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Slide
IS 310 Business Statistics
IS 310

Business
Statistics
CSU
Long Beach
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Slide
IS 310 Business Statistics
Inferences on Two Populations

In the past, we dealt with one population mean and one
population proportion. However, there are
situations where two populations are involved
dealing with two means.

Examples are the following:

O We want to compare the mean salaries of male and female
graduates (two populations and two means).

O We want to compare the mean miles per gallon(MPG) of two
comparable automobile makes (two populations and two
means)
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Slide
IS 310 Business Statistics
Statistical Inferences About Means
and Proportions with Two Populations
Inferences About the Difference Between
Two Population Means: o
1
and o
2
Known

Inferences About the Difference Between
Two Population Means: o
1
and o
2
Unknown
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Slide
IS 310 Business Statistics
Inferences About the Difference Between
Two Population Means: o
1
and o
2
Known


Interval Estimation of
1

2


Hypothesis Tests About
1

2

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Slide
IS 310 Business Statistics
Estimating the Difference Between
Two Population Means
Let
1
equal the mean of population 1 and
2
equal
the mean of population 2.
The difference between the two population means is

1
-
2
.
To estimate
1
-
2
, we will select a simple random
sample of size n
1
from population 1 and a simple
random sample of size n
2
from population 2.
Let equal the mean of sample 1 and equal the
mean of sample 2.
x
1
x
2
The point estimator of the difference between the
means of the populations 1 and 2 is .
x x
1 2

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IS 310 Business Statistics
Expected Value
Sampling Distribution of
x x
1 2

E x x ( )
1 2 1 2
=
Standard Deviation (Standard Error)
o
o o
x x
n n
1 2
1
2
1
2
2
2

= +
where: o
1
= standard deviation of population 1
o
2
= standard deviation of population 2
n
1
= sample size from population 1
n
2
= sample size from population 2
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IS 310 Business Statistics
Interval Estimate
Interval Estimation of
1
-
2
:
o
1
and o
2
Known
2 2
1 2
1 2 / 2
1 2
x x z
n n
o
o o
+
where:
1 - o is the confidence coefficient
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IS 310 Business Statistics
Interval Estimation of
1
-
2
:
o
1
and o
2
Known
In a test of driving distance using a mechanical
driving device, a sample of Par golf balls was
compared with a sample of golf balls made by Rap,
Ltd., a competitor. The sample statistics appear on the
next slide.
Par, Inc. is a manufacturer
of golf equipment and has
developed a new golf ball
that has been designed to
provide extra distance.
Example: Par, Inc.
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IS 310 Business Statistics
Example: Par, Inc.
Interval Estimation of
1
-
2
:
o
1
and o
2
Known
Sample Size
Sample Mean
Sample #1
Par, Inc.
Sample #2
Rap, Ltd.
120 balls 80 balls
275 yards 258 yards
Based on data from previous driving distance
tests, the two population standard deviations are
known with o
1
= 15 yards and o
2
= 20 yards.
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Slide
IS 310 Business Statistics
Interval Estimation of
1
-
2
:
o
1
and o
2
Known
Example: Par, Inc.
Let us develop a 95% confidence interval estimate
of the difference between the mean driving distances of
the two brands of golf ball.
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Slide
IS 310 Business Statistics
Estimating the Difference Between
Two Population Means
m
1

2
= difference between
the mean distances
x
1
- x
2
= Point Estimate of m
1

2

Population 1
Par, Inc. Golf Balls

1
= mean driving
distance of Par
golf balls
Population 2
Rap, Ltd. Golf Balls

2
= mean driving
distance of Rap
golf balls
Simple random sample
of n
2
Rap golf balls
x
2
= sample mean distance
for the Rap golf balls
Simple random sample
of n
1
Par golf balls
x
1
= sample mean distance
for the Par golf balls
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Slide
IS 310 Business Statistics
Point Estimate of
1
-
2

Point estimate of
1

2
= x x
1 2

where:

1
= mean distance for the population
of Par, Inc. golf balls

2
= mean distance for the population
of Rap, Ltd. golf balls
= 275 258
= 17 yards
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Slide
IS 310 Business Statistics
x x z
n n
1 2 2
1
2
1
2
2
2
2 2
17 1 96
15
120
20
80
+ = +
o
o o
/
.
( ) ( )
Interval Estimation of
1
-
2
:
o
1
and o
2
Known

We are 95% confident that the difference between
the mean driving distances of Par, Inc. balls and Rap,
Ltd. balls is 11.86 to 22.14 yards.
17 + 5.14 or 11.86 yards to 22.14 yards
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Slide
IS 310 Business Statistics
Hypothesis Tests About
1

2
:
o
1
and o
2
Known
Hypotheses
1 2 0
2 2
1 2
1 2
( ) x x D
z
n n
o o

=
+
=
1 2 0
:
a
H D
=
0 1 2 0
: H D s
0 1 2 0
: H D
>
1 2 0
:
a
H D
>
0 1 2 0
: H D
<
1 2 0
:
a
H D
Left-tailed Right-tailed Two-tailed
Test Statistic
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Slide
IS 310 Business Statistics
Example: Par, Inc.
Hypothesis Tests About
1

2
:
o
1
and o
2
Known
Can we conclude, using
o = .01, that the mean driving
distance of Par, Inc. golf balls
is greater than the mean driving
distance of Rap, Ltd. golf balls?
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IS 310 Business Statistics
H
0
:
1
-
2
< 0


H
a
:
1
-
2
> 0
where:

1
= mean distance for the population
of Par, Inc. golf balls

2
= mean distance for the population
of Rap, Ltd. golf balls
1. Develop the hypotheses.
p Value and Critical Value Approaches
Hypothesis Tests About
1

2
:
o
1
and o
2
Known
2. Specify the level of significance. o = .01
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IS 310 Business Statistics
3. Compute the value of the test statistic.
Hypothesis Tests About
1

2
:
o
1
and o
2
Known
p Value and Critical Value Approaches
o o

=
+
1 2 0
2 2
1 2
1 2
( ) x x D
z
n n
2 2
(235 218) 0 17
6.49
2.62
(15) (20)
120 80
z

= = =
+
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IS 310 Business Statistics
p Value Approach
4. Compute the pvalue.
For z = 6.49, the p value < .0001.
Hypothesis Tests About
1

2
:
o
1
and o
2
Known
5. Determine whether to reject H
0
.
Because pvalue < o = .01, we reject H
0
.
At the .01 level of significance, the sample evidence
indicates the mean driving distance of Par, Inc. golf
balls is greater than the mean driving distance of Rap,
Ltd. golf balls.
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Slide
IS 310 Business Statistics
Hypothesis Tests About
1

2
:
o
1
and o
2
Known
5. Determine whether to reject H
0
.
Because z = 6.49 > 2.33, we reject H
0
.
Critical Value Approach
For o = .01, z
.01
= 2.33
4. Determine the critical value and rejection rule.
Reject H
0
if z > 2.33
The sample evidence indicates the mean driving
distance of Par, Inc. golf balls is greater than the mean
driving distance of Rap, Ltd. golf balls.
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IS 310 Business Statistics
Sample Problem
Problem # 7 (10-Page 401; 11-Page 414)
a. H : = H : >
0 1 2 a 1 2
b. Point reduction in the mean duration of games during 2003 = 172 166
= 6 minutes
_ _ 2 2
c. Test-statistic, z = [( x - x ) 0] / [ ( / n ) + ( / n )]
1 2 1 1 2 2
=(172 166)/[ (144/60 + 144/50)]
= 6/2.3 = 2.61
Critical z at = 1.645 Reject H
0.05 0
Statistical test supports that the mean duration of games in 2003 is less
than that in 2002.
p-value = 1 0.9955 = 0.0045
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Slide
IS 310 Business Statistics
Inferences About the Difference Between
Two Population Means: o
1
and o
2
Unknown


Interval Estimation of
1

2


Hypothesis Tests About
1

2

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Slide
IS 310 Business Statistics
Interval Estimation of
1
-
2
:
o
1
and o
2
Unknown
When o
1
and o
2
are unknown, we will:
replace z
o/2
with t
o/2
.
use the sample standard deviations s
1
and s
2
as estimates of o
1
and o
2
, and
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IS 310 Business Statistics
Interval Estimation of -
1 2
(Unknown and )
1 2

Interval estimate
_ _ 2 2
(x - x ) t (s /n + s /n )
1 2 /2 1 1 2 2

Degree of freedom = n + n - 2
1 2
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IS 310 Business Statistics
Example: Specific Motors
Difference Between Two Population Means:
o
1
and o
2
Unknown
Specific Motors of Detroit
has developed a new automobile
known as the M car. 24 M cars
and 28 J cars (from Japan) were road
tested to compare miles-per-gallon (mpg) performance.
The sample statistics are shown on the next slide.
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IS 310 Business Statistics
Difference Between Two Population Means:
o
1
and o
2
Unknown
Example: Specific Motors
Sample Size
Sample Mean
Sample Std. Dev.
Sample #1
M Cars
Sample #2
J Cars
24 cars 28 cars
29.8 mpg 27.3 mpg
2.56 mpg 1.81 mpg
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IS 310 Business Statistics
Difference Between Two Population Means:
o
1
and o
2
Unknown
Let us develop a 90% confidence
interval estimate of the difference
between the mpg performances of
the two models of automobile.
Example: Specific Motors
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IS 310 Business Statistics
Point estimate of
1

2
= x x
1 2

Point Estimate of
1

2

where:

1
= mean miles-per-gallon for the
population of M cars

2
= mean miles-per-gallon for the
population of J cars
= 29.8 - 27.3
= 2.5 mpg
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IS 310 Business Statistics
Interval Estimate of -
1 2
Interval estimate
2 2
29.8 27.3 t (2.56) /24 + (1.81) /28)
0.1/2
2.5 1.676 (0.62)
2.5 1.04
1.46 and 3.54
We are 90% confident that the difference between the
average miles per gallon between the J cars and M
cars is between 1.46 and 3.54.


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Slide
IS 310 Business Statistics
Hypothesis Tests About
1

2
:
o
1
and o
2
Unknown
Hypotheses
1 2 0
2 2
1 2
1 2
( ) x x D
t
s s
n n

=
+
=
1 2 0
:
a
H D
=
0 1 2 0
: H D s
0 1 2 0
: H D
>
1 2 0
:
a
H D
>
0 1 2 0
: H D
<
1 2 0
:
a
H D
Left-tailed Right-tailed Two-tailed
Test Statistic
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Slide
IS 310 Business Statistics
Example: Specific Motors
Hypothesis Tests About
1

2
:
o
1
and o
2
Unknown
Can we conclude, using a
.05 level of significance, that the
miles-per-gallon (mpg) performance
of M cars is greater than the miles-per-
gallon performance of J cars?
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Slide
IS 310 Business Statistics
2. Specify the level of significance.
3. Compute the value of the test statistic.
o = .05
p Value and Critical Value Approaches
Hypothesis Tests About
1

2
:
o
1
and o
2
Unknown
1 2 0
2 2 2 2
1 2
1 2
( ) (29.8 27.3) 0
4.003
(2.56) (1.81)
24 28
x x D
t
s s
n n

= = =
+ +
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IS 310 Business Statistics
Hypothesis Tests of -
1 2
H : = H : >
0 1 2 a 1 2

Where average miles per gallon of M cars
1
average miles per gallon of J cars
2

At = 0.05 with 50 degree of freedom, critical t = 1.676

Since t-statistic (4.003) is larger than critical t (1.676), we reject
the null hypothesis. This means that the average MPG of M cars
is not equal to that of J cars
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IS 310 Business Statistics
End of Chapter 10
Part A