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Hypothesis Testing Introduction (Ch 11) Concepts of testing Tests of Hypothesis (Sigma known)
Rejection Region method P-value method Two tail test example
Introduction
The purpose of hypothesis testing is to determine whether there is enough statistical evidence in favor of a certain belief about a parameter. Examples
Does the statistical evidence in a random sample of potential customers support the hypothesis that more than 10% of the potential customers will purchase a new product? Is a new drug effective in curing a certain disease? A sample of patients is randomly selected. Half of them are given the drug while the other half are given a placebo. The improvement in the patients condition is then measured and compared.
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m = 170
Sample from the customer population, and build a statistic related to the parameter hypothesized (the sample mean). Pose the question: How probable is it to obtain a sample mean at least as extreme as the one observed from the sample, if H0 is correct?
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Assume the null hypothesis is true (m= 170). Common sense suggests the following.
Suppose x is much larger than 170, then the mean m is likely to be greater than 170. Reject the null hypothesis.
m = 170
When the sample mean is close to 170, it is not implausible that the mean m is 170. Do not reject the null hypothesis.
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Types of Errors
Two types of errors may occur when deciding whether to reject H0 based on the statistic value. Type I error: Reject H0 when it is true. Type II error: Do not reject H0 when it is false. Example continued Type I error: Reject H0 (m = 170) in favor of H1 (m > 170) when the real value of m is 170. Type II error: Believe that H0 is correct (m = 170) when the real value of m is greater than 170.
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Testing the Population Mean When the Population Standard Deviation is Known
Example 11.1
A new billing system for a department store will be costeffective only if the mean monthly account is more than $170. A sample of 400 accounts has a mean of $178. If accounts are approximately normally distributed with s = $65, can we conclude that the new system will be cost effective?
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Approaches to Testing
There are two approaches to test whether the sample mean supports the alternative hypothesis (H1)
The rejection region method is mandatory for manual testing (but can be used when testing is supported by a statistical software) The p-value method which is mostly used when a statistical software is available.
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Recall:
therefore,
It seems reasonable to reject the null hypothesis and believe that m > 170 if the sample mean is sufficiently large.
Reject H0 here Critical value of the sample mean
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x xL
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za
x L 170 65 400
a
m x 170
xL
P(commit a Type I error) = P(reject H0 given that H0 is true) = P( x xL given that H0 is true) is allowed to be a.
Since P( Z Z a ) a we have:
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a = 0.05
m x 170
xL
za
x L 170 65 400
65 x L 170 z a . 400 If we select a 0.05, z .05 1.645. 65 x L 170 1.645 175.34. 400
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x m s n
One tail test
z za
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Conclusion
Since Z = 2.46 > 1.645, reject the null hypothesis in favor of the alternative hypothesis.
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P-value Method
The p-value provides information about the amount of statistical evidence that supports the alternative hypothesis.
The p-value of a test is the probability of observing a test statistic at least as extreme as the one computed, given that the null hypothesis is true. Let us demonstrate the concept on Example 11.1
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P-value Method
The probability of observing a test statistic at least as extreme as 178, given that m = 170 is
x 178
The p-value
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a = 0.05
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Problem 11.54
Many Alpine ski centers base their projections of revenues and profits on the assumption that the average Alpine skier skis 4 times per year. To investigate the validity of this assumption, a random sample of 63 skiers is drawn and each is asked to report the number of times they skied the previous year. Assume that the population standard deviation is 2, and the sample mean is 4.84. Can we infer at the 10% level that the assumption is wrong?
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Suggested Problems: 11.6,11.42, 11.44 Next Time: Finish Chapter 11 (Section 11.4), Begin Chapter 12
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