Business Statistics II

STAT202
SINGLE SAMPLE HYPOTHESIS TESTING: MEANS
What is the process for hypothesis
testing?
State the hypothesis to be tested
Specify a decision rule (the level of inconsistency in the data that will lead to a
rejection of the hypothesis)
Collect data and calculate necessary statistics to test the hypothesis
Make a decision (reject or not reject)
Take action based on this decision
What exactly are we testing?
Specifying values
 Means (cover this today)
 Proportions (cover this next class)

Directionality of H1 compared to H0
 Not equal to versus equal to
 Greater than versus less than or equal to
 Less than versus greater than or equal to

Any sign that contains “equal to” goes in H0 (the null hypothesis)
Translating to Symbols

Where μ0 is the benchmark value or the “status quo” and μ is the population
average we are comparing to it. When we use a sample, μ is replaced with μ1

How can we apply this to our examples?

 Our Example Hypotheses
A company that produces aluminum cans has a current supplier. A new supplier has entered the
market. Their quality control team wants to know if they should switch to the new supplier.
 H0=the new supplier will provide aluminum with average quality level that is not higher than the old supplier
 H1=the new supplier will provide aluminum with a higher average quality level than the old supplier

A customer service call center wants to change their procedure for handling complaints that
decreases the time needed to resolve complaints. They have been testing a new procedure in a small
group of calls. Should the adopt the new procedure?
 H0=the average time to resolve complaints is not lower with the new process as the old process
 H1=the average time to resolve complaints is lower with the new process than the old process

A company that produces cell phone cases recently implemented a new manufacturing process in an
attempt to decrease the number of defective items. Is it working?
 H0=the new manufacturing process does not lead to lower average number of defective cases
 H1=the new manufacturing process leads to a lower average number of defective cases
 Stating the Hypotheses Quantitatively
A company that produces aluminum cans has a current supplier. A new supplier has entered the
market. Their quality control team wants to know if they should switch to the new supplier.
 μ0=average quality level with old supplier; μ1= average quality level with new supplier
 H0: μ0>= μ1; H1: μ0<μ1

A customer service call center wants to change their procedure for handling complaints that
decreases the time needed to resolve complaints. They have been testing a new procedure in a small
group of calls. Should the adopt the new procedure?
 μ0=average time to resolve complaint with current process; μ1= average time to resolve complaint with new process
 H0: μ0<= μ1; H1: μ0>μ1

A company that produces cell phone cases recently implemented a new manufacturing process in an
attempt to decrease the number of defective items. Is it working?
 μ0=average # of defective cases with old process; μ1= average # defective cases with new process
 H0: μ0<= μ1; H1: μ0>μ1
Stating the Decision Rule
Now that we have the hypotheses listed out, we must create the decision rule
This involves finding critical values and rejection regions (the values for which
we reject the null hypothesis)
The mean value for the alternative hypothesis is calculated from a sampling
distribution
We need to specify
 How different does μ1 have to be from μ0 to justify rejecting the null hypothesis?
 In what direction?

We do this by indicating an acceptable probability of a false positive

 Will need standard error to do this
Stating the Decision Rule

Note the connection to the probability of a false positive

Stating the Decision Rule
Common critical values are: 0.1, 0.05, and 0.01
 Will link to z-scores

These values represent the probability that you reject the null hypothesis when
you should not (false positive)
For a single-tailed test, this is all applied to one side of the distribution to define
a rejection region
For a two-tailed test, it is split in half on either side since there are two ways to
reject the null hypothesis
Executing the Statistical
Test for Means
Steps for Execution
Define the null and alternate hypotheses
Determine if we have a right, left or two tailed test
State the critical value (0.1, 0.05, 0.01)
 Link the critical value to a z-score – how many z-scores away is “okay”?

Calculate a test statistic

 This is the new step – how many z-scores away from the null hypothesis is the alternative
hypothesis?
Compare the test statistic to the z-score associated with the critical value
Decide to reject or not reject the null hypothesis
Execution Example
Suppose a plant produces paper for laser printers. Those sheets of paper must
be a standard width of 216 mm. There is inherently variation in the production
process but if the variation is too large, the machines must be adjusted.
Specifically, we know that the width of the paper is normally distributed with a
standard deviation of .0230 mm. Occasionally, a quality control inspector will
take a sampling of paper sheets to measure them to check if the machines need
to be adjusted.
The quality control inspector just sampled 50 sheets of paper. He found the
average width to be 216.0070 mm. If our a=0.05, does this sample show that the
paper is too wide and require adjusting the machines?
Steps for Execution
Define the null and alternate hypotheses
 μ0 = 216 mm; μ1 =216.0070
 H0: μ0 >= μ1
 H1: μ0 < μ1

Determine if we have a right, left or two tailed test

State the critical value (0.1, 0.05, 0.01)
Calculate a test statistic
Compare the test statistic to the z-score associated with the critical value
Decide to reject or not reject the null hypothesis
Test type and critical value
Steps for Execution
Define the null and alternate hypotheses
 μ0 = 216 mm; μ1 =216.0070
 H0: μ0 >= μ1
 H1: μ0 < μ1

Determine if we have a right, left or two tailed test

 Right tailed

State the critical value (0.1, 0.05, 0.01)

 0.05, z-score of +1.645

Calculate a test statistic

Compare the test statistic to the z-score associated with the critical value
Decide to reject or not reject the null hypothesis
Compute the Test Statistic
 Sample mean=216.0070
Hypothesized mean=216
Std dev=0.0230
N=50

Test statistic=
Steps for Execution
Define the null and alternate hypotheses
 μ0 = 216 mm; μ1 =216.0070
 H0: μ0 >= μ1
 H 1 : μ0 < μ 1

Determine if we have a right, left or two tailed test

 Right tailed

State the critical value (0.1, 0.05, 0.01)

 0.05, z-score of +1.645

Calculate a test statistic

 2.152

Compare the test statistic to the z-score associated with the critical value
Decide to reject or not reject the null hypothesis
Comparing Test Statistic

Test Statistic=2.152
Steps for Execution
Define the null and alternate hypotheses
 μ0 = 216 mm; μ1 =216.0070
 H0: μ0 >= μ1
 H 1 : μ0 < μ 1

Determine if we have a right, left or two tailed test

 Right tailed

State the critical value (0.1, 0.05, 0.01)

 0.05, z-score of +1.645

Calculate a test statistic

 2.152

Compare the test statistic to the z-score associated with the critical value - LARGER
Decide to reject or not reject the null hypothesis - REJECT
Revising our Example
We just performed a one-tailed test
We did this because the average of the sample was larger than 216. So we
tested to see if it was statistically significantly larger
But we could have decided that we care about any deviation (including the
width being too small)
In that case, we run a two-tailed test
Steps for Execution
Define the null and alternate hypotheses
 μ0 = 216 mm; μ1 =216.0070
 H0: μ0 = μ1
 H1: μ0 ≠ μ1

Determine if we have a right, left or two tailed test

State the critical value (0.1, 0.05, 0.01)
Calculate a test statistic
Compare the test statistic to the z-score associated with the critical value
Decide to reject or not reject the null hypothesis
Test type and critical value
Steps for Execution
Define the null and alternate hypotheses
 μ0 = 216 mm; μ1 =216.0070
 H0: μ0 >= μ1
 H1: μ0 < μ1

Determine if we have a right, left or two tailed test

 Two tailed

State the critical value (0.1, 0.05, 0.01)

 0.025, z-score of +/- 1.960

Calculate a test statistic

Compare the test statistic to the z-score associated with the critical value
Decide to reject or not reject the null hypothesis
Compute the Test Statistic
 Sample mean=216.0070
Hypothesized mean=216
Std dev=0.0230
N=50

Test statistic=
Steps for Execution
Define the null and alternate hypotheses
 μ0 = 216 mm; μ1 =216.0070
 H0: μ0 >= μ1
 H1 : μ 0 < μ 1

Determine if we have a right, left or two tailed test

 Two tailed

State the critical value (0.1, 0.05, 0.01)

 0.025, z-score of +/- 1.960

Calculate a test statistic

 2.152

Compare the test statistic to the z-score associated with the critical value
Decide to reject or not reject the null hypothesis
Comparing Test Statistic

Test Statistic=2.152 *Note that the test statistic DID NOT change but the critical value did
Steps for Execution
Define the null and alternate hypotheses
 μ0 = 216 mm; μ1 =216.0070
 H0: μ0 >= μ1
 H 1 : μ0 < μ 1

Determine if we have a right, left or two tailed test

 Right tailed

State the critical value (0.1, 0.05, 0.01)

 0.05, z-score of +1.645

Calculate a test statistic

 2.152

Compare the test statistic to the z-score associated with the critical value - LARGER
Decide to reject or not reject the null hypothesis - REJECT
Notes for next class
We will cover one more instance for means
We will cover hypothesis testing for proportions
Execute a few examples (means and proportions)
 Discuss practical importance versus statistical significance

HW1 is posted
 You can begin the homework and should be able to complete the 1st three problems