HYPOTHESIS TESTS

Chapter - 9
In this Chapter
 We develop a procedure to test the
validity of a statement about a population
parameter.
Examples:
 The mean starting salary for graduates of
four year business schools is Rs. 32,000
per month.
 Eighty percent of those who play the state
lottery regularly never win more than $
100 in any one play.
What is Hypothesis?
 Is a statement about a population
developed for the purpose of testing.
 In most cases the population is too
large that it is not feasible to study
all items in the population.
 We can, therefore, test a statement
to determine whether the sample
does or does not support the
statement concerning the population.
HYPOTHESIS TESTING

 A procedure based on sample

evidence and probability theory to
determine whether the hypothesis
is a reasonable statement.
Five-Step Procedure for Testing a
Hypothesis

 State the Null Hypothesis (Ho) and

the Alternate Hypothesis (Hı)
 Select a level of significance.
 Identify the test statistic.
 Formulate a decision rule.
 Make a decision
Step 1: State the Null Hypothesis (Ho)
and the Alternate Hypothesis (Hı)

 The first step is to state the

hypothesis being tested. It is called
the null hypothesis, designated (Ho).
 The capital H stands for hypothesis,
and the subscript zero implies “no
difference”.
 There is usually a “not” or a “no”
term in the null hypothesis, meaning
that there is “no change”.
 For example, the null hypothesis is that
the number of miles driven on the steel-
belted tire is not different from 60,000.
 Therefore, Ho: μ = 60,000.
 We either reject or fail to reject the null
hypothesis.
 The null hypothesis is a statement that is
not rejected unless our sample data
provide convincing evidence that it is false.
ALTERNATE HYPOTHESIS
 The alternate hypothesis describes
what you will conclude if you reject
the null hypothesis. It is written as
Hı.
 It is also called the research
hypothesis.
 The alternate hypothesis is accepted
if the sample data provide us with
enough statistical evidence that the
null hypothesis is false.
Example:

 A recent article indicated that the

mean age of U.S. commercial
aircraft is 15 years.
 The null hypothesis represents the
current or reported condition.
 Ho: μ = 15.
 The alternate hypothesis is that the
statement is not true: H1: μ ≠15.
Developing Null and Alternative Hypotheses

 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 provide sufficient
evidence to show that the null hypothesis can be
rejected.
Developing Null and Alternative Hypotheses

 Alternative Hypothesis as a Research

Hypothesis

• Example:
A new teaching method is developed that is
believed to be better than the current method.
• Alternative Hypothesis:
The new teaching method is better.
• Null Hypothesis:
The new method is no better than the old method.
Developing Null and Alternative Hypotheses

 Alternative Hypothesis as a Research

Hypothesis

• Example:
A new sales force bonus plan is developed in an
attempt to increase sales.
• Alternative Hypothesis:
The new bonus plan increase sales.
• Null Hypothesis:
The new bonus plan does not increase sales.
Developing Null and Alternative Hypotheses

 Alternative Hypothesis as a Research

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

 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 using 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.
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. m > 67.6 ounces.
• Alternative Hypothesis:
The label is incorrect. m < 67.6 ounces.
Select a level of significance
LEVEL OF SIGNIFICANCE The probability of making a
Type 1 error when the null hypothesis is true as an equality.

 The level of significance is designated a ,

the Greek letter alpha. It is also sometimes
called level of risk.
 There is no one level of significance that it
is applied to all tests.
 The common choices for a are .05, .01 and
.10.
 Traditionally, .05 level is selected
for consumer research projects, .01
for quality assurance, and .10 for
political polling.
Type I and Type II Errors
Population Condition

Ho True Hı True

Accept Ho Correct Type II

Conclusion Error
Conclusion

Reject Ho Type I Correct

Error Conclusion
Type I Error from Indian Epic
It may be recalled that in “Abhigyan
Shakuntalam” , king Dushyanta had married
shakuntala when he met her in her village, while
wandering in a jungle. He gave her his royal ring
as a gift which could also serve as her identity
when she would come to meet him, in future.
However, while going to meet him, she lost the
ring in the river. When she reached Dushayant‟s
place and met him, he failed to recognize her
especially since she did not have the ring. Thus
Dushayant committed Type I error as he
rejected Shankutla as his wife when, in fact, she
was his true wife.
Type II Error from Indian Epic
In Mahabharta epic, Dronacharya – the
„guru‟ of both Pandavas and Kauravas –
was fighting from the Kaurav‟s side.
However, he had taken a vow that he
would stop fighting if and when his son
Aswathama was killed in the war. It so
happened that during the war, one
elephant named Aswathama was killed.
Lord - Krishna the mentor of Pandavas –
thought of a strategy to make
Dronacharya lay down his arms.
Yudhishter on advice of lord Krishna,
went to Dronacharya and pronounced
Aswathama was dead-but was it a human
or an elephant? Dronacharya, on listening
the first part of Yudhishtir‟s sentence,
presumed that his son was dead, and he
left for his heavenly abode without
waiting to listen to the second part of
Yudhishter‟s sentence. Thus, Droncharya
could be said to have committed Type II
error i.e. accepting a statement when it
was not true.
Select a Test Statistic

 A value, determined from sample

information, used to determine
whether to reject the null
hypothesis.
 The test criteria that are frequently
used in hypothesis testing are Z, t,
F,  2
test.
Formulate the Decision Rule

 A decision rule is a statement of the

specific conditions under which the
null hypothesis is rejected and the
conditions under which it is not
rejected .
Step 5: Make a Decision

 Make a decision regarding the null

hypothesis on the sample
information .
 Interpret the results of the test.
Summary of Forms for Null and Alternative
Hypotheses about a Population Mean

 The equality part of the hypotheses always appears

in the null hypothesis.
 In general, a hypothesis test about the value of a
population mean m must take one of the following
three forms (where m0 is the hypothesized value of
the population mean).

H 0 : m  m0 H 0 : m  m0 H 0 : m  m0
H a : m  m0 H a : m  m0 H a : m  m0

One-tailed One-tailed Two-tailed

(lower-tail) (upper-tail)
 Null and Alternative Hypotheses

 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

The emergency service is meeting

H0: m  
the response goal; no follow-up
action is necessary.

The emergency service is not

Ha: m  
meeting the response goal;
appropriate follow-up action is
necessary.

where: m = mean response time for the population

of medical emergency requests
One-Tailed Test of Hypothesis
Let us consider a null and alternative hypotheses as below:

Lower Tail Test Upper Tail Test

Ho: μ ≥ μo Ho: μ ≤ μo
H1: μ < μo H1: μ > μo

One-tailed test contains the rejection region on one tail of the

sampling distribution of a test statistic. In case of a left-tailed
test, a researcher rejects the null hypothesis if the computed
sample statistic is significantly lower than the hypothesized
population parameter (considering the left side of the curve in
Figure 10.5).
In case of a right-tailed test, a researcher rejects the null
hypothesis if the computed sample statistic is significantly higher
than the hypothesized population parameter (considering the
right side of the curve in Figure 10.6).
Figure 10.5: Acceptance and rejection regions for one-tailed (left) test
(alpha = 0.05)
Figure 10.6: Acceptance and rejection regions for one-tailed (right) test
(alpha = 0.05)
 Population Mean:  known

One - tailed Test

Lower Tail Test Upper Tail Test
Ho: μ ≥ μo H o : μ ≤ μo
H1: μ < μo H1: μ > μo
One-Tailed Tests About a Population Mean:
 Known

Example: Hilltop Coffee

 The Federal trade Commission (FTC)

periodically conducts statistical studies
designed to tests the claims that
manufacturers make about their products.
 For example, the label on a large can of
Hilltop Coffee States that the can contains
3 pounds of coffee.
 The FTC knows that Hilltop production
process cannot place exactly 3 pounds of
coffee, even if the mean filling weight is
for the population of all cans filled is 3
pounds per can.
 However, as long as the population mean
filing weight is at least 3 pounds per can,
the rights of consumers can be protected.
 Thus, the FTC interprets the label
information on a large can of coffee as a
claim by Hilltop that the population mean
is at least 3 pounds per can.
 We will show how the FTC can check the
hilltops claim by conducting the lower tail
hypothesis test?
Develop Null and Alternative
Hypothesis

If the population mean filling weight

is at least 3 pounds per can,
Hilltop‟s claim is correct.

Ho: μ ≥ 3
Hı: μ < 3

The hypothesized value of population

mean is μo = 3
 Suppose a sample of 36 cans of coffee is
selected.
 Sample mean x is computed as an estimate of
population mean μ.
 If x < 3 pounds, the sample results will cast a
doubt on null hypothesis.
 We want to know how much less than 3 pounds
must x be before we would be willing to declare
the difference significant and risk making a Type
I error by falsely accusing Hilltop of a label
violation.
 The director of FTC’s program made
the following statement:
If the company is meeting its weights
specifications at µ = 3, I would like 99%
chance of not taking any action against the
company. Although I do not want to accuse
the company wrongly of underfilling its
product, I am willing to risk a 1% chance of
making such an error.”
Therefore from the director‟s statement we
would set a = .01
Thus we must design the hypothesis test so
that probability of making a type I error when
µ = 3 is .01
Test Statistic
 For the Hilltop Coffee study,
previous FTC test show that the
population standard deviation can
be assumed known with the value
of σ = .18
 In addition these tests also show
the population of filling weights can
be assumed to have a normal
distribution.
Sampling distribution of x

 x    .18  0.03
n 36
TEST STATISTIC FOR HYPOTHESIS TESTS ABOUT A POPULATION
MEAN: σ KNOWN
z  x  m0
 / n
Suppose the sample of 36 Hilltop coffee
cans provides a sample mean of x =
2.92 small enough to cause us to reject
Ho ?

x = 2.92; σ = .18 and n = 36

z  x  m 0  2.92  3  2.67
 / n .18/ 36
Critical Value Approach

 The critical value is the value of the

test statistic that corresponds to the
area of a  .0 in the lower tail of the
standard normal distribution.
 Using standard normal distribution
table, we find that z = -2.33 provides
an area of .01 in the lower tail.
For Hilltop Coffee Study Critical Value
Rejection Rule for a level of significance of
.01 is

Reject Ho if Z ≤ -2.33
a  .01
z
0
Z=-2.33
 x = 2.92
 z = -2.67
 Since z = -2.67 < -2.33, we can
reject Ho and conclude that Hilltop
coffee is under filling cans.
p-value approach

 The p-value is a probability,

computed using the test statistic,
that measures the support (or lack
of support) provided by the sample
for the null hypothesis.
 It has become the preferred method
when using computer software
packages such as Excel, SPSS,
Minitab.
 Because p-value is probability, it
ranges from 0 to 1.
 In general the smaller the p-value,
the less support it indicates for the
null hypothesis.
p-value for Hilltop coffee example
 Thus the p-value is the probability that the
test statistic z is less than or equal to -2.67
 Using the standard normal distribution
table, we find that the area between the
mean and z = -2.67 is .4962.
 Thus the p-value is .5000-.4962 = .0038
 This p-value indicates a small probability of
obtaining a sample mean of x = 2.92 or
smaller when sampling from a population
with μ = 3.
 .0038 <= .01, therefore we reject H0
Two – Tailed Test

Ho: μ = μo
H1: μ ≠ μo
Example:
 The U.S. Golf Association (USGA)
establishes rules that manufacturers of golf
equipment must meet if their products are
to be acceptable for use in USGA events.
 MaxFlight uses a high technology
manufacturing process to produce golf balls
with average distances from 295 yards.
 When the average distance falls below 295
yards, the company worries about losing
sales because the balls do not provide as
much distance as advertised.
 When the average distance passes 295 yards,
MaxFlight‟s golf balls may be rejected by the
USGA for exceeding the overall distance
standard concerning carry and roll.
 MaxFlights‟s quality control program involves
taking periodic samples of 50 golf balls to
monitor the manufacturing process.
 For each sample, a hypothesis test is
conducted to determine whether the process
has fallen out of adjustment.
 We assume that the process is functioning
correctly; i.e. the golf balls produced have
a mean distance of 295 yards.

H0: μ = 295
H1: μ ≠ 295

 If the sample mean is significantly less than

295 yards or significantly greater than 295
yards, we will reject H0.
x

 The quality control team selected = .05 as

the level of significance for the test. Data
from previous tests conducted when the
process was known to be in adjustment
show that the population standard
deviation can be assumed known with a
value of = 12. Thus, with a sample size of
n = 50, the standard error of x is
 x    12  1.7
n 50
 Because the sample size is large, the
central limit theorem allows us to conclude
that the sampling distribution of can be
approximated by a normal distribution.

Suppose that a sample of 50 golf balls is

selected and that the sample mean is =
297.6 yards. This sample mean provides
support for the conclusion that the
population mean is larger than 295 yards.
Computing z - statistic

z  x  m0  297.6  295  1.53

/ n 12/ 50
Critical Value Approach

 With a level of significance of = .05

 The area in each tail beyond the
critical values is a / 2  .05 / 2  .025
 Using the table of of areas of
standard normal distribution.
 z
-1.96 0 1.96

Reject H0 Reject H0
  z.025  1.96 and z.025  1.96

Reject H0 if z ≤ 1.96 or if z ≥ 1.96

Because the value of the test for the MaxFlight study is z = 1.53,
The statistical evidence will not permit us to reject the null
hypothesis at the .05 level of significance.
p-value Approach
 Area between mean and z = 1.53 is .4370
 .5000 - .4370 = .0630
 P-value = 2(.0630) = .1260
 Since p-value = .1260 >.05
 Null hypothesis is not rejected, no action
will be taken to adjust the MaxFlight
manufacturing process.
P( z  1.53)  .0630 P( z  1.53)  .0630

z
-1.53 0 1.53

P-value = 2(.0630) = .1260

 Relationship Between Interval
Estimation and Hypothesis Testing
 For a σ known case, the confidence interval estimate of
a population mean corresponding to a (1 - α)
confidence coefficient is given by

x  za / 2
n
Conducting a hypothesis requires us first to develop the
Hypotheses about the value of the population parameter. In
Case of the population mean, the two tailed test takes the form

H 0 : m  m0
H1 : m  m0
 Where m0 is the hypothesized value for the
population mean. Using the two tailed critical value
approach, we do not reject H for values of the
0
sample mean x that are within  za /2 and  za /2
standard errors of m0. Thus do-not-reject region for
the sample mean x in a two tailed hypothesis test
with the level of significance of α is given by


m0  za / 2
n
 For MaxFlight hypothesis test, which resulted
in the following two tailed test.
H0: μ = 295
H1: μ ≠ 295
a  .05, n  50, x  297.6,   12
Using these results with z.025  1.96 , we find that the
95% confidence interval estimate of the population mean is
 
x  za / 2
n
12
297.6  1.96
50
297.6  3.3
294.3 to 300.9

This finding enables the quality control manager to

conclude that the mean distance for the population of
golf balls is 294.3 – 300.9 yards.
 Lower Tail Test Upper Tail Test Two-Tailed Test

Hypothesis H 0 : m  m0 H 0 : m  m0 H 0 : m  m 0
H1 : m  m0 H1 : m  m0 H1 : m  m0
Test Statistic x  m0 x  m0 x  m0
  
n n n
Rejection Rule:
p-value app Reject H 0 if Reject H 0 if Reject H 0 if
p  value  a p  value  a p  value  a

Rejection Rule: Reject H 0 if

Critical value Reject H 0 if Reject H 0 if
z   za /2
z   za z  za
or if z  za /2
 Testing For a Population Mean: Population
Standard Deviation (  ) Unknown

 We are able to use the standard

normal distribution, that is z, under
two conditions:
1. The population is known to follow
a normal distribution , and the
population standard deviation is
known.
 What do we do when the population
standard deviation is not known?

 Under these condition we replace the

standard normal distribution with the t
distribution.
 t- statistic

t  X m
s/ n

with n - 1 degrees of freedom, where

X is the mean of samp le.
m is hy p othesized p op ulation mean.
s is standard deviation of the samp le.
n is the number of observations in the samp le.
 Example:

The Mcfarland Insurance Company Claims

Department reports the mean cost to process
a claim is $60.
An industry comparison showed this amount
to be larger than most other insurance
companies, so they instituted cost cutting
measures.
To evaluate the effect the cost cutting
measures, the supervisor of the Claims
Department selected a random sample of 26
claims processed last month and determined
the cost to process these selected claims.
 The sample information is reported below

$ 45 49 62 40 43 61
48 53 67 63 78 64
48 54 51 56 63
58 51 58 59 56
38 76

At the .01 significance level is it reasonable to conclude that

mean cost to process a claim is now less than $ 60.
Step 1: State the null hypothesis and alternate
hypothesis.

 The null hypothesis is that the

population mean is at least $ 60.
 The alternate hypothesis is that the
population mean is less than $ 60.

H 0 : m  $60
H1 : m  $60
 Step 2 : select the level of significance

 We decided in .01 significance level.

Step – 4 : Select the test statistic

t  X m
s/ n
Step-4: Formulate the decision rule.

 In this case the number of observations

in a sample is 26, so there are 26 – 1 =
25 degrees of freedom.
 For the critical values, refer the t –
distribution table.
 The table value is 2.485
 Since this is a one tailed test and the
rejection region is in the left tail test, the
critical value is negative.
 The rejection region is to reject H 0 if the
value of t is less than -2.485
 df = 26 – 1 = 25

Rejection
Region

a  .01

-2.485 -1.818 0
Critical Computed
value Value of t
 Step 5: Make a decision and interpret the result

t  X m
s/ n
 56.42  60  1.818
10.04/ 26
 Since value of t – statistics is less
than the tabulated value.
 Therefore, we can not reject the
null hypothesis.
 Two – Tailed Test

 The mean length of a small

counterbalance bar is 43 millimeters.
The production supervisor is
concerned that the adjustments of the
machine producing the bars have
changed. He asks the Engineering
Department to investigate. Engineers
selects a random sample of 12 bars
and measures each. The results are
reported below in
 Milliteres.
42 39 42 45 43 40
39 41 40 42 43 42

 Is it reasonable to conclude that

there has been change in the mean
length of the bars ? Use the .02
significance level.
Solution

 State null and alternate hypothesis

 H 0 : m  43
H1 : m  43
 The alternate hypothesis does not
state a direction, so this is a two
tailed test.
 There are 11 degrees of freedom,
found by n – 1 = 12 – 1 = 11.
 The t value is 2.718
 The decision rule is:
Reject the null hypothesis if the
computed test statistic, t, is to the
left of -2.718 or to the right of
2.718
 df = 12 – 1 = 11

Rejection Rejection
Region Region

a / 2  .01 a / 2  .01

-2.718 0 2.718
Critical Critical
value value
 We have calculated sample mean:

x  41.5 millimeters

 Sample standard deviation is:

s = 1.784
Compute t – statistic

t  X m
s/ n
 41.5  43.0  2.913
1.784/ 12
 The null hypothesis that the
population mean 43 millimeters is
rejected because the computed t of
-2.913 does not lie in the
acceptance area.
 We reject the null hypothesis and
conclude that there is change in the
length of the bars.
 Lower Tail Test Upper Tail Test Two-Tailed Test

Hypothesis H 0 : m  m0 H 0 : m  m0 H 0 : m  m 0
H1 : m  m0 H1 : m  m0 H1 : m  m0
Test Statistic x  m0 x  m0 x  m0
s s s
n n n
Rejection Rule:
p-value app Reject H 0 if Reject H 0 if Reject H 0 if
p  value  a p  value  a p  value  a

Rejection Rule: Reject H 0 if

Critical value Reject H 0 if Reject H 0 if
z  ta /2
z  ta z  ta
or if z  ta /2
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).

H0: p > p0 H0: p < p0 H0: p = p0

Ha: p < p0 Ha: p > p0 Ha: p ≠ p0

One-tailed One-tailed Two-tailed

(lower tail) (upper tail)
Tests About a Population Proportion

 Test Statistic
p  p0
z
p

where:

p0 (1  p0 )
p 
n

assuming np > 5 and n(1 – p) > 5

Tests About a Population Proportion

 Rejection Rule: p –Value Approach

Reject H0 if p –value < a
 Rejection Rule: Critical Value Approach
H0: p  p0 Reject H0 if z > za

H0: p  p0 Reject H0 if z < -za

H0: p  p0 Reject H0 if z < -za or z > za

Two-Tailed Test About a Population Proportion

 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 a = .05.
 Two-Tailed Test About a
Population Proportion

1. Determine the hypotheses. H 0 : p  .5

H a : p  .5
2. Specify the level of significance. a = .05

3. Compute the value of the test statistic.

p0 (1  p0 ) .5(1  .5)
p    .045644
a common n 120
error is using
p in this p  p0 (67 /120)  .5
z   1.28
formula p .045644
Two-Tailed Test About a
Population Proportion

 Critical Value Approach

4. Determine the criticals value and rejection rule.

For a/2 = .05/2 = .025, z.025 = 1.96

Reject H0 if z < -1.96 or z > 1.96

5. Determine whether to reject H0.

Because 1.278 > -1.96 and < 1.96, we cannot reject H0.
 Lower Tail Test Upper Tail Test Two-Tailed Test

Hypothesis H 0 : p  p0 H 0 : p  p0 H 0 : p  p0
H1 : p  p0 H1 : p  p0 H1 : p  p0
Test Statistic p  p0 p  p0 p  p0
z z z
p0 (1  p0 ) p0 (1  p0 ) p0 (1  p0 )
n n n
Rejection Rule:
p-value app Reject H 0 if Reject H 0 if Reject H 0 if
p  value  a p  value  a p  value  a

Rejection Rule: Reject H 0 if

Critical value Reject H 0 if Reject H 0 if
z   za /2
z   za z  za
or if z  za /2
END OF CHAPTER