HYPOTHESIS TESTING

Dr. Md. Siddikur Rahman

One Sample Tests of Hypothesis

• A hypothesis is a statement about a

population parameter.

• Data are then used to check the

reasonableness of the statement.
One Sample Tests of Hypothesis

Definition
• A statement about a population parameter
developed for the purpose of testing.

Hypothesis Testing
• A procedure based on sample evidence and
probability theory to determine whether the
hypothesis is a reasonable statement.
9-5

Hypothesis Testing
Step 1: State null and alternate hypotheses

Step 2: Select a level of significance

Step 3: Identify the test statistic

Step 4: Formulate a decision rule

Step 5: Take a sample, arrive at a decision

Do not reject null Reject null and accept alternate

 Step 1
State the Null Hypothesis (H0) and
the Alternate Hypothesis (H1)

NULL HYPOTHESIS
✓A statement about the value of a population parameter.
✓The Alternate hypothesis describes what you will conclude if
you reject the null hypothesis.
ALTERNATE HYPOTHESIS
✓ A statement that is accepted if the sample data provide
enough evidence that the null hypothesis is false.
✓Example: A recent article indicated that the mean age of a
Biman commercial aircraft is 20 years. To conduct a statistical
test regarding this statement, the first step is to determine the
null and alternate hypothesis. The null hypothesis represents
the current or reported condition.
❖It is written
H 0 :  = 20.

❖The Alternate hypothesis is that the statement is

not true, that is,
H1 :   20
❖It is important to remember that no matter how the
problem is stated; the null hypothesis will always contain the
equal sign. The equality will never appear in the alternative
hypothesis.
 Step 2

Select a level of significance (or Risk)

LEVEL OF SIGNIFICANCE

The probability of rejecting the null hypothesis when

it is true.

The level of significance is designated by , the Greek

letter alpha. A decision is made to use the .05 level
(often stated as 5% level), the .01 level, and the .10
level. Traditionally, the .05 level is selected for consumer
research projects; the .01 level is for quality assurance and
.10 for political polling.
There are two types of errors in rejecting or accepting the
null hypothesis:

TYPE I ERROR
TYPE II ERROR

TYPE I ERROR
▪ Rejecting the null hypothesis, H0, when it is true.
▪ The probability of committing another type of error, called
a type II error, is designated by the Greek letter .

TYPE II ERROR
▪ Accepting the null hypothesis when it is false.
The following table summarizes the
decisions the researcher could make and
the possible consequences:

Researcher
Null
Hypothesis Accepts H0 Rejects H0
Ho is true Correct decision Type I error
Ho is false Type II error Correct decision
 Step 3

Select the Test Statistic

There are many test statistics. Here we will use

z and t as the test statistic. In future we will
also use test statistics as F and 2 , called chi-
square.

TEST STATISTIC
A value, determined from sample information,
used to determine whether to reject the null
hypothesis.
In hypothesis testing for the mean () when
σ is known or the sample size is large, the
test statistic z is computed by

X −
z=
 / n
The z value is based on the sampling distribution of X .
which is normally distributed when the sample is
reasonably large.
 Step 4

Formulate the decision Rule

o A decision rule is a statement of the specific condition

under which the null hypothesis is rejected and the
conditions under which it is not rejected.
o The region or area of rejection defines the location of all
those values that are so large or so small that the
probability of their occurrence under a true null hypothesis
is rather remote.
 CHART 10.1 (Text Book)
Note in the chart that :
The area where the null hypothesis is not
rejected is to the left of 1.65
The area of rejection is to the right of 1.65
A one-tailed test is being applied.
The .05 level of significance was chosen.
The sampling distribution of the statistic z is
normally distributed.
The value of 1.65 separates the regions where
the null hypothesis is rejected and where it is
not rejected.
The value 1.65 is the critical value.
 CRITICAL VALUE

The dividing point between the region

where the null hypothesis is rejected
and the region where it is not rejected.
 Step 5

Make a Decision

The fifth and final step in hypothesis testing

is computing the test statistic, comparing it
to the critical value, and making a decision
to reject or not to reject the null
hypothesis.
 ONE-TAILED AND TWO-TAILED TESTS OF SIGNIFICANCE

Chart 10.2 (Text Book)

One way to determine the location of the

rejection region is to look at the direction in
which the inequality sign in the alternate
hypothesis is pointing

( either < or > ). For example, test is one-tailed if

H1 states  > or  < .
In summary, a test is one-tailed when the
alternate hypothesis H1 states a direction, such
as :

H0: The mean income of Managers of Computer

Companies is $50,000 per year

H1: The mean income of Managers of Computer

Companies is greater than $50,000 per year
That is,
• H0: =50000
• H1:  >50000
• If no direction is specified in the alternate
hypothesis, we use a two-tailed test. Changing
the previous example,
• H0: The mean income of Managers of Computer
Companies is $50,000 per year
• H1: The mean income of Managers of Computer
Companies is not equal to $50,000 per year.
• That is,
H0:  = 50000

H1:   50000

If the null hypothesis is rejected and H1

accepted in the two-tailed test, the mean income
could be significantly greater than $50,000 per
year or it could be significantly less than $50,000
per year. To accommodate these two
possibilities, the 5 percent area of rejection is
divided into the two tails of the sampling
distribution

(2.5 percent each).

Chart 10.3 (Text Book)

Note that the total area in the
normal distribution is 1.0000,
found by .9500+.0250+.0250.
 TESTING FOR POPULATION MEAN WITH A
KNOWN POPULATION STANDARD DEVIATION
[A Two - Tailed Test]

Example: The weekly production of steel desks of

a Company is normally distributed, with a mean of
200 and a standard deviation of 16. Recently, due
to market expansion, new production methods
have been introduced and new employees hired.
The vice president of manufacturing would like to
investigate whether there has been a change in
the weekly production of the desk. To put it another
way, is the mean number of desks produced at the
Company different from 200 at the .01 significance
level? A sample of 50 was taken and mean was
found to be 203.5.
 TESTING FOR A POPULATION MEAN:
SMALL SAMPLE
• POPULATION STANDARD DEVIATION
UNKNOWN
• When the sample size is less than 30 (n<30)
and the population standard deviation is not
known, we replace the standard normal
distribution with the t distribution.
• To conduct a test of hypothesis using the t
distribution, we use the following formula:

X −
t =
s/ n
 With n – 1 degrees of freedom, where:

X is the mean of the sample

•  is the hypothesized population mean
• s is the standard deviation of the sample
• n is the number of observation in the
sample
 EXAMPLE
An Insurance Company reports that the mean
cost to process a claim is $60. A comparison
showed this amount to be larger than most other
insurance companies, so they instituted cost-
cutting measures.The Insurance Company
selected a random sample of 26 recent claims.
The mean cost per claim was $57 and the
standard deviation was $10. Can they conclude
that the cost-cutting measures were effective?
Or should they conclude that the difference
between the sample mean ($57) and the
population mean ($60) is due to chance? Use
the .01 significance level. P-value?
 SOLUTION: done on the board.

• [Self - Review 10.3 Page: 354 and

example at page 355].
• [Self – Review 10.4 Page 358]
• Exercise 15, 17.
 TESTS CONCERNING PROPORTIONS

• A proportion is the ratio of the number of

successes to the number of observations.
We let X refer to the number of successes
and n the number of observations, so the
proportion of success in a fixed number of
trials is X/n. Thus, the formula for
computing a sample proportion, p, is p =
X/n.
• Some assumptions must be met and conditions
met before testing a population proportion. To
test a hypothesis about a population proportion,
a random sample is chosen from the population.

• It is assumed that the binomial assumptions are

met.

• both n and n(1 - ) are at least 5. n is the

sample size, and  is the population proportion.
It takes advantage of the fact that a binomial
distribution can be approximated by the normal
distribution.
 EXAMPLE
Tina Dennis is the comptroller for Meek
Industries. She believes that the current cash-
flow problem at Meek is due to the slow
collection of accounts receivable. She believes
that more than 60 percent of the accounts are in
arrears more than three months. A random
sample of 200 accounts showed that 140 were
more than three months old. At the .01
significance level, can she conclude that more
than 60 percent of the accounts are in arrears
for more than three months?
 EXAMPLE
Suppose prior elections in a state indicated it is
necessary for a candidate for governor to receive
at least 80 percent of the vote in the northern
section of the state to be elected. The incumbent
governor is interested in assessing his chances of
returning to office and plans to conduct a survey of
2,000 registered voters in the northern section of
the state. It was found that 1,550 planned to vote
for him.
Using the hypothesis-testing procedure, assess
the governor's chances of reelection.
 SOLUTION

Done On The Board

 p- value in hypothesis testing

The p-value provides additional insight into the

decision. It gives additional information on the
strength of the rejection. That is, how confident are
we in rejecting the null hypothesis? The p-value
compares with the significance level. If the p-value
is smaller than the significance level, H0 is
rejected. If it is larger than the significance level,
H0 is not rejected.
• Determining the p-value not only results in a
decision regarding H0 but it gives us additional
insight into the strength of the decision. A very
small p-value, such as .0001, indicates that
there is little likelihood the H0 is true. On the
other hand a p-value of .2033 means that H0 is
not rejected, and there is little likelihood that it is
false.

• How do we compute the p-value? [BOARD].

 Two - Sample Tests of Hypothesis

HYPOTHESIS TESTING: POPULATION MEANS

[Till now we have conducted tests of hypothesis in which we compared

the results of a single sample to a population value. That is, we
selected a single random sample from a population and conducted a
test of whether the proposed population value was reasonable. We
compared the results of a single sample statistic to a population
parameter. In this chapter, we expand the idea of hypothesis testing to
two samples. That is we select two random samples to determine
whether the samples are from the same or equal populations.

For example, we may want to test: Is there an increase in the

production rate if music is piped into the production area?]
 EXAMPLE
Customers at FoodTown super Markets have a choice
when paying for their groceries. They may check out and
pay using the standard cashier assisted checkout, or
they may use the new U-Scan procedure. In the
standard procedure a FoodTown employee scans each
item, puts it on a short conveyor where another
employee puts it in a bag and then into the grocery cart.
In the U-Scan procedure the customer scans each item,
bags it, and places in the cart themselves.The U-Scan
procedure is designed to reduce the time a customer
spends in the checkout time.
The U-Scan facility was recently installed
at the Tom Road town location. The store
manager would like to know if the mean
checkout time using the standard
checkout method is longer than the U-
Scan. She gathered the following sample
information. The time is measured from
when the customer enters the line until
their bags are in the cart. Hence the time
include both waiting in line and checking
out. What is the p-value?
 EXAMPLE
There have been complaints that resident
physicians and nurses on the surgical wing
respond too slowly to calls of senior citizens. In
fact it is claimed that the other patients receive
faster services. Quality assurance department
wanted to investigate the allegation. After studying
the problem, the department collected the
following sample information. At the .01
significance level, is it reasonable to conclude the
mean response time is longer for the senior citizen
cases? What is the p-value in this case?
Customer Sample Mean Sample Standard Sample
Type Deviation Size

Standard 5.50 minutes 0.40 minutes 50

U-scan 5.30 minutes 0.30 minutes 100

 SOLUTION

Done On The Board

[ Self Review 11-1, page: 383. Exercise 1]

Go to slide 44 for small samples.

 Two sample Tests about proportions
Assumptions are the same as one sample test.

Example: Keya Cosmetics recently developed a

new fragrance that they plan to market under the
name “Heavenly” . A number of market studies
indicate that Heavenly has very good market
potential. The sales department is particularly
interested in whether there is a difference in the
proportions of younger and older women who
would purchase Heavenly if it were marketed.
There are two independent populations, a
population consisting of the younger women and a
population consisting of the older women. Each
sampled woman will be asked to smell Heavenly
and indicate whether she likes the fragrance well
enough to purchase a bottle.
A random sample of 100 young women
revealed 20 liked the Heavenly
fragrance well enough to purchase it.
Similarly, a sample of 200 older women
revealed 100 liked the fragrance well
enough to make purchase.
 DEPENDENT SAMPLES

In our previous example, we tested the difference

between the means from two independent
samples. This means, for example,
that the sample response time for the senior
citizens is unrelated to the response time for the
other patients. If Mr. Rahman is a senior citizen
and his response time is sampled, that does not
affect the response time for any other patient.
 There are situations, in which the samples are not
independent. To put it another way, the samples are
dependent or related.

The test statistic follows the t distribution and we

calculate its value from the following formula:

PAIRED t TEST
d
t=
sd / n
• There are n-1 degrees of freedom and

d is the mean of the difference between the paried

or related observations
sd is the standard deviation of the differences between the
paired or related observations

n is the number of paired observations

 EXAMPLE
A loan giving organization wishes to compare the two
companies they use to appraise the value of
residential homes. The Organization selected a
sample of 10 residential properties and scheduled
both firms for an appraisal. The results, reported in
$000, are:
Home 1 2 3 4 5 6 7 8 9 10

Co. A 135 110 131 142 105 130 131 110 125 149

Co. B 128 105 119 140 98 123 127 115 122 145
Home Co. A Co. B Difference, d d2
1 135 128 7 49
2 110 105 5 25
3 131 119 12 144
4 142 140 2 4
5 105 98 7 49
6 130 123 7 49
7 131 127 4 16
8 110 115 -5 25
9 125 122 3 9
10 149 145 4 16
Total 46 386
At the .05 significance level, can we
conclude there is a difference in the
mean appraised values of the homes?
 SOLUTION

Done On The Board

To find the p-value, we use Appendix F and the
section for a two-tailed test. Move along the
row with 9 degrees of freedom and find the
values of t that are closest to our calculated
value. For a .01 significance level, the value of
t is 3.250. The computed value is larger than
this value, but smaller than the value of 4.781
corresponding to the .001 significance level.
Hence, the p-value is less than .01.
Comparing Populations with Small Samples

In this section we consider the case in which the population

standard deviations are unknown and the number of
observations in at least one of the samples is less than 30.
We often refer to this as a "small sample test of means”
The three required assumptions are:
The sampled populations follow the normal
distribution.
The two samples are from independent
population.
The standard deviation of the two populations
are equal.
The test statistic is the t distribution.

The following formula is used to pool the sample

variances. Notice that two factors are involved:
the number of observations in each sample
and the sample standard deviations
themselves.

Pooled Variance :
(n1 − 1) s + (n2 − 1) s
2 2
S =2 1 2
n1 + n2 − 2
p
 Where-

• s12 is the variance (standard deviation

squared) of the first sample.
• s22 is the variance of the second sample.
• The value of t is computed from the following
equation:

X1 − X 2
t =
1 1
2
sp ( + )
n1 n2
Where:

X1 is the mean of first sample

X 2 is the mean of the second sample

n1 is the number of observations in first sample

n2is the number of observations in second sample

s 2p is the pooled estimate of the population varience

The number of degrees of freedom in
the test is the total number of items
sampled minus the total number of
samples. Because there are two
samples, there are n1 + n2 - 2 degrees
of freedom.
 EXAMPLE

The production manager, at a manufacturer of

wheelchairs, wants to compare the number of
defective wheelchairs produced on the day shift
with the number on the afternoon shift. A sample
of the production from 6 day shifts and 8
afternoon shifts revealed the following number of
defects.

Day 5 8 7 6 9 7
Afternoon 8 10 7 11 9 12 14 9
 EXAMPLE
At the .05 significant level, is there a
difference in the mean number of defects
per shift?

❑ What is the p-value?

❑ Interpret the result.
 SOLUTION

Done On The Board

TEST CONCERING PROPORTION