26/09/2024

Statistics for Business and Economics

Chapter 9 - Hypothesis Tests

Anderson, Sweeney, Williams, Camm, Cochran, Fry, Ohlmann
© 2020 Cengage Learning

Tien Dung Khong

Associate Professor, PhD., advanced senior lecturer

Contents
1.- Developing Null and Alternative Hypotheses
2.- Type I and Type II Errors
3.- Population Mean: σ Known
4.- Population Mean: σ Unknown
5.- Population Proportion
6.– Hypothesis Testing and Decision Making
7.– Calculating the Probability of Type II Errors
8.– Determining the Sample Size for a Hypothesis Test about a Population
Mean
9.– Big Data and Hypothesis Testing

1
 26/09/2024

Hypothesis Testing
• Hypothesis testing can be used to determine whether a statement
about the value of a population parameter should or should not be
rejected.
• The null hypothesis, denoted by H0 , is a tentative assumption about a
population parameter.
• The alternative hypothesis, denoted by Ha, is the opposite of what is
stated in the null hypothesis.
• The hypothesis testing procedure uses data from a sample to test the
two competing statements indicated by H0 and Ha.

Developing Null and Alternative Hypotheses (1 of 4)

• It is not always obvious how the null and alternative hypotheses
should be formulated.
• Care must be taken to structure the hypotheses appropriately so that
the test conclusion provides the information the researcher wants.
• The context of the situation is very important in determining how the
hypotheses should be stated.
• In some cases it is easier to identify the alternative hypothesis first. In
other cases the null is easier.
• Correct hypothesis formulation will take practice.

2
 26/09/2024

Developing Null and Alternative Hypotheses (2 of 4)

• Alternative Hypothesis as a Research Hypothesis
• Many applications of hypothesis testing involve an attempt to gather evidence in
support of a research hypothesis.
• In such cases, it is often best to begin with the alternative hypothesis and make it the
conclusion that the researcher hopes to support.
• The conclusion that the research hypothesis is true is made if the sample data
provides sufficient evidence to show that the null hypothesis can be rejected.

Example: A new teaching method is developed that is believed to be better than the
current method.

Null Hypothesis: The new method is no better than the old method.
Alternative Hypothesis: The new teaching method is better.
5

Developing Null and Alternative Hypotheses

(3 of 4)

Example: A new sales force bonus plan is developed in an attempt to

increase sales.
Null Hypothesis: The new bonus plan will not increase sales.
Alternative Hypothesis: The new bonus plan will increase sales.

Example: A new drug is developed with the goal of lowering blood pressure
more than the existing drug.
Null Hypothesis: The new drug does not lower blood pressure more than the
existing drug.
Alternative Hypothesis: The new drug lowers blood pressure more than the
existing drug.

3
 26/09/2024

Developing Null and Alternative Hypotheses

(4 of 4)

Null Hypothesis as an Assumption to be Challenged

• We might begin with a belief or assumption that a statement about
the value of a population parameter is true.
• We then use a hypothesis test to challenge the assumption and
determine if there is statistical evidence to conclude that the
assumption is incorrect.
• In these situations, it is helpful to develop the null hypothesis first.
• Example: The label on a soft drink bottle states that it contains 67.6
fluid ounces.

Summary of Forms for Null and Alternative

Hypotheses
• The equality part of the hypotheses always appears in the null
hypothesis.
• In general, a hypothesis test about the value of a population mean μ
must take one of the following three forms (where μ0 is the
hypothesized value of the population mean).

4
 26/09/2024

Null and Alternative Hypotheses (1 of 2)

• Example: Metro EMS

• A major west coast city provides one of the most comprehensive

emergency medical services in the world. Operating in a multiple hospital
system with approximately 20 mobile medical units, the service goal is to
respond to medical emergencies with a mean time of 12 minutes or less.

• The director of medical services wants to formulate a hypothesis test that

could use a sample of emergency response times to determine whether or
not the service goal of 12 minutes or less is being achieved.

Null and Alternative Hypotheses (2 of 2)

10

5
 26/09/2024

Type I Error
• Because hypothesis tests are based on sample data, we must allow
for the possibility of errors.
• A Type I error is rejecting H0 when it is true.
• The probability of making a Type I error when the null hypothesis is
true as an equality is called the level of significance.
• Applications of hypothesis testing that only control for the Type I
error are often called significance tests.

11

Type II Error
• A Type II error is accepting H0 when it is false.
• It is difficult to control for the probability of making a Type II error.
• Statisticians avoid the risk of making a Type II error by using “do not
reject H0 ”rather than “accept H0”.

12

6
 26/09/2024

Type I and Type II Errors

13

p-Value Approach to One-Tailed Hypothesis

Testing
• The p-value is the probability, computed using the test statistic, that
measures the support (or lack of support) provided by the sample for
the null hypothesis.

• If the p-value is less than or equal to the level of significance α, the

value of the test statistic is in the rejection region.
• Reject H0 if the p-value ≤ α.

14

7
 26/09/2024

Suggested Guidelines for Interpreting p-

Values
• Less than 0.01: Overwhelming evidence to conclude Ha is true.
• Between 0.01 and 0.05:Strong evidence to conclude Ha is true.
• Between 0.05 and 0.10:Weak evidence to conclude Ha is true.
• Greater than 0.10: Insufficient evidence to conclude Ha is true.

15

Lower-Tailed Test About a Population Mean: σ Known (1 of 2)

• p-Value Approach

16

8
 26/09/2024

Upper-Tailed Test About a Population Mean: σ Known

(1 of 2)

• p-Value Approach

17

Critical Value Approach to One-Tailed

Hypothesis Testing
• The test statistic 𝑧 has a standard normal probability distribution.
• We can use the standard normal probability distribution table to find
the 𝑧-value with an area of α in the lower (or upper) tail of the
distribution.

• The value of the test statistic that established the boundary of the
rejection region is called the critical value for the test.
• The rejection rule is:
Lower tail: Reject H0 if 𝑧 ≤ –𝑧α
Upper tail: Reject H0 if 𝑧 ≥ 𝑧α

18

9
 26/09/2024

Lower-Tailed Test About a Population Mean:

σ Known (2 of 2)
• Critical Value Approach

19

Upper-Tailed Test About a Population Mean:

σ Known (2 of 2)
• Critical Value Approach

20

10
 26/09/2024

Steps of Hypothesis Testing

• Step 1. Develop the null and alternative hypotheses.
• Step 2. Specify the level of significance α.
• Step 3. Collect the sample data and compute the value of the test statistic.

p-Value Approach
• Step 4. Use the value of the test statistic to compute the p-value.
• Step 5. Reject H0 if p-value ≤ α.

Critical Value Approach

• Step 4. Use the level of significance α to determine the critical value and the rejection rule.
• Step 5. Use the value of the test statistic and the rejection rule to determine whether to reject H 0.

21

One-Tailed Tests About a Population Mean: σ

Known (1 of 5)
• Example: Metro EMS

• The response times for a random sample of 40 medical emergencies

were tabulated. The sample mean is 13.25 minutes. The population
standard deviation is believed to be 3.2 minutes.

• The EMS director wants to perform a hypothesis test, with a .05 level
of significance, to determine whether the service goal of 12 minutes
or less is being achieved.

22

11
 26/09/2024

One-Tailed Tests About a Population Mean: σ

Known (2 of 5)
1.Develop the hypotheses.

2.Specify the level of significance. α = .05

3.Compute the value of the test statistic.

23

One-Tailed Tests About a Population Mean: σ

Known (3 of 5)
p –Value Approach
4. Compute the p –value.

For z = 2.47, the cumulative probability is 0.9932. (See Z-table) positive-z.pdf

p-value = 1 – 0.9932 = 0.0068

5. Determine whether to reject H0.

Because p-value = 0.0068 ≤ α = 0.05, we reject H0.
There is sufficient statistical evidence to infer that Metro EMS is not meeting
the response goal of 12 minutes.

24

12
 26/09/2024

One-Tailed Tests About a Population Mean: σ

Known (4 of 5)
• p –Value Approach

25

One-Tailed Tests About a Population Mean: σ

Known (5 of 5)
• Critical Value Approach

26

13
 26/09/2024

P Value Approach to Two-Tailed Hypothesis

Testing
• Compute the p-value using the following three steps:
1. Compute the value of the test statistic 𝑧.
2. If 𝑧 is in the upper tail (𝑧 > 0), compute the probability that 𝑧 is
greater than or equal to the value of the test statistic. If 𝑧 is in the
lower tail (𝑧 < 0), compute the probability that 𝑧 is less than or equal to
the value of the test statistic.
3. Double the tail area obtained in step 2 to obtain the p-value.
• The rejection rule: Reject H0 if the p-value ≤ α.

27

Critical Value Approach to Two-Tailed

Hypothesis Testing
• The critical values will occur in both the lower and upper tails of the
standard normal curve.

• Use the standard normal probability distribution table to find 𝑧α/2 (the
𝑧-value with an area of α/2 in the upper tail of the distribution).
• The rejection rule is:

28

14
 26/09/2024

Two-Tailed Tests About a Population Mean: σ

Known (1 of 6)
• Example: Glow Toothpaste
• The production line for Glow toothpaste is designed to fill tubes with a mean weight of 6
oz. Periodically, a sample of 30 tubes will be selected in order to check the filling
process.
• Quality assurance procedures call for the continuation of the filling process if the sample
results are consistent with the assumption that the mean filling weight for the
population of toothpaste tubes is 6 oz.; otherwise the process will be adjusted.

• Assume that a sample of 30 toothpaste tubes provides a sample mean of 6.1 oz. The
population standard deviation is believed to be 0.2 oz.

• Perform a hypothesis test, at the 0.03 level of significance, to help determine whether
the filling process should continue operating or be stopped and corrected.

29

Two-Tailed Tests About a Population Mean: σ

Known (2 of 6)
1. Develop the hypotheses.

2. Specify the level of significance. α = 0.03

3. Compute the value of the test statistic.

30

15
 26/09/2024

Two-Tailed Tests About a Population Mean: σ

Known (3 of 6)
p –Value Approach
4. Compute the p –value.

For z = 2.74, the cumulative probability is 0.9969.

p-value = 2(1 – 0.9969) = 0.0062

5. Determine whether to reject H0.

Because p-value = 0.0062 ≤ α = 0.03, we reject H0.
There is sufficient statistical evidence to infer that the alternative hypothesis
is true (i.e., the mean filling weight is not 6 ounces).

31

Two-Tailed Tests About a Population Mean: σ

Known (4 of 6)
• p-Value Approach

32

16
 26/09/2024

Two-Tailed Tests About a Population Mean: σ

Known (5 of 6)
Critical Value Approach
4. Determine the critical value and the rejection rule.

• There is sufficient statistical evidence to infer that the alternative

hypothesis is true (i.e., the mean filling weight is not 6 ounces).

33

Two-Tailed Tests About a Population Mean: σ

Known (6 of 6)
• Critical Value Approach

34

17
 26/09/2024

Confidence Interval Approach to Two-Tailed Tests

About a Population Mean
(1 of 2)
• Select a simple random sample from the population and use the
value of the sample mean 𝑥̅ to develop the confidence interval for
the population mean μ. (Confidence intervals are covered in Chapter
8.)
• If the confidence interval contains the hypothesized value μ0, do not
reject H0. Otherwise, reject H0. (Actually, H0 should be rejected if μ0
happens to be equal to one of the end points of the confidence
interval.)

35

Confidence Interval Approach to Two-Tailed Tests

About a Population Mean (2 of 2)
• The 97% confidence interval for μ is

• Because the hypothesized value for the population mean, μ0 = 6, is not in

this interval, the hypothesis-testing conclusion is that the null hypothesis,
H0: μ = 6, can be rejected.

36

18
 26/09/2024

Tests About a Population Mean: σ Unknown (1

of 2)

• Test Statistic:

• This test statistic has a t distribution with n – 1 degrees of freedom.

37

Tests about a Population Mean: σ Unknown (2

of 2)

• Rejection Rule: p-value approach

• Rejection Rule: Critical value approach

38

19
 26/09/2024

p -Values and the t Distribution

• The format of the t distribution table provided in most statistics
textbooks does not have sufficient detail to determine the exact p-
value for a hypothesis test.
• However, we can still use the t distribution table to identify a range
for the p-value.
• An advantage of computer software packages is that the computer
output will provide the p-value for the t distribution.

39

Example: Highway Patrol

• One-Tailed Test About a Population Mean: σ Unknown

• A State Highway Patrol periodically samples vehicle speeds at various

locations on a particular roadway. The sample of vehicle speeds is
used to test the hypothesis H0: μ ≤ 65.

• The locations where H0 is rejected are deemed the best locations for
radar traps. At Location F, a sample of 64 vehicles shows a mean
speed of 66.2 km/h with a standard deviation of 4.2 km/h. Use α =
0.05 to test the hypothesis.

40

20
 26/09/2024

One-Tailed Test About a Population Mean: σ

Unknown (1 of 4)
1.Develop the hypotheses.

2.Specify the level of significance. α = .05

3.Compute the value of the test statistic.

41

One-Tailed Test About a Population Mean: σ

Unknown (2 of 4)
p –Value Approach
4. Compute the p –value.

5. Determine whether to reject H0.

Because p-value < α = 0.05, we reject H0.
We are at least 95% confident that the mean speed of vehicles at Location F
is greater than 65 km/h.

42

21
 26/09/2024

One-Tailed Test About a Population Mean: σ

Unknown (3 of 4)
Critical Value Approach
4. Determine the critical value and the rejection rule.

5. Determine whether to reject H0.

Because 2.286 ≥ 1.669, we reject H0.
We are at least 95% confident that the mean speed of vehicles at Location F
is greater than 65 km/h. Location F is a good candidate for a radar trap.

43

One-Tailed Test About a Population Mean: σ

Unknown (4 of 4)

44

22
 26/09/2024

A Summary of Forms for Null and Alternative

Hypotheses About a Population Proportion
•The equality part of the hypotheses always appears in the null
hypothesis.
•In general, a hypothesis test about the value of a population
proportion 𝑝 must take one of the following three forms (where
𝑝0 is the hypothesized value of the population proportion).

45

Tests About a Population Proportion (1 of 2)

• Test Statistic:

46

23
 26/09/2024

Tests About a Population Proportion (2 of 2)

• Rejection Rule: p –Value Approach
Reject H0 if p –value ≤ α

• Rejection Rule: Critical Value Approach

47

Two-Tailed Test About a Population

Proportion (1 of 4)
• Example: National Safety Council (NSC)

• For a Christmas and New Year’s week, the National Safety Council
estimated that 500 people would be killed and 25,000 injured on the
nation’s roads. The NSC claimed that 50% of the accidents would be
caused by drunk driving.

• A sample of 120 accidents showed that 67 were caused by drunk

driving. Use these data to test the NSC’s claim with α = 0.05.

48

24
 26/09/2024

Two-Tailed Test About a Population

Proportion (2 of 4)

49

Two-Tailed Test About a Population

Proportion (3 of 4)
p –Value Approach
4. Compute the p –value.

• For z = 1.28, the cumulative probability = 0.8997.

• p-value = 2(1 – 0.8997) = 0.2006.

5. Determine whether to reject H0.

• Because p-value = 0.2006 > α = 0.05, we cannot reject H0.
• We do not have convincing evidence that the true proportion of accidents
that would be caused by drunk driving is different than 50%.

50

25
 26/09/2024

Two-Tailed Test About a Population

Proportion (4 of 4)
Critical Value Approach
4. Determine the critical value and the rejection rule.

5. Determine whether to reject H0.

• Because 1.278 is not less than −1.96 and is not greater than 1.96, we
cannot reject H0.
• We do not have convincing evidence that the true proportion of accidents
that would be caused by drunk driving is different than 50%.

51

26