Testing of Hypothesis

Example:

The roofing construct for a new sports complex has been

awarded to Parkhill Associates, a large building contractor.
Building specifications call for a moveable roof covered by
approximately 10,000 sheets of 0.04 inch-thick aluminum.
The aluminum sheets can not be appreciably thicker than
0.04 inch because the structure could not support the
additional weight. Nor can the sheets be appreciably
thinner than 0.04 inch because the strength of the roof
would be inadequate. Because of this restriction on
thickness, Parkhill carefully checks the aluminum sheets
from supplier.

Prof. G.N. Patel 2

 From past experience with this supplier, Parkhill believes
that these sheets come from a thickness population with a
standard deviation of 0.004 inch.

On the basis of these data, Parkhill must decide whether

the 10,000 sheets meet specifications or not.

Parkhill wants to be sure for 99% that error should not be

more then 0.001inch.
Of course, Parkhill does not want to measure each sheet, so
it randomly samples. How many minimum number of samples
the Parkhill to take.

Prof. G.N. Patel 3

Sample statistic

A random sample of 107 sheets gives

Whether these aluminum sheets meet the requirement specifications

or not?

Prof. G.N. Patel 4

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

Prof. G.N. Patel 5

 Examples:

The label on a soft drink bottle states that it

contains 300 ml.

A new drug is developed with the goal of lowering blood pressure

more than the existing drug.

Prof. G.N. Patel 6

Null and Alternative Hypotheses: Example

A manufacturer claims 10 kg packages of flour.

The null hypothesis, denoted by H0 , is a tentative

assumption about a population parameter.

The alternative hypothesis, denoted by Ha or H1, is the

opposite of what is stated in the null hypothesis.
Null and Alternative Hypotheses:
Example

A manufacturer claims 10 kg packages of flour.

H 0 : 10 kg
H 1 : 10 kg
 Developing Null and Alternative Hypotheses
Null Hypothesis as an Assumption to be Challenged

Example:
The label on a soft drink bottle states that it
contains 67.6 fluid ounces.
Null Hypothesis:
The label is correct. > 67.6 ounces.
Alternative Hypothesis:
The label is incorrect. < 67.6 ounces.
Decision Table for Hypothesis Testing for
Null Hypothesis

True False

Correct Type II error

Accept Decision

Reject Type I error Correct Decision

Type I and Type II Errors

Type I Error
Rejecting a true null hypothesis
The probability of committing a Type I error is called the level of
significance.

Type II Error
Failing to reject a false null hypothesis
The probability of committing a Type II error is called .
To Note:

1. Would like and to be as small as possible.

2. and are inversely related.
3. Usually set (and dont worry too much about .)
4. Most common values for and are 0.01 and 0.05.
5. 1 - : the power of the statistical test.

A measure of the ability of a hypothesis test to reject a false null

hypothesis.

Prof. G.N. Patel

Condition for using the Normal and t Distributions in
testing hypothesis about mean.

When the population When the population

standard deviation is standard deviation is
known not known

Sample size n is larger Normal distribution Normal distribution

than 30 z table z table

Sample size n is 30 or
less than and the Normal distribution t distribution
population is normal or z table t table
approximately normal
Example 1:

If our goal is to accept a null hypothesis that = 36.5 with 96%

certainty when its true, and our sample size is 50, diagram the
acceptance and rejection regions for the following alternative
hypotheses:
a) H1: 36.5
b) H1: > 36.5
c) H1: < 36.5

8.19
Example 2:

For the following cases, specify which probability distribution to

use in a hypothesis test:

a) H0: =15, H1 : 15, x = 14.8, = 3, n=35

b) H0: =9.9, H1 : 9.9, x = 10.6, = 2.3, n=16

c) H0: =42, H1 : > 42, x = 44, = 4, n=10

d) 8.20
Example 3:

The statistics department installed energy-efficient lights, heaters,

and air conditioners last year. Now they want to determine whether
the average monthly energy usage has decreased. Should they perform
a one- or two- tailed test? If their previous average monthly energy
usage was 3,124 kilowatt hours, what are the null and alternative
hypothesis?

8.24
Example 4:
Atlas sporting goods has implemented a special trade
promotion for its propane stove and feels that the
promotion should result in a price change for the
consumer. Atlas knows that before the promotion
began, the average retail price of the stove was
$44.95, and the standard deviation was $5.75. Atlas
samples 25 of its retailers after the promotion begins
and finds the mean price for the stoves is now $42.95.
At a .02 significance level, does Atlas have reason to
believe that the average retail price to the consumer
has decreased?

8.26
Example 5:

From 1980 until 1985, the mean price/earnings (P/E) ratio of the
approximately 1,800 stocks listed on the stock Exchange was 14.35
and the standard deviation 9.73. In a sample of 30 randomly chosen
stocks, the mean P/E in 1986 was 11.77. Does this sample present
sufficient evidence to conclude (at the 0.05 level of significance) that
in 1986 the mean P/E ratio for stocks had changed from its earlier
value?

8.27
Example 6:

General Electric has developed a new bulb whose design specifications

call for a light output of 960 lumens compared to an earlier model that
produced only 750 lumens. The companys data indicate that the
standard deviation of light output for this type of bulb is 18.4 lumens.
From a sample of 20 new bulbs, the testing committee found an
average light output of 954 lumens per bulb. At a 0.05 significance
level, can Generally Electric conclude that its new bulb is producing
the specified 960 lumen output?

8.28
Example 7:

The average commission charged by full service brokerage firms on a

sale of common stock is $144, and the standard deviation is $52. Joel
has taken a random sample of 121 trades by his clients and determined
that they paid an average commission of $151. At a 0.10 significance
level, can Joel conclude that his clients commissions are higher than
the industry average?

8.30
Example 8:

Each day, the Customs Service has historically intercepted about $28
million in contraband goods being smuggled into the country, with a
standard deviation of $16 million per day. On 64 randomly chosen days
in 1992, the Customs Service intercepted an average of $30.3 million
in contraband goods. Does this sample indicate (at a 5% level of
significance) that the Customs Commissioner should be concerned that
smuggling has increased above its historic level?

8.31
Hypothesize, Test, Action, Business (HTAB)
Step 1. Establish a null and alternative hypothesis
Step 2. Determine appropriate statistical test
Step 3. Set the value of alpha, the Type I error
Step 4. Establish the decision rule
Step 5. Gather sample data
Step 6. Analyze the data
Step 7. Reach a statistical conclusion
Step 8. Make a business decission
Example 9 : A company advertises the net weight of
its cereal is 24 kg with = 0.2. A consumer group
would like to check this claim. They cannot check
every box of cereal, so a sample of 40 cereal boxes
were examined and found the mean weight as 23.95
kg.
A decision is to be made about the true mean
weight based on the sample mean with level of
significance () of 0.05.

Prof. G.N. Patel

Example 10: The mean age of all shoppers at a local
jewelry store is 37 years (with a standard deviation
of 7 years). In an attempt to attract older adults
with more disposable income, the store launched a
new advertising campaign. Following the advertising,
a random sample of 47 shoppers showed a mean age
of 39.3. Is there sufficient evidence to suggest the
advertising campaign has succeeded in attracting
older customers?

Prof. G.N. Patel

Example11: The active ingredient for a drug is
manufactured using fermentation. The standard
process yields a mean of 26.5 grams (assume s = 3.2).
A new mixing technique during fermentation is
implemented. A random sample of 32 batches
showed a sample mean 27.1. Is there any evidence to
suggest the new mixing technique has changed the
yield?

Prof. G.N. Patel

Example12: A television documentary on overeating
claimed that Japanese are about 10 pounds
overweight on average. To test this claim, 18
randomly individuals were examined; their excess
weight was found to be 12.4 pounds, and sample
standard deviation was 2.7 pounds. At a significance
level of 0.01, is there any reason to doubt the
validity of the claimed 10-pound value?

Prof. G.N. Patel

 Example 13: A company is evaluating the
promotability of its employee, that is determining the
proportion whose ability, training and supervisory
experience qualify them for promotion to the next
higher level management. The human resources
director tells the president that roughly 80 percent
of the employees in the company are promotable.
The president assembles a special committee to assess
the promotability of all employees. This committee
conducts in-depth interviews with 150 employees and
finds that in its judgment only 70 percent of sample
are qualified for promotion. The president wants to
test at the 0.05 level of significance that 0.8 of the
employees are promotable.

Prof. G.N. Patel 27

 Example 14: A ketchup manufacturer is in the process
of deciding whether to produce a new extra-spicy
brand. The companys marketing-research department
used a national telephone survey of 6000 households
and found that the extra-spicy ketchup would be
purchased by 335 of them. A much more extensive
study made 2 years ago showed that 5 percent of the
households would purchase brand then. At a 2 percent
level of significance, should the company conclude that
there is an increased interest in the extra-spicy
flavor?

Prof. G.N. Patel 28

Example 15: A random sample of 20 privately held
Corporations revealed the data in the table given in
next slide about Chief Executive Officers( CEOs). Use
the information to answer the following. Assuming the
population is approximately normally distributed , is it
reasonable to conclude, at 5 percent significance level,
that the average age of CEOs is significantly greater
than 50?

Prof. G.N. Patel 29

Co. # Age Status Kids Co. # Age Status Kids
1 68 M 3 11 55 M 3
2 50 M 3 12 55 S 0
3 65 M 3 13 50 M 3
4 66 M 3 14 42 D 2
5 52 M 1 15 64 M 4
6 44 M 4 16 43 M 2
7 77 M 3 17 57 M 4
8 43 M 2 18 62 M 3
9 59 M 2 19 67 M 2
10 45 M 4 20 56 M 2
Status= marital status( Single, Married, or Divorce)
Kids= # of children

Prof. G.N. Patel 30