2 > σ02 H0: σ2 = σ02 H1: σ2 ≠ σ02 α α χ n2−1,1−α χ n2−1,α Reject H0 if χ n −1 χ n2−1,α Statistics for Business and Economics, 6e © 2007 Pearson Education, Inc α /2 α /2 χ n2−1,1−α / χ n2−1,α / Reject H0 if or χ n2−1 > χ n2−1,α / χn2−1 < χn2−1,1−α / Chap 11-57 Chapter Summary  Addressed hypothesis testing methodology  Performed Z Test for the mean (σ known)  Discussed critical value and p-value approaches to hypothesis testing  Performed one-tail and two-tail tests  Performed t test for the mean (σ unknown)  Performed Z test for the proportion  Discussed type II error and power of the test  Performed a hypothesis test for the variance (χ2) Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hall Ch 9-58 .. .Chapter Goals After completing this chapter, you should be able to:  Formulate null and alternative hypotheses for applications involving       ... variance of a normal distribution Formulate a decision rule for testing a hypothesis Know how to use the critical value and p-value approaches to test the null hypothesis (for both mean and proportion... 9-16 Hypothesis Tests for the Mean Hypothesis Tests for Known Copyright â 2010 Pearson Education, Inc Publishing as Prentice Hall σ Unknown Ch 9-17 Test of Hypothesis for the Mean (σ Known)