Team Assignment-2:

Hypothesis Testing

Team Members:
Asif Khan Mohammed – 2230254
Amer Uddin Afsar – 2208331
Sainty – 2210903
Krishna Moe Thu - 2130179
Parthasarthy PV – 2216761

University Canada West

MBAF 502-(CAMPUS Winter23-15)
Abera Demeke
Mar-19-2023
Q1. Sample data about the listing price of a house was collected from Surrey, Guilford area in
2022, and the data is given below. Using the data, answer the following questions:

N Listing N Listing N Listing

Price Price Price
1 1049900 11 1229000 21 1450000
2 1049900 12 1230000 22 1450000
3 1050000 13 1298999 23 1469900
4 1075000 14 1299000 24 1475000
5 1075000 15 1299000 25 1475000
6 1078800 16 1398000 26 1480000
7 1179000 17 1398000 27 1499000
8 1188000 18 1399000 28 1499000
9 1188000 19 1449900 29 1499233
10 1225000 20 1450000 30 1499900
1. a) What is the mean listing price of a home?
Answer:

The mean listing price of a home from the Surrey and Guilford area in 2022 is 1313551.067

1. b) Generate appropriate numerical summaries for the listing price of a home, the
sample standard deviation, etc.
Answer:
1. Mean = 1313551.067
Mean shows the average listing price of a home from the Surrey and Guilford area in 2022.
2. Median 1348500
The median shows that half of the listing prices are below 1348500, and half are above
1348500. The median is often used to measure central tendency when the data is skewed or
has outliers, as it is less affected by extreme values than the mean.
3. Mode = 1450000
In this case, we can see that the value 1450000 appears three times, which is more than any
other value. Therefore, the mode of the listing prices is 1450000.
4. Standard Deviation = 164832.1338
This indicates that the data is relatively spread out from the mean, around 1313551.067. The
standard deviation can help give an idea of the variability in the price listing and how
representative the mean is of the dataset.
5. Sample Variance = 27169632347
 For the dataset of listing prices, the sample variance is approximately 27169632347. This
means that the average squared difference between each price listing and the mean is quite
large, indicating that the data is spread out.
6. Skewness = -0.40315359
This shows that the dataset of price listing is slightly skewed to the left, with a long tail on the
left-hand side of the distribution. This means that there are some lower values in the price
listing that are pulling the mean and the distribution towards the left.
7. Range = 450000
The range of a dataset of price listing is the difference between the largest and smallest values
of price listing of homes. In this case, the largest value is 1499900, and the smallest value is
1049900, and the difference between them is 450000.

1. c) Use these summaries to develop a 95% confidence interval to estimate the mean listing
price of a house in your selected city. That is, you will be using the sampling data you collected
to estimate the population parameter (listing price). Make sure to show both your calculations
and a final statement of its meaning.

Answer:

Step 1: Find the standard error of the mean:

σ
σx 
n
Where: σ = Population standard deviation = 164832.13

n = Sample size = 30

By substituting the above values in formulae, we get the standard error of the mean

σ x = 30094.09264

Step 2: Find zα/2 for a 95% confidence interval:

For a 95% confidence interval α = 0.05

If α = 0.05, then zα/2 = z0.025 = 1.96 is the value that encloses 95% of the area under the
normal distribution and leaves 2.5% in each tail.

Step 3: Calculate the interval endpoints.

As we already know, Standard deviation (σ) = 164832.13

Formulas for the Confidence Interval for the Mean (σ Known)

 UCLx  x  zα/ 2 σ x
LCLx  x  zα/ 2 σ x

Where: x̄ = The sample mean

zα/2 = The critical z- score

σ x = The standard error of the mean

The Margin of Error (ME) is the amount added and subtracted to the point estimate to form
the confidence interval.

By substituting the above values in formulae, we get

Upper confidence limit (UCLx) = 1375100.397

Lower confidence limit (LCLx) = 1252001.736

Step 4: Stating the conclusion.

Conclusion:

Based on our sample mean of 1313551.067, we are 95% confident that the mean listing price
of a house in your selected city is between 1252001.736 and 1375100.397

1.d) The mean selling price of a house in the sample area is said to be $1,400,00. To determine if
this is true in your sample data, conduct a hypothesis test using a critical value approach using
α = 0.05 level of significance. Make sure to state the null and alternative hypotheses. Write a
concluding statement about your results

Answer:

Critical value approach:

Step 1: Identify the null and alternative hypotheses.

H0: μ = 1,400,000

H1: μ ≠ 1,400,000

Step 2: Setting a value for the significance level, α

Given, α = 0.05

Step 3: Determining the appropriate critical value.

 For two-tail, Critical z-score (zα) = 1.96

Step 4: Calculate the appropriate test statistic.

As we already know from the dataset

Mean (x) = 1313551.067

Random Sample (n) = 30

Standard Deviation (σ) = 164832.1338

Where, Zx̄ = The z-test statistic

x̄ = The sample mean

µH0= The mean of the sampling distribution, which is assumed to be true for the null
hypothesis

σ = The standard deviation of the population

n = The sample size

Calculating the appropriate test statistic from the above formulae, we get Zx̄ = -2.87

Step 5: Comparing the z-test statistic (zx) with the critical z-score (zα).

Zx̄ = 2.87 is greater than Zα = 1.96. So, Reject H0.

Step 6: Stating the conclusion.

Conclusion:

According to the sample of 30 price listings of houses, there is not enough evidence
to support the claim that the mean selling price of a house in the sample area is said to be
$1,400,00.

Q2. Grace is the manager at a local restaurant and has implemented changes to her operation to
reduce the average wait time for a table between 6 pm and 8 pm on Saturday night to less than
20 minutes. A random sample of 45 wait times on Saturday night had a mean of 18.3 minutes.
Grace knows from past experience that the standard deviation of wait times is 5 minutes.
Conduct a hypothesis test using p-value and critical value approach to determine if Grace’s
changes have reduced average wait time to less than 20 minutes using α = 0.01

Answer:

Critical value approach:

Step 1: Identify the null and alternative hypotheses.

H0: μ ≥ 20 minutes.

H1: μ < 20 minutes.

Step 2: Setting a value for the significance level, α

Given, α = 0.01

Step 3: Determining the appropriate critical value.

For one-tail, Critical z-score (zα) = 2.33

Step 4: Calculate the appropriate test statistic.

Given:

Mean (x) = 18.3 minutes.

Random Sample (n) = 45 wait times.

Standard Deviation of Wait times (σ) = 5 minutes

Where, Zx̄ = The z-test statistic

x̄ = The sample mean

µH0= The mean of the sampling distribution, which is assumed to be true for the null
hypothesis

σ = The standard deviation of the population

n = The sample size

Calculating the appropriate test statistic from the above formulae, we get Zx̄ = -2.28.
Step 5: Comparing the z-test statistic (zx) with the critical z-score (zα).

Zx̄ = 2.28 is not greater than Zα = 2.33. So, do not Reject H0.

Reject H0

Do not reject H0 α = 0.01

x scale
20
Zx̄ = 2.28 zα= 2.33 z scale
Step 6: Stating the conclusion.

Conclusion:

According to the sample of 45 wait times on Saturday night, there is not enough
evidence to support the claim that Grace’s has reduced the average wait time to less than 20
minutes.

p- Value Approach:

Step 1: Identify the null and alternative hypotheses.

H0: μ ≥ 20 minutes.

H1: μ < 20 minutes.

Step 2: Setting a value for the significance level, α

Given, α = 0.01

Step 3: Determining the appropriate critical value.

For one-tail, Critical z-score (zα) = 2.33

Step 4: Calculate the appropriate test statistic.

Given: Mean (x) = 18.3 minutes.

Random Sample (n) = 45 wait times.

Standard Deviation of Wait times (σ) = 5 minutes

α = 0.01. For one-tail, Critical z-score= 2.33.

 Calculating the appropriate test statistic from the above formulae, we get Zx̄ = -2.28.

Step 5: Calculate the p-value from excel.

Excel’s NORM.S.DIST function can also be used to determine the p-value

=NORM.S.DIST(z, cumulative)

Input the test statistic value for Zx̄ and set cumulative = TRUE to get the area to the left of the
test statistic:

=NORM.S.DIST(2.28, TRUE) = 0.988696156

Because our p-value is the area to the right of the test statistic, we subtract 0.9886 from 1.0.

We get 1.0 – 0.9886 = 0.011303844.

Step 5: Comparing the p-value with the level of significance (α = 0.01).

Now, we compare the p-value with the α-value given.

Therefore, p-value > α-value, i.e.,0.011303844 > 0.01. So, we do not reject H0.

Reject H0
0.9886 p-value=0.0113

20 Min

z x =2.28 x scale
¯x̄ =18.3
z scale

Step 6: Stating the conclusion

Conclusion:

According to the sample of 45 wait times on Saturday night, there is not enough
evidence to support the claim that Grace’s has reduced the average wait time to less than 20
minutes.
Q3. Business organizations are relying more and more on social media to search for job
candidates. According to one survey, 70% of employers use social media sites to screen job
candidates during the hiring process. A random sample of 160 firms found that 103 of them use
social media sites to screen candidates during the hiring process. Test the hypothesis that less
than 70% of organizations use social media to screen job candidates during the hiring process
with α = 0.01.
a. Use the critical value approach to test this hypothesis
b. Use the p-value approach to test this hypothesis
Answer:
a. Critical value approach:
Step 1: Identify the null and alternative hypotheses
H0: p ≥ 0.7

H1: p < 0.7

Step 2: Setting a value for the significance level, α

α = 0.01

Step 3: Determining the appropriate critical value.

For one-tail, Critical z-score (zα) = 2.33

Step 4: Calculate the appropriate test statistic.

Given:

The number of organizations that use social media sites to hire candidates (x) = 103

The sample size (n) = 160

The formula for the Sample Proportion:

By substituting the given values, we get the sample proportion (p̂ ) = 0.643

Formulae for z-test statistics:

Where: zp = The z-test statistic for the proportion

p̂ = Sample Proportion.
 pH0 = The population proportion, which is assumed to be true in the null hypothesis.

n = Sample size

By substituting the above values, we get the z-test statistic for the proportion (z p) = -1.56

Step 5: Compare the z-test statistic (zp) with the critical z-score (zα).

The z-test statistic (zp) is less than the critical z-score (zα).

i.e., 1.56 < 2.33

So, do not reject H0.

Do not reject H0 Reject H0

α = 0.01
p̂ - scale 0.7
Zp = 1.56 Zα = 2.33
z- scale
Step 6: Stating the conclusion.

Conclusion:

According to the sample of 160 firms, at the 0.01 level of significance, there is not
enough evidence to support the claim that less than 70% of organizations use social media to
screen job candidates during the hiring process.

b. p-value approach:

Step 1: Identify the null and alternative hypotheses

H0: p ≥ 0.7

H1: p < 0.7

Step 2: Setting a value for the significance level, α

α = 0.01

Step 3: Determining the appropriate critical value.

For one-tail, Critical z-score (zα) = 2.33

Step 4: Calculate the appropriate test statistic.

 Given:

The number of organizations that use social media sites to hire candidates (x) = 103

The sample size (n) = 160

α = 0.01; For one-tail, Critical z-score (zα) = 2.33

The formula for the Sample Proportion:

By substituting the given values, we get the sample proportion (p̂ ) = 0.643

Formulae for z-test statistics:

Where: zp = The z-test statistic for the proportion

p̂ = Sample Proportion.

pH0 = The population proportion, which is assumed to be true in the null hypothesis.

n = Sample size

By substituting the above values, we get the z-test statistic for the proportion (z p) = -1.56

Step 5: Calculate the p-value from excel.

Excel’s NORM.S.DIST function can also be used to determine the p-value

=NORM.S.DIST(z, cumulative)Input the test statistic value for Zp and set cumulative = TRUE
to get the area to the left of the test statistic:

=NORM.S.DIST(1.56, TRUE) = 0.94062

Because our p-value is the area to the right of the test statistic, we subtract 0.94062 from 1.0.

We get p-value = 1.0 – 0.94062 = 0.059

Step 5: Comparing the p-value with the level of significance (α = 0.01).

Since the p-value = 0.059 > α = 0.01,

So, we do not reject H0.

 Rejection region:
α = 0.01
Do not reject H0

p̂ - scale 0.7
Zp = 1.56 Zα=2.33
z- scale p = 0.643
p-value = 0.059
Step 6: Stating the conclusion.

Conclusion:

According to the sample of 160 firms, at the 0.01 level of significance, there
is not enough evidence to support the claim that less than 70% of organizations use social
media to screen job candidates during the hiring process.