Chi square test

where

oij is the observed cell count in the ith row and jth column of the table

eij is the expected cell count in the ith row and jth column of the table, computed as

The calculated Χ2 value is then compared to the critical value from the Χ2 distribution table with
degrees of freedom df = (R - 1)(C - 1) and chosen confidence level. If the calculated Χ2 value >
critical Χ2 value, then we reject the null hypothesis.
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Anita Cruz recently assumed responsibility for a large investment portfolio. She wonders
whether industry sector influences investment objective. Her staff prepared the following
contingency table from a random sample of 400 common stocks.
Industry Sector
Investment Electronics Airlines Healthcare
Growth 200 20 80
Income 40 40 20
 State the null and alternate hypotheses in this context
 Which Statistical test you will advise in this scenario?
 Test whether industry sector influences investment objective.

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A gasoline distributor wonders whether an individual’s income levels influences the grade of
gasoline purchased. Following is the contingency table developed based on a survey of 300
customers.
Personal Type of Gasoline
Income Regular Premiu Extra Premium
m
Less than $30,000 180 20 40
$30,000 or More 120 120 120
State the null and alternate hypotheses in this context.
Is there any association between the income levels and the grade of gasoline purchased according
to the above data? Assume that the level of significance is 5%.

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The operations manager of a company that manufactures tires wants to determine whether there
are any differences in the quality of work among the three daily shifts. She randomly selects 540
tires and carefully inspects them. Each tire is either classified as perfect, satisfactory, or
defective, and the shift that produced it is also recorded. The two categorical variables of interest
are shift and condition of the tire produced. The data can be summarized by the accompanying
two-way table. Does the data provide sufficient evidence at the 5% significance level to infer that
there are differences in quality among the three shifts?

  Perfect Satisfactory Defective

Shift 1 106 124 10
Shift 2 67 85 10
Shift 3 37 70 31